Are there enough superheroes to revive movie theaters?

The six major superhero movies released in 2017 combined to gross more than $4 billion in worldwide ticket sales.¹ The trend continued in the first half of 2018, with three superhero movies ranking in the top five most popular cinematic releases.²

However, beyond these blockbusters, the picture looked grim for the movie industry in 2017. Overall ticket sales declined by 6 percent year-over-year—the lowest figure in over two decades.³ Furthermore, less than 20 percent of major movies released during the year were able to recoup their production and marketing costs.⁴

Moreover, the decline has been consistent over the last nine years, with US theater attendance posting a negative compound annual growth rate (CAGR) of 2 percent from 2009 and 2017. Rising ticket and concession prices, changing entertainment preferences, and a lack of desired content are some of the factors that may be responsible for this downturn.⁵

On the other hand, video streaming services are seeing skyrocketing growth.

According to our analysis, the number of US households subscribing to video streaming services grew from 12 million in 2009 to 71 million in 2017, a CAGR of 25 percent. This adoption is likely fueled by consumers’ strong desire for original content and the flexibility video streaming provides for consuming media wherever and whenever they want. These growth figures are further reflected in the booming valuations of several streaming organizations.⁶

Video streaming’s rising popularity likely indicates that people have a strong appetite for video content, particularly movies. So, why are some studios and theaters unable to capitalize? Perhaps consumers desire changes in the ways movies are priced, promoted, or shown.

Change often paves the way for novel business models—and we are already seeing some from movie theaters in 2018.⁷ One example is monthly subscription-based services that give consumers the ability to watch a fixed number of movies in theaters at a discounted price.⁸ Many individual theaters are also trying to reinvent themselves with their own version of subscription services and pre-feature advertising. These new approaches are already driving positive results for some theater chains.⁹

The future of movie-going will probably look different, and new business models may turn out to be the real superheroes. Innovation will likely be the key as studios and theaters explore ways to improve customer stickiness and reach untapped markets.

This charticle authored by Shashank Srivastava on October 10, 2018.

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Endnotes

¹ Mark Hughes, “How 2017 Became the Greatest Year for Superhero Movies of All Time,” Forbes, November 27, 2017.
² “2018 Worldwide Grosses,” Box Office Mojo.
³ Jacob Siegal, “2017 Was the Worst year for Movie Ticket Sales in the US in over Two Decades,” BGR, January 3, 2018.
⁴ Deloitte analysis based on data from SNL Kagan.
⁵ Brooks Barnes, “Already at Movie Theaters Near You: Ticket Subscriptions,” The New York Times, July 2, 2018.
⁶  Martin Wolf, “ FANG stocks are anything but a bubble,” Business Insider, June 15, 2017.     
⁷ Pamela McClintock, “Box Office: Summer Revenue Booms While Attendance Still Lags,” The Hollywood Reporter, August 28, 2018.
⁸ Brooks Barnes, “Already at Movie Theaters Near You: Ticket Subscriptions,” The New York Times, July 2, 2018.
⁹ Motley Fool Staff, “Movie Chains in 2018: New Revenue Streams and Subscription Services,” The Motley Fool, September 20, 2018.