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2005 was a Year the Movie Industry Would Like to Forget

March 14th, 2006

MPAA released the final box office numbers for 2005 and for the most part they were not good.

The Good:

  • A total of 8 films broke the $200 million mark at the domestic box office, which is a new record.
  • The average box office revenue for a MPAA new release rose 7.8% to $37.3 million.
  • The average production cost for a MPAA movie dropped 3.8% to $60.0 million.
  • The average total cost for a MPAA movie dropped 0.6% to $96.2 million.
  • Ticket prices grew 3.2% to $6.41 on average. While this was above the average wage increase, it was below last year's inflation of 3.4%.

The Bad:

  • The average P&A budget for an MPAA release increased by 5.2% to $36.2 million, but the studios seem to be getting less bang for their buck.
  • While the number of films to break the $200 million barrier rose from 5 to 8, the number of films to earn between $100 million and $200 million movies dropped from 18 to 12.
  • Foreign box office fell during the past year by 9.2% to $14.25 billion, but this is not as bad as it seems as much of it can be explained by a strengthening American dollar. However, it is still bad news by any definition.
  • Average production budgets for Subsidiary / Affiliate studios, (like Fox Searchlight and Miramax) plummeted by 19.0% to $23.5 million and are now just half of what they were 2 years ago.
  • Conversely the average P&A budgets for Subsidiary / Affiliate studios shot up 33.3% to $15.2 million.
  • So while total costs fell by 6.4% to $37.8 million, a much lower percentage of that could be seen on the screen, 62.2% to 71.8%.

The Ugly

  • The total box office fell 5.7% to $8.99 billion. That's the lowest total box office since 2001 and the worst year-to-year drop-off since the numbers have been collected.
  • Admission fell even faster plummeting 8.7% to 1.40 billion. That is the lowest level since 1997 and the worst year-to-year drop-off in 20 years.
  • The average box office for all movies fell 23.0% from $20.0 million to $15.4 million, which is a case of too many movies and not enough moviegoers.
  • The gap between costs and revenues for the average film fell again this year, but with the average total cost to get an MPAA film into theatres at $96.2 million and the average box office revenue only $37.3 million, something has to change.
  • The number of films hit new highs last year with 563 releases / re-issues, which is roughly 11 openings every weekend. Of those 194 are from MPAA distributors while an incredible 355 are from independent studios. While having independent films is great, the sheer number of them is choking the marketplace to the point where few can succeed.

The Huh?

  • It seems like every year they commission a pointless survey and this year they asked moviegoers if they liked the movie going experience. And to nobody's surprise, 81% said yes. Of course people who go to the movies like going to the movies. The real question is why are fewer people going to the movies? Part of the problem is 31% of people surveyed said the Home Theatre experience was better than going to a movie, but at least that means the Home Market numbers should remain strong for a while to come.
  • Speaking of which, in a related survey, 42% of people asked said they planned to buy the last movie they saw when it comes out on DVD and most of those decided to buy the movie immediately after watching it.

How's the outlook for the future?

The movie industry had a really bad year last year, I'd like to blame it on the number of really bad movies that came out, but for the most part there's no correlation between quality and box office.

I think the two movies that can most be blamed for 2005's box office slump were Passion of the Christ and Star Wars: Revenge of the Sith. I know what you're thinking, "How can a surprise hit from 2004 and the top movie of 2005 be blamed for last year's slump?" Here me out.

In 2004 when Passion of the Christ it created a huge increase in business especially among people who don't normally go to the movies. So when 2005 rolled around and these people didn't return to the theatres there was a huge year-to-year drop-off. As that film's effect was lessening, Star Wars effect kicked in. Studios were so scared of going up against that film that they held back their best stuff, which further hurt box office numbers. So even with Star Wars's opening weekend beat most expectations, the lack of counter-programming meant the total box office was still down on a year-to-year basis.

At this point, the only story being talked about was The Slump. What was causing it? How bad will it get? When will it end? All the moviegoers heard was The Slump and they assumed that there was nothing worth seeing, so they didn't go to the theatres, which made The Slump worse, which increased the coverage it was getting... I think you can see where this is going.

On the other hand, it could be a symptom of changing behaviors amongst entertainment seekers as they are looking to alternate sources. If this is true, the movie industry will have to do something creative to cut the losses, and creativity is not Hollywood's strong suit.

Oh yeah, and the industry should stop making so many bad movies.

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