Movie theaters at risk

posted by Jeff | Wednesday, October 7, 2020, 12:00 PM | comments: 0

There was news this week that the parent company of Regal Cinemas was planning to shut down the entire chain. It's the latest swing in an industry that has been on a strange ride for decades at this point. Domestic box office growth has been more or less continuous for four decades, with some bumps here and there. The crazy thing about it though is that it's rooted mostly in the sheer number of movies made. The average gross by movie has actually been going down.

The theater experience itself has been a mixed bag. Theaters were gross before the turn of the century, but they gradually became more comfortable and cleaner. They also got crazy expensive, so you were going to spend at least $20 for one person at a matinee with popcorn and a soda. Depending on the quality of the movie, this makes the value of the endeavor feel potentially not worth it. Some chains have implemented to-the-seat food service to varying degrees of success. Projection and viewing experience has generally gotten better everywhere as digital projection has improved and been widely deployed.

I've loved going to movies as a little thing just for me. Whether it was periods of unemployment or just the need to get out one Saturday morning to make time for myself, I've enjoyed going to movies alone. The cost and value of that certainly has varied though. When you do get a dud of a movie, you don't feel as great about dropping that cash. To me, this is the dangerous thing that the industry set up: So many movies are made and movie houses have so many screens that they've made this gigantic inelastic machine that needs to be fed, with content and cash. That means that there is a lot of crap made, and you have movies that make a few million or more than a billion.

I think this inelastic machine is part of what puts the industry at risk, but also now you have unprecedented convenience to watch things at home. Home theater set ups are inexpensive, and the newer wave of OLED TV's in particular make amazing pictures. Having a movie-like experience at home, instantly streamed, is possible. The only thing you lose is the shared experience of viewing with others (which probably doesn't matter to extreme introverts).

When the pandemic has subsided some time next year, I wonder where this will leave the theater business. On one hand, some may not survive, but for those that do, will the value and experience still be worth it the same way? It's a reckoning that the business will have to deal with, much in the way that commercial real estate for white collar work seems shaky when people are successfully working in a distributed manner.


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