What does it mean when an industry hasn't experienced growth in sales since 1997? For the majority of industries it would be devastating to them. Look at the music industry as an example, they've been going down since 2000, and are showing signs of it in a big way, as we talked about recently.
When considering cinema admissions, the total for 2006 of 1.4 billion equals the total that was generated in 1997. Still, things have been able to stay fairly healthy in spite of it.
On one side of the equation, that's good, as the multi-platforms that have proliferated like video-on-demand, high definition DVDs and Internet streaming are real, potential competitors. The fact that they are still hanging in there shows some lasting resiliency.
The major reason that they've been able to still record gains in spite of no growth is the increase of ticket prices, as all moviegoers have experienced. Price increases have averaged 4 percent since 1997. Another reason is that they're getting more revenue out of their on-screen advertising, which has helped their bottom line.
The other positive spin on this is that after the shakeout between 1999-2001, where 13 large movie circuits filed for bankruptcy, it has stablized and grown some, even with flattening of admissions.
There are real concerns for the long-term though as Kagan analyst Wade Holden says, "It's a matter of concern for exhibitors because they rely on their customers to buy high-margin food and beverages. Every ticket sold means another person passes by the concession stand."
The question for the industry is how much higher can they raise tickets before it even further erodes admissions? Once that point is reached, then what? Right now it's a holding period, where they are able to maintain even with declining admissions. There is no way that can go on forever.
On the major studio side, they have more reason to celebrate, as even with 20 fewer films last year, they still came up with some pretty good numbers, although not all of them, which means that the average gross per film increased.
But with Weinstein Co. and Lionsgate, and other independents increasing output by 73 releases in 2006, it brought total releases up for the year.
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