Monday, February 15, 2016

The Disturbing Truth Behind Hollywood’s Record Year

You may have heard that Hollywood set a record for total domestic box office in 2015. And that the year included the two biggest openings of all time (Jurassic World and Star Wars: The Force Awakens). The industry is going gangbusters… or so it would seem.

As I read the various year-end box office analyses, I wondered how much of the record box office for 2015 is the result of Star Wars and Jurassic World? And how would the box office stack up to previous years if it weren’t for those two gigantic movies?

Of course, it’s not fair to remove the top two movies from one year and then compare it to the full box office of another year. But with a little quick research on, I was able to calculate the box office for each of the last five years without the top two movies of that year, and then without the top five movies of that year. You can see the results in this table:

What I discovered is that when we look at everything below the top two movies, this year’s box office ranks fourth out of the last five years. When we look at everything below the top five movies, it is the worst year of the last five years.

But what does this really mean? After all, those top movies did come out each of those years. Well, consider that there are six major Hollywood studios. Not every studio can have one of the top five films. And nobody would operate a studio to score just one big hit. The hundreds of studio movies below the top five matter for the health of the industry. And the box office for those films was not so great last year.

Another little detail about 2015: a lot of big studio movies bombed. Victor Frankenstein had the worst opening for a studio release in 2,500 or more theaters. Jem and the Holograms had the worst start of all time for a major-studio release. We Are Your Friends had the worst opening for a Warner Brothers film released in more than 2,000 theaters. Sandra Bullock had the worst opening of her career (Our Brand is Crisis) and Johnny Depp had his worst opening in a wide release movie (Mordecai). The studios lost a lot of money on those five movies, which adds a little perspective to the five big hits.

It’s been widely discussed that the movie business is becoming bifurcated into gigantic franchise hits and small independent films. The mid-budget movie is vanishing as a studio product. It looks like the studios are engaged in an increasingly high risk/high reward game.

Why China May Not Be the Savior We’ve been Waiting For

Despite the trumpeting of 2015’s record box office, most people in Hollywood are aware that the domestic business has been pretty flat for years. And many of those Hollywood people are looking to China as the market that will keep the business growing. It is certainly true that U.S. studios are making a bigger and bigger share of their revenue internationally, and China is going to be the biggest international market very soon. There are some astonishing numbers – last year Chinese box office grew 48.7%. In 2015, Chinese box office was $6.79 billion, and is predicted to surpass the North American box office ($11 billion, as discussed above) in 2017. (source: The Hollywood Reporter)

But there are two reasons to temper excitement over these numbers.

First is U.S. market share of Chinese box office. In most foreign territories, U.S. films far outpace the domestic products. There are exceptions, such as India where Bollywood films are much more popular than Hollywood films. Unfortunately, when it comes to market share, China looks more like India than, say, Europe. Chinese films took 61% of Chinese box office in 2015. Only three U.S. films landed on China’s top 10 chart for the year. And while Chinese box office increased 49% in 2015, U.S. share of that box office fell 16%. This trend is likely to continue as the Chinese government aggressively bulks up their film production industry.

Second, people often confuse box office with studio revenue, forgetting that the exhibitors take a cut. In North America, studios usually get 50%-60% of the box office. In China, they only get about 25%.

So, as we see Chinese total box office grow, it’s important to remember that Chinese films are taking most of that money, and of the box office that is attributed to U.S. films, the value is about half what it would be in North America.

All of which means, there may be some bumpy roads ahead for Hollywood.


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