When movie theaters reopen in the U.S., they may face a bleak future. A new study from Performance Research and Full Circle Research shows that cinemas may not ever return to their pre-crisis levels. With significant concern for personal health and safety, most movie fans appear to prefer to watch at home. When asked if (costs being roughly the same) they would rather see first-run films in a movie theater or as a digital rental at home (assuming both options were available at the same time), a stunning 70% of participants say they are more likely to watch at home versus only 13% who said they were likely to go to the theater. 17% of survey participants said they were not sure which they would choose.
Comparing the findings to a similar study conducted by Performance Research in March, things have definitely not improved, with more consumers (52%) feeling that being in heavily attended public spaces will "scare" them for a "long time", up from the March number (47%) during the acceleration of the health crisis in the U.S.
37% of the survey participants say they plan to attend movies in theaters less often (up from 28% in March) and 10% say they may never set foot in a movie theater again (up from 6% in March). When pressed on the genres of movies that would most likely get they to pay-up for movie tickets, 43% say 'comedy', 35% SAY 'drama' and, surprisingly, 'action' came in with only 33% of the vote, despite the fact that this has been by far the most popular genre by box office dollars and film volume over the past decade. Horror only drew 19% of the tally despite being a profitable and popular category for years.
Obviously, pricing is an important factor for getting consumers to purchase and/or rent digital titles at home. For a first-run movie, the most popular price point is $10 (with 47% of the participating vote) while only 20% of participants feeling that a $20 price point is reasonable. As the price rises, though, the audience continues to fall-off, with only 6% willing to pay $30; 3% willing to pay $40 and 1% willing to pay $50, $60 or even $80. Some, more frugal, holdouts (19%) say they would only watch if the film were free (although this may include those who would watch it on a subscription streaming service).
The pricing of in-home first-run movies is a bit of a misleading indicator, though, since at $10, or even $20, everyone in the household can watch the movie. If you've got a family of 4, this equates to a $5 per person price (at $20 for the rental). This compares to nearly 2x that amount (at the average cost of a movie ticket), or nearly 4x that total if you're going to see the movie in a theater in the major metropolitan markets. Add to that cost the little extras like parking and concessions and a night at the movies for a family of 4 in the major markets can eat up $150 to $200. It's pretty easy to see that for a $20 rental and whatever food you choose (made at home, picked-up or delivered via Grubhub), you can get a lot of entertainment for a lot less at home.
The theatrical pricing conundrum has been irritating consumers for years with consumer sentiment reflected in Motion Picture Association (MPAA) studies nearly every year being increasingly negative toward the pricing of attending movies in theaters. Generally, as the big theaters have invested more in bigger venues with better technology and more food and beverage service offerings, they have had to also contend with studios (especially Disney) commanding a larger share of the opening weeks of box office revenues, leaving less for the theaters, despite ever-increasing ticket prices. Studios are also pressuring theaters by attempting to shorten the theatrical release window (a trend being aggressively tested during the shutdown after being hotly debated for years) and, with more releases, driving shorter big screen runs. All of this serves to pressure theater financial performance driving operators to largely increase prices or try to add services, including entertainment complexes (multi-tainment) and restaurants.
More entertainment and food options, though, may not look all that appealing to consumers when theaters reopen. In all cases, getting consumers to return to public venues (including theaters) will require cleanliness and social distancing, especially in food service areas and restrooms. While airlines, restaurants and other services are seeing their capacities slashed to accommodate social distancing and masks are largely being required for travel, shopping and eating out, fully 61% of survey respondents said that a mask requirement would likely increase their likelihood of attending an event in a public forum. Most people also said that they would prefer capacities for public venues being restricted to 60%.
Perhaps even more troubling for the biggest cinema chains is the outlook and attitude towards concessions and food service. Over the last several years, these big chains have been furiously adding expanded food and beverage (F&B) offerings to their theaters. Some chains, like Alamo Drafthouse, Studio Movie Grill, Movie Tavern (owned by Marcus) and the recently bankrupt IPic have even made expanded menus and all types of beverages (including alcohol) part of their core value proposition. Based on the survey, only 47% of participants said they are comfortable buying food and drinks at concession.
With either regulations or public pressure now likely to restrict capacities in their auditoriums, entertainment areas and food service, alike, theaters face an increasingly desperate road ahead. How they will respond to giving studios increasing shares of the big screen revenue at a time while their debt loads from expansions are burdening their financial performance and capacities are lowered remains to be seen. As studios also increasingly direct more of their content direct to digital, fewer movies will be available to fill those big screens and drive consumers to attend.
What, then, is next? Could cinemas shift their playbooks and start screening live sports and possibly working with streamers to get the content from them up on the big screen? What if you could go see the NBA Finals at a cinema, with burgers and beer in a big comfy recliner? Would that take you away from your couch or Buffalo Wild Wings? What about the Super Bowl, or, for that matter, Monday Night Football? Would a Floyd Mayweather vs Conor McGregor rematch do even better on the big screen than the over $500 million it generated? Could cinemas work out deals with Amazon and Netflix to put their original titles on the screen for a VERY low rental fee (or no fee)? The additional draw from these titles that could be shown for lower ticket prices and may help drive more concession sales may entice users to the cinema.
No matter how you look at it, the writing is on the wall for cinemas. Consumers that are increasingly concerned for their safety and more conscious and concerned over their wallets are less likely to come charging back to theaters. In all likelihood, theater operators will need to provide an experience that is less crowded and much more sanitary (factors that will limit revenue and increase costs, respectively). Operators will also contend with increasingly shortened theatrical windows and fewer titles as digital in-home pipelines benefit from studio decisions to move some product straight to home. What those operators do next to evolve their businesses will determine whether they adapt - or die.
This story was first reported at Variety