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The Fallout From the Summer of Pain: Suffering Movie Theaters, Spooked Film Financiers, Contraction & China Anxiety

I feel like I’ve written this article before. In fact, I know I have. In the 5 years of this site’s existence, I’ve written the obituary for the film industry multiple times. The sky, it seems, is constantly falling.

Except it’s not. It’s more like the sky is changing colors quicker than the industry can react to, with the periodically appearing thunder clouds sometimes triggering sirens for a tornado that never quite comes or comes but fails to deliver irreparable damage. Because after every storm cloud there’s a rainbow, and….

Ugh. I’m just going to stop with this storm cloud metaphor. The point I’m trying to make is that after every bad fiscal quarter or year the industry usually convinces itself that next year will be better. Summer 2017 sucked, with ticket sales down 10.8% compared to last year? Oh, well. Can’t win ’em all. No worries. Our sequels will be better next summer, what with Infinity War, the Han Solo prequel, Deadpool 2, Jurassic World 2, The Incredibles 2, Ant-Man 2, Mission Impossible 6 and everything.

That’s probably true. In the past 5 years, summers with disappointing overall sales or a distressingly high number of bombs have usually been followed by a rebound the next year. But that doesn’t help things right now, not when, as Variety noted, the entire film industry is suffering:

-AMC Entertainment, the country’s largest theater chain, lost 27% of its value on the stock market “in a matter of hours after alerting analysts that its upcoming quarterly earnings would be worse than anticipated.”

–Since the beginning of August, the top four theater chains in North America lost $1.3 billion in value.

-Worse yet, there is no relief in sight since “theatrical revenues are expected to fall through the next two months” due to an especially weak crop of new movies. The fall is expected to post as high as a 15% year over year decline. It’s more than enough to completely cancel out all the gains we made back in February and March when hits like Logan and Beauty and the Beast started 2017 out with a bang.

-EuropaCorp stands to lose tens of millions on Valerian and the City of a Thousand Planets

-Broad Green, the indie house responsible for A Walk in the Woods, closed its production division and layed off 20% of its staff after years of decline.

Open Road, an indie house which pushed Spotlight all the way to a Best Picture win just a year and a half ago, was sold to Tang Media on Aug. 7 for an undisclosed sum.

-Hasbro nearly bought Lionsgate last week before talks broke down. Not surprisingly, Lionsgate’s boss then immediately starting talking again about his desire crank out more Hunger Games and Twilight movies because “there are more stories to tell in those worlds.” What he really means, though, is, “Maybe if we make more of those we’ll finally be able to sell to a bigger company, or make enough money that we don’t need to sell at all.”

Detroit will be an awards season darling, but it’ll be lucky to break even after Annapurna, the indie production company-turned distributor, made a huge marketing push.

-Film financiers are starting to walk away after years of losing money. For example, China’s Huahua missed its $500m payment to Paramount in June, forcing Paramount’s boss, Viacom, to send representatives over there to see what the hell is going on. Lone Star Capital, a big loser on Ghostbusters and The Brothers Grimsby, pulled the plug on its slate financing deal with Sony in July, and no one’s buying Sony’s bullshit explanation that it can just finance all of its own movies or easily find some suckers to replace Lone Star.

-And China has become a big problem. The skyrocketing growth of the country’s film industry has finally hit a rough patch. Moreover, their government has cracked down on foreign investments, aiming to coerce its own companies and banks into only making investments which will benefit China. Dalian Wanda, the conglomerate that gobbled up Legendary and AMC, is selling off some $9 billion in tourism assets to service its debt. There is still uncertainty over whether or not the quota capping the number of foreign movies released in the country per year will be raised and, if so, what it will be raised to. And there lingers the possibility that an audit of China’s box office will uncover widespread fraud in ticket sale reporting.

Of course, as Eric Wold, senior analyst at B. Riley & Co., told Variety, “People tend to overreact a little bit when you get a short-term period of box office weakness. The first reaction is some kind of systemic problem with the industry.”

It is, after all, a cyclical business dependent on quality content, and Wonder Woman, Guardians 2, Dunkirk, Baby Driver, The Big Sick and Spider-Man: Homecoming could only do so much to cover all of the movies bombing around them (like literally every other sequel that came out, even poor War for the Planet of the Apes).

One of the best-reviewed blockbusters in recent memory has thus far mustered a mere $280m worldwide, $132m domestic, off of a $150m production budget

This is partially the result of Hollywood learning from past summer failures to spread its blockbusters around, which is how we ended up with Logan, Kong, Beauty and the Beast, Power Rangers and Ghost in the Shell coming out in March instead of maybe, I dunno, August, a month the studios have collectively given up on this year. Also, this is the first time that Game of Thrones has been a summer TV show, which can’t be helping things at the box office.

But in an increasingly boom or bust business the long-term consequences going forward are going to be ever-present uncertainty, more reluctant film financiers, widespread contraction and suffering movie theaters. The economics are such that the entire industry is collectively swinging for the fences with every big movie, pushing budgets to such a level that seemingly every new movie needs to become one of the top 20 grossing films of all time just to break even. It’s insanity.

One wonders how much longer this cycle of “our sequel, reboots and wannabe cinematic universes sucked this year”/”oh, thank god, our sequels and reboots the following year saved our asses” can continue, especially as viewers continue to emerge from summers talking less about the biggest movies they saw and more about the TV shows they loved (e.g., Stranger Things last year, GLOW, Game of Thrones this year).

I’ll leave the final word to Variety:

In a world of digital giants and communications titans, movie companies are looking downright diminished. Take AT&T’s $85 billion purchase of Time Warner (a deal that is still waiting for a government rubber stamp). The telephone conglomerate is shelling out big money for the company behind HBO and Warner Bros. Yet even with all that cinematic and small-screen firepower, Time Warner will contribute less than 20% of its revenues. Are we moving toward a time when blockbuster movies and watercooler shows are something that gets thrown in with a more expensive phone plan? Someday, and that day may be fast approaching, content won’t be king. It will be additive.

Source: Variety

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