Rogue One A Star Wars Story
Courtesy of Jonathan Olley/©Lucasfilms

“Finding Dory,” “Rogue One: A Star Wars Story,” “The Secret Life of Pets” and other blockbusters helped drive the domestic box office to record heights in 2016. However, it’s not like moviegoing suddenly saw a surge in popularity. Attendance was essentially flat with last year’s 1.32 billion and a far cry from the record 1.57 billion admissions from 2002. The record came from a new high-water mark in ticket prices, as well as the added cost that comes with Imax and 3D releases.

Overseas, the numbers are still being tallied, but many experts believe that a slowdown in China will lead to revenue declines.

The story of 2016, when it is written, will be a mixed one. Despite the rise of streaming services and quality television, the movie business continues to be resilient. Audiences are still turning up en masse for the new Star Wars or Avengers films, regardless of how adept “Game of Thrones” is at serving up epic spectacles.

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Yet there are also very real challenges to the business. Fewer films are accounting for an ever greater slice of overall box office revenues and one studio in particular, Disney, is responsible for more than half of the top ten highest grossing films. There’s also a dawning realization that the older modes of distributing movies are in need of a shakeup — a change that seems likely to roil the industry.

As studio executives and filmmakers look ahead to 2017, and what they hope will be another record-smashing 12 months, here are five takeaways from the year that was.

1.) WINDOWS ARE COLLAPSING

Screening Room, the Sean Parker-backed startup that hoped to release movies in the home at the same time they hit theaters, got a raft of big-name filmmakers to back it, but has yet to announce any major studio partners. But that doesn’t mean exhibitors who view any erosion of the theatrical window as an existential threat should be breathing a sigh of relief. The debate around Screening Room and the support it received from the likes of J.J. Abrams and Steven Spielberg signals that there is a growing realization that movie distribution may require a major overhaul. The threat of piracy is too real and it’s increasingly clear that our on-demand culture, one in which people want to see things where they want, when they want, is making the old experience of hitting the multiplex seem passé.

Universal and Warner Bros. have publicly said they’re having discussions with exhibitors about making some films available on demand for a higher price earlier than they are traditionally released on those platforms. It’s clear that any diminishment of the standard 90 days that a film appears exclusively in theaters will require studios to offer exhibitors some sort of carrot, likely in the form of a cut of digital revenues.

One entertainment company chief told Variety that a big cable company or some other competitor will try to compact the theatrical window down to a “few weeks” at some point this year. The executive added, “It will be for a high price. We are pretty good at carving out windows.”

Just don’t look to Disney to join in. The studio is on a hot streak and doesn’t seem too eager to mess with a good thing. “The theatrical experience is the embodiment of our filmmakers’ vision and acts as a locomotive to all the downstream businesses,” from television, to consumer products to theme parks, said Dave Hollis, the studio’s distribution chief.

There are other believers in the value of a theatrical release. Although indie films such as “Margin Call” and “Arbitrage” proved that there is money to be made in simultaneously releasing a film in theaters and in the home, many art house companies have grown convinced that this approach is shortsighted. Debuting a film in theaters raises its profile and helps it cut through the clutter, they argue. While Netflix has publicly emphasized streaming its films over releasing them theatrically, other digital pioneers such as Amazon have opted to embrace more traditional distribution models. In turn, they’ve been rewarded with the likes of “Manchester by the Sea” and “Love and Friendship,” two of the year’s bigger indie releases, as well as duds such as “The Neon Demon.”

“We’re definitely doubling down on theatrical,” said Howard Cohen, head of Roadside Attractions, which distributed “Love and Friendship” and “Manchester by the Sea” with Amazon. “What quickly happened with day and date was that everybody jumped in and VOD became code for not a good movie.”

2.) SEQUELITIS MAY BE REAL, BUT FRANCHISES ARE STILL KING

Audiences seemed to come down with a nasty case of “sequelitis” last summer, rejecting or failing to show up in force for the likes of “Independence Day: Resurgence,” “Teenage Mutant Ninja Turtles: Out of the Shadows,” and “Neighbors 2: Sorority Rising.” All told three out of the fourteen sequels released over the summer failed to match the grosses of their predecessors. It didn’t help that many of these films were roundly rejected by critics.

“Ultimately, it was about the product,” said Paul Dergarabedian, senior media analyst at ComScore.

Despite these failures, it would be incorrect to assume that Hollywood is going to get out of the franchise game. For the most part reboots, spinoffs, prequels, and followups are still the driving force in the business. Of the top ten highest-grossing films domestically, eight are sequels, remakes or exist in some sort of cinematic universe. Hardly a triumph of originality. The only exceptions are “The Secret Life of Pets” and “Zootopia,” two animated offerings that benefited from their associations with Illumination and Disney, top brands in the world of family entertainment.

And the reason that many studio executives and analysts believe that 2017 will be an even bigger year at the box office is because it will see the return of major franchises such as “Star Wars,” “Guardians of the Galaxy,” “The Fast and the Furious,” and “Alien,” not because of any explosion of risk-taking and creativity.

What studios do seem to have realized is that they need to offer something familiar that still seems fresh. Those sequels or spinoffs that did work, such as “The Conjuring 2” or “Rogue One: A Star Wars Story,” introduced new characters or plot lines, taking their franchises in innovative directions, instead of simply recycling plot points and scenarios from previous chapters.

“You have to do a lot of work to convince people of why you made another movie and why they need to see it,” said Megan Colligan, Paramount’s marketing and distribution chief.

3.) CHINA RISING?

After years of explosive growth, the Chinese box office finally showed signs of slowing down. Ticket sales in the country grew by a mere 3%, a steep decline from the 49% jump experienced in 2015. It’s left some observers wondering if the Middle Kingdom will overtake the U.S. as the top market for film in 2017,as many had previously predicted.

At the same time, the U.S. failure of “Warcraft” and the video game adaptation’s success in China shows that culturally the countries still want different things from their blockbusters. Having a big budget and a lot of special effects isn’t a guarantee that a film will work in Asia or vice versa.

Studio executives still believe that Hollywood’s future is inexorably linked with that of China.

“Of course there are going to be some pauses, but it’s still going to be a much bigger business five years from now than it is today,” said Disney’s Hollis.

Then there are longer term concerns. President elect Donald Trump has railed against trade with China on the campaign trail. If he enacts tariffs on Chinese goods, it could impact the number of Hollywood films that the country allows to screen in China annually.

Negotiations on film quotas are expected to take place this year. Expect the talks to be heated. Chinese investment in the entertainment business is already raising concerns. AMC, which is owned by Chinese conglomerate Dalian Wanda, faced a public relations backlash when it was buying Carmike, and some lawmakers have raised questions about the level of Chinese ownership of media companies. Hearings on Capitol Hill seem preordained, but no matter how hard Congress slams the gavel, studios will continue to seek out Chinese investment and try to appeal to Chinese audiences. China has become to big to be ignored.

4.) STAR POWER GETS DINGED

Movie stars aren’t shining as brightly. The likes of Tom Hanks, Ben Stiller, Brad Pitt, Warren Beatty, Melissa McCarthy, and Johnny Depp saw audiences steer clear of their latest offerings, while movies such as “Rogue One” and “The Jungle Book” made bank without relying on A-list names above the title. One by one, their projects fell, as “Allied,” “Alice Through the Looking Glass,” “Inferno,” “Rules Don’t Apply,” “Ghostbusters,” and “Zoolander 2” collapsed at the box office. In the case of Depp and Pitt, messy divorces served as distractions, limiting both actors from doing press for “Alice” and “Allied,” respectively. It can be risky to rely to heavily on a single actor to sell a project.

“Passengers,” a science-fiction romance with Jennifer Lawrence and Chris Pratt, is still in theaters, but its debut was on the lower end of expectations. That’s disturbing because both actors are seen as two of the hottest performers in Hollywood. If they can’t generate sparks, who can?

Nor were actors alone in seeing their popular appeal diminish. Top directors such as Steven Spielberg and Ang Lee also failed to attract crowds with their latest efforts, “The BFG” and “Billy Lynn’s Long Half Time Walk,” leaving audiences cold. Both filmmakers may face tough questions when it comes time to get a greenlight for their next passion project.

What makes it puzzling is that there are still a few instances where a star, a director, and a project can perfectly align, ensuring box office success. Hanks may have face-planted with “Inferno,” a Dan Brown adaptation, but he scored with “Sully,” a biopic about Chesley Sullenberger. The actor’s innate decency combined with Clint Eastwood’s direction seemed like the perfect match for the story of a hero pilot. The problem is that kind of alchemy is difficult to pull off and hard to bank on.

5.) BLOCKBUSTERS CAN ARRIVE AT ANY TIME OF YEAR

When it comes to releasing their biggest films, studios have started to stretch out. Gone are the days when a major release had to hit theaters between Memorial Day and the end of July if it wanted to put up blockbuster grosses. Instead, the likes of “Deadpool,” “Zootopia,” and “The Jungle Book” opened in the dead of winter or spring and were rewarded with some of the year’s highest grosses. Without the same level of competition, these films weren’t forced to rack up a disproportionate amount of their revenues in their opening weekend. They could benefit from word-of-mouth.

Warner Bros. bet heavily on this type of dating when it scheduled “Batman v Superman: Dawn of Justice” and “Suicide Squad” for March and August release windows. These comic book movies let Marvel have the prime summer and winter openings, and putting some distance between them and those costumed avengers, helped everybody profit.

“Neither one of those two months were proven for releasing films,” said Jeff Goldstein, president of domestic distribution at Warner Bros. “And with both of those films we proved those periods could work.”

Others will soon follow suit. Next year, “The Ghost in the Shell,” “The LEGO Batman Movie,” “Logan,” and “Beauty and the Beast” are just a few of the high-profile movies that will steer clear of summer in favor of spring or winter debuts. In Hollywood, no secret stays that way for very long.

James Rainey contributed to this report.

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