Movie Theaters Bounce Back: What’s Behind the 2018 Rebound

Reports of the death of movies are greatly exaggerated.

The exhibition business came roaring back in 2018, as blockbusters such as “Black Panther,” “Avengers: Infinity War,” and “Jurassic World: Fallen Kingdom” powered ticket sales to record levels. The domestic box office hit a new high-water mark of $11.5 billion and global revenues also have a chance of reaching new heights if Christmas releases such as “Aquaman” and “Mary Poppins Returns” can ring in the new year in style.

Studios and theater owners are closing out the year in a much more optimistic frame of mind, after being written off in 2017 as creaky anachronisms that were being rapidly surpassed by more agile streaming players such as Netflix and Amazon. So why did moviegoers return to theaters in force over the last 12 months?

“It’s all about content,” said Jeff Goldstein, head of domestic distribution at Warner Bros. “There were movies audiences wanted to see.”

When they did hit the multiplexes, audiences around the world were able to see a more diverse range of heroes. Films such as “Crazy Rich Asians,” “Black Panther,” and “Oceans 8” allowed Asians, black people, and women to take center stage. At a time when the need for inclusion is being fiercely debated across the entertainment industry, the movies that tapped into the zeitgeist most strongly seemed to be the ones that eschewed straight white male protagonists.

“Audiences connect more deeply when they see people like themselves on screen,” said Cathleen Taff, Disney’s distribution chief.

Moreover, studios were able to spread the wealth throughout the year. Instead of banking on reliable release dates during popcorn season or Christmas to fuel blockbusters, some of this year’s biggest moneymakers came from frames that were once seen as dumping grounds in between tentpoles.

“We had movies in every month that shattered expectations,” said Phil Contrino, director of media and research at the National Association of Theatre Owners. “That’s why you have a record year.”

February fielded the top-grossing domestic film of 2018 with “Black Panther,“ while “Venom,“ “A Star Is Born,“ and “Halloween“ powered October to a record month. Without the competition from summer behemoths or holidays season juggernauts, a number of titles were able to break out and earn a tidy sum.

There are reasons to celebrate, but the film industry also can’t afford to become complacent. The business faces some significant structural challenges and hasn’t figured out a compelling way to replenish the franchise well. Disney, armed with Marvel, Pixar, and Lucasfilm, continues to dominate the movie industry, siphoning off more than a quarter of domestic revenues. With more than $3 billion in stateside grosses, Disney racked up some $1.2 billion more in ticket sales than its closest rival, Universal. The studio will cast an even larger shadow across the theatrical business when it absorbs much of Fox’s film assets as part of a $71.3 billion mega-merger, a position that will give it even greater leverage when negotiating with theaters for revenue splits and access to screens.

There are also reasons to worry that the film business remains overly reliant on a handful of genres and franchises. Six of the top 10 highest-grossing domestic releases in 2018 were superhero pics and nine of the 10 most successful North American movies were sequels or spinoffs, hardly a triumph for originality. The only movie in the top 10 that wasn’t part of a pre-existing series was “The Grinch,” a venerable piece of intellectual property that has already inspired a Jim Carrey movie and a beloved television film with the voice of Boris Karloff.

The problem is that some of these franchises are growing longer in the tooth. Many are now entering their second, third, or, in the case of “Star Wars,” their fourth decades. When studios have attempted to stray from branded IP, the results have been mixed. For example, Universal and its partners shelled out more than $100 million on “Mortal Engines,” a steampunk epic from “The Lord of the Rings” maestro Peter Jackson that stands to lose upwards of $125 million, and Lionsgate’s $100 million attempt to fashion a younger, hipper “Robin Hood” will result in a steep write-down. Given the vast sums of time and treasure needed to make a tentpole movie, there’s little margin for error. Even movies that gross hundreds of millions of dollars such as “Solo: A Star Wars Story” can result in red ink when they fail to approach the billion-dollar mark globally.

As the cost of making movies rises, the major chains have continued to invest in improving their amenities. Recliner seats, reserved ticketing, and alcoholic beverages have become more ubiquitous as theaters have scrambled to find ways to differentiate cinemas from home entertainment platforms. Yet there are suggestions that audiences don’t want a premium offering. They want value. MoviePass may have sputtered out in spectacular fashion, brought low by a cash crunch, shoddy customer service, and the New York attorney’s investigation into fraud allegations, but before it collapses in a tsunami of bad publicity, it should get credit for popularizing a subscription model for moviegoing. AMC and Cinemark have already launched alternative subscription services at different price points, and Cineworld, the owner of Regal, is rumored to be mulling a similar offering. The challenge now will be finding a responsibly priced service that will appeal to younger customers while enabling theaters to make a profit.

“We’ve struck a chord with millennials and found a vehicle they like to use,” said AMC CEO Adam Aron. “We believe we introduced it the right way. We think [other subscription-based services] made a lot of mistakes that made their viability doubtful. By contrast, we were not shy. We charged more than double what our competitors were charging.”

Ticket sales and attendance may have increased in 2018, but AMC, Cinemark, Imax, and other publicly traded exhibitors have yet to see that reflected in their share prices. For instance, AMC, the world’s largest chain, is trading at just over $12 a share. In 2016, its stock was worth more than $35 a share. Imax and Cinemark have also failed to fully reverse the damage from an industry-wide selloff.

“There’s a lot of skepticism on Wall Street that these gains will continue into 2019,” said Eric Wold, an exhibition industry analyst with B. Riley FBR. “We haven’t had back-to-back attendance gains since 2002.”

Add to that fears of trade wars with China and recession worries, and it’s unlikely that any of these companies will be able to fully regain investors’ confidence in the near term. They also have to contend with the fact that the heat right now is on the television and streaming businesses. Studies, such as a recent report by the National Association of Theatre Owners, an exhibition industry trade group, suggest that lower-cost entertainment options such as Netflix and Amazon aren’t killing theaters. People who stream more movies and shows in the home also tend to be more frequent cinemagoers. Respondents who visited a movie theater nine times or more in the last 12 months consumed more streaming content than consumers who visited a movie theater only once or twice over the past year, the study found.

However, the amount of money that these companies are shelling out to content creators is staggering and unlikely to be rivaled by major studios. Netflix is rumored to be spending $13 billion on content in 2018 and Amazon will shell out a reported $6 billion — that enables them to sign deals with the Alfonso Cuarons and Martin Scorseses of the world. And because they straddle different forms of media, they aren’t subjected to the same kind of scrutiny as a Disney or a Fox. Netflix, for instance, doesn’t report any box office or ratings information unless the statistics are wildly positive, a lack of transparency that frustrates movie studios who feel obligated to share more financial information.

Still, Netflix and, to a much lesser extent, Amazon have been able to carve a niche for themselves as havens of creativity, immune to the such crass concerns as commercial appeal. Cuaron’s “Roma,” a sprawling, black and white film about a family in Mexico City; Tamara Jenkins’ “Private Lives,” a comedy about a couple’s infertility struggles; and Scorsese’s upcoming “The Irishman,” a hugely expensive crime drama with Robert De Niro and Al Pacino, would have struggled to get the same budgets at a traditional studio. At this year’s Venice Film Festival, Spike Lee was asked about Netflix’s willingness to finance “The Irishman.”

“Netflix, they wrote a check, and it was a check that no other studio was willing to do,” Lee said. “So it’s a decision that if you’re an artist when you get to that level, do you want your film made?”

He added, “Netflix is the future of cinema. You can have access to it anytime and anywhere. That is what people need.”

That money comes with a catch, however. Cuaron and other filmmakers have pushed Netflix to provide some kind of theatrical release for their movies only to be met with opposition from exhibitors unwilling to show movies that will debut on the service within weeks of their premieres. Privately, many directors gripe that their movies open on Netflix and promptly fade from the conversation. They miss the immediate feedback they receive from a theatrical release and they long for being a part of a wider cultural dialogue. If Netflix is indeed the future, progress may come at a cost.

RELATED VIDEO:

More Film

  • Hustlers Movie

    STX, Black Bear Pictures, Elevation Form Distribution Partnership

    STX Entertainment, Black Bear Pictures and Canadian distributor Elevation Pictures have unveiled a strategic distribution partnership. The agreement was announced Wednesday at the Berlin Film Festival and includes an exclusive output deal for STXinternational to sell and distribute all Black Bear productions internationally. Elevation Pictures, in which Black Bear is a major investor, will distribute [...]

  • Indian Film Festival Los Angeles to

    Indian Film Festival Los Angeles to Open With Imtiaz Ali Evening

    The Indian Film Festival Los Angeles will kick off not with a new film, but what is billed as An Evening With Imtiaz Ali, the writer-director of such films as “Jab We Met” and “Rockstar.” He will be joined for an onstage conversation with filmmaker Anurag Kashyap. A screening of Ali’s 2014 film “Highway” will [...]

  • Morena BaccarinMetropolitan Opera Opening Night Gala,

    'Deadpool,' 'Homeland's' Morena Baccarin to Star in Espen Sandberg's Survival Thriller 'Beast'

    “Deadpool” and “Homeland” actress Morena Baccarin will star in the survival thriller “Beast,” to be directed by Espen Sandberg, who co-helmed Oscar-nominated “Kon-Tiki” and “Pirates of the Caribbean: Dead Men Tell No Tales.” Based on Aaron W. Sala’s Blacklist script, “Beast” is about a woman who survives a plane crash and is stranded on a [...]

  • Tiffany Haddish Variety Power of Women

    Tiffany Haddish, Willem Dafoe and Tye Sheridan Join Oscar Isaac in 'The Card Counter'

    Tiffany Haddish, Tye Sheridan, and Willem Dafoe have been cast in “The Card Counter,” a casino-set revenge thriller starring Oscar Isaac. Paul Schrader is directing the movie from a screenplay he wrote. Martin Scorsese also joined the project as an executive producer. It’s the fifth collaboration between Schrader and Scorsese, who previously worked together on [...]

  • EUGENE HERNANDEZ, DIRECTOR OF NEW YORK

    Eugene Hernandez Named New York Film Festival Director

    Eugene Hernandez will take over as New York Film Festival director, replacing former chief Kent Jones who stepped down in September. Hernandez, who serves as deputy executive director of Film at Lincoln Center, is bolstering his responsibilities to include strategic direction and leadership of the New York Film Festival. He will also serve on the [...]

  • Chris-Brancato-Giancarlo-Esposito-Carole-Bouquet-and-Zabour-Breitman

    ‘The Luminaries,’ ‘The Eddy,’ ‘Patria’ Set for Series Mania

    PARIS  —  “Narcos” showrunner Chris Brancato and “Godfather of Harlem” star Giancarlo Esposito, actors Carole Bouquet and Zabou Breitman, and the cast and crew behind the Canal Plus series “The Bureau” will be among the many guest of honor at this year’s Series Mania, which will kick off its 11th edition on March 20. Returning to [...]

  • Jakob Mejlhede Andersen

    NENT Studios U.K. CEO Jakob Mejlhede Andersen Steps Down

    Jakob Mejlhede Andersen, the CEO of NENT Studios U.K., is stepping down from the business, which operates the Nordic region’s leading streamer Viaplay. Mejlhede was appointed CEO of NENT Studios U.K. in October 2019 and was previously executive VP and CCO for NENT Group’s Viaplay. He also held the role of executive VP and group [...]

More From Our Brands

Access exclusive content