Screen Engine/ASI: What’s Behind the Summer B.O. Slump

Screen Engine/ASI: What’s Behind the Summer B.O. Slump

The summer box office came up short in 2017 and a variety of theories have been circulating inside Hollywood as to the cause of the decline. On average, the top 20 movies released between May and August of this year opened to revenues that were 15 percent lower than the set of top films that opened between May and August in 2016. Such a rate of decline is dramatic by any measure, but what are the causes?

“Audiences have gotten smart to the marketing, and they can smell the good ones from the bad ones at a distance,” one studio executive noted. “People are just beginning to wake up [such] that what used to pass as summer excitement isn’t that exciting, or that entertaining. This is vividly clear in terms of the other choices that consumers have.”

While these quotes ring true for many, they are from a New York Times article published twelve years ago, when the summer box office slumped by just 9 percent YOY.

Declines in one type of entertainment behavior are typically offset by gains in another kind.  Back in 2005 the culprit behind the theatrical decline was video rentals. At the time, Blockbuster Video spent $60 million advertising its “no late fees” subscription model and created a temporary surge in rental transactions (profits did not surge).  Since then, DVD has given way to more convenient, affordable, and comprehensive options. (Remember when you couldn’t get the movie you wanted at Blockbuster?)

Greg Durkin                             Screen Engine/ASI

Along with the rising popularity of streaming video, the past year also saw a stark rise in Amazon Fire TV and Roku devices , including TVs with built-in functionality. Accompanying that rise in OTT hardware was a spike in searches for “kodi firestick, ” as a faction of consumers have discovered that it’s easier than ever to stream from file-sharing services straight to their TVs.

Headlines have covered how streaming video growth has impacted linear television viewing, and why Nielsen is modifying how it counts viewers, but relatively little has been said about the impact on theatrical box office revenues.

Source: Screen Engine/ASI

Screen Engine/ASI has tracking studies designed to measure how television, streaming video, physical home video, and theatrical interact with each other. Such research confirms that streaming video stick ownership has nearly doubled within the light moviegoer segment over the past year. This same segment of light moviegoers recorded a 100 percent increase in watching content for free without ads on file sharing sites, year-over-year.

Despite these realities, Rotten Tomatoes, not streaming video, has been the scapegoat for this summer’s box office decline. The average critic rating for the top 20 films from each summer is comparable (59 percent in 2016 and 58 percent in 2017), but the belief is that consumers are paying more attention to critics and aggregator reviews, and this shift is translating into box office declines.

Screen Engine/ASI has conducted an exhaustive exploration of the influence of reviews using a wide array of data and a variety of modeling techniques, and results vary widely by audience segment. A great way to understand why the market declined is to look at how the audiences differed.

PostTrak™, the collaboration between comScore and Screen Engine/ASI, intercepted more than 85,000 verified moviegoers across the past two summers and a number of differences were evident…
— Moviegoers reported a large increase in streaming video usage year-over-year.
— Audiences didn’t perceive a dramatic change in the quality of movies across the two summers
— The largest declines in revenue were from Hispanics and 18-to-34-year olds.

Hispanic audiences are an important segment for the movie industry, especially for horror, family, and animated films. Domestic demographic trends, increased studio marketing efforts and strong representation in major movie markets like LA and NYC have contributed to a rising Hispanic movie market in recent years.

Though Hispanics account for roughly 18 percent of the U.S. population, they represented an average of 22 percent of the audience for the top 20 films this summer, ranging from 30 percent for animated The Emoji Movie (Cars 3 and Despicable Me 3 also had very strong Hispanic representation) to 14 percent for Dunkirk. Last summer, the average was 24 percent, with a similar range: The Conjuring 2 at 34 percent and Star Trek Beyond at 15 percent.

But these ranges and averages don’t consider the size of the opening weekend revenues. The opening weekend box office revenue attributed to Hispanics for the top 20 films of this summer was down more dramatically than it was for other segments. Though the segment typically accounts for closer to 20 percent of the audience, some 34 percent of the decline in opening weekend box office revenue for the top summer releases can be attributed to Hispanics.

Source: Screen Engine/ASI

Over the past 10 months Hispanics have altered public behaviors, like going to a movie theater, in ways that differ from Caucasians. There have been reports of Hispanic consumers declining in other retail sectors, so seeing evidence of a decline in theatrical ticket sales isn’t hard to believe.  It’s worth noting that Hispanic box-office has a weak correlation with Rotten Tomatoes critic scores, and a considerably lower correlation than critic scores have with other audience segments.

Whether the culprit is Rotten Tomatoes, streaming video, declining retail spending among Hispanics, or all of the above, studios and exhibitors need to update their strategies.

Greg Durkin is EVP Analytics and Innovation, Screen Engine/ASI.

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