Do Increased Box Office Sales Tell the Whole Story?

Includes: DIS, DWA, PIXR, SNE, TWX
by: Kevin Maney

The MPAA just released a major report on the movie industry's 2007 performance, and most of the spin is positive. Box office sales climbed to $9.6 billion, the MPAA points out, a 5% increase that reflects a healthy industry.

But look a little deeper and the increase vanishes. The movie industry in general is fine because of other outlets, like DVD sales. The theatrical movie business, though, is not so pretty. The movie theater experience is simply not so much better than watching at home that it lures people out the way it used to.

First of all, the 5% increase is entirely because of price increases. The number of actual theater visits stayed exactly the same from 2006 to 2007: 1.4 billion, the MPAA report says. And the same report starkly shows that theater prices increased 5% in 2007. Considering rising population figures, movies are bringing in less per person than a year ago.

The report doesn't show the number of theater screens in existence. For that, you have to go to the National Association of Theater Owners, which reports that the number of screens has been rising. (Though 2007 figures aren't out yet.) This means that movies are bringing in less per screen than they used to.

At the same time, the average cost of making a film is up to $106 million in 2007, vs. $100 million the year before.

All in all, it's not a great economic model: costs are rising, the addressable market and number of outlets are rising, yet revenue is staying flat.

The MPAA insists that technology isn't to blame. Part of the report shows that consumers who own five or more media technologies (only 14% of the population) see way more movies than consumers who have less than five. The numbers aren't broken down further, but I suspect there might be more to it than the MPAA shows. People who own lots of media technology are generally voracious media consumers and have more discretionary income, and might tend to go to more movies anyway.

The average Joe who has a DVD player and a nice TV is apparently not going to a ton of movies.