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Is This Decade As Good As It Gets At The Box Office?

Image via Krists Luhaers on Unsplash

As the decade comes to an end, one of the most disruptive trends over the last ten years has been the growth of streaming providers such as Netflix, Hulu and a slew of others and the effect they've had on the television and film industries. The number of streaming services consumers can choose from, which is currently well over 100, is growing at an exponential rate.

Streaming services have consistently poached customers from the television industry over the last decade. Nearly 25% of U.S. households are expected to cut their traditional pay television subscriptions by 2022, according to eMarketer.

Despite the popularity of streaming providers, the film industry had a record year at the box office as recently as 2018. However, as the decade comes to an end, 2019 will see U.S. box office sales fall short of last year's record year. Box office sales for the year are estimated to come in around $11.4 billion, a decline of more than 4% from last year's $11.9 billion. While 2019 is still likely to end up as the second-best year at the box office, it will mark the fifth downturn this decade.

Thanks to record movie ticket prices, the film industry is squeezing out record box office sales despite a decline in the number of people actually heading to movie theaters. Ticket sales peaked at 1.57 billion in 2002. In 2018, when box office sales hit a record $11.9 billion, the number of tickets sold had fallen to 1.3 billion. The average price of a movie ticket hit a record $9.11 last year. For comparison, the average price throughout the 1990s was less than $5 and has risen consistently for decades. To be fair for those who insist there is no inflation, the average ticket price in 1995 was $4.35, or $7.09 when adjusted for inflation, more than 20% cheaper than current ticket prices.

In another worrying sign for the film industry, the average ticket price declined to $8.93 during the third quarter. The year-to-date average ticket price stood at $9.08 through the third quarter, according to The National Association of Theatre Owners.

Amidst the rise of streaming services and changing consumer preferences, studios are increasingly releasing movies directly to streaming services. Most notably, Netflix released Martin Scorsese's highly-anticipated "The Irishman" after playing at indie movie theaters for less than a month. Disney, which recently launched its streaming service Disney+, released its Christmas comedy "Noelle" directly to the streaming service, bypassing movie theaters. The same day, Disney also released its remake of "Lady and the Tramp" directly to Disney+, becoming the first Disney remake to forego a theatrical release.

If Disney increasingly chooses to go this route, it could be the nail in the coffin for box office sales. Disney accounted for 38% of U.S. box office sales this year, with six movies grossing more than $1 billion. Thanks to an aggressive acquisition strategy this decade, Disney increased its share of U.S. box office sales from just 10.5% in 2008. Warner Bros. had the second-highest share of U.S. box office sales this year with a distant 13.8%.

While Disney and other studios will continue to show their most anticipated films in theaters for years to come, this year may go down as a pivotal year in the transformation of the film industry. There are numerous signs that the box office is increasingly facing headwinds. Whether it be renowned directors such as Scorsese favoring streaming, Disney seeing lackluster turnout for Star Wars or ticket sales peaking in 2002 while ticket prices start to decline, the box office may be the latest industry that gets disrupted.

Leftover Crumbs

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  • A big uh oh for WaWa. Convenience store chain WaWa is facing a slew of lawsuits following a data breach that affected all of the company's 850 locations. Malware was placed on WaWa's payment processing servers back in early March but was not discovered until earlier this month. "The data breach was the inevitable result of Wawa’s inadequate data security measures and cavalier approach to data security," said one of the lawsuits. WaWa will offer free credit card monitoring and identity theft prevention services to those who were affected. 

  • Too much government? Los Angeles Mayor Eric Garcetti is considering imposing a requirement on ride share companies that they use electric vehicles. The proposal is driven by LA’s goal of cutting its greenhouse gas emissions and reaching carbon neutral status by 2050. "We have the power to regulate car share," Garcetti said. "We can mandate, and are looking closely at mandating, that any of those vehicles in the future be electric."

  • Monopolies suddenly matter? The U.S. Department of Justice's antitrust division is reportedly concerned about Liberty Media's proposed acquisition of iHeartRadio. Liberty Media, which controls SiriusXM and Pandora, is seeking to increase its current 4.8% stake in iHeartRadio, which emerged from bankruptcy six months ago. Regulators reportedly declined to approve Liberty Media's plan immediately, saying they needed more time to review the implications of a deal.

  • Things you see late in a bull market. China's parliament approved an amendment to a Securities Law that will make it easier for companies to IPO. The amendment, which will go into effect March 1, removes complex and time-consuming scrutiny by regulators before companies go public. The amendment also contains a provision with stricter penalties for securities violations.