It sure looks that way as exhibition and studio execs prepare to head to Las Vegas next week for the annual confab. There are no obvious, explosive controversies to address this time out — which is unusual. Since 2011, when the meeting formerly known as ShoWest became CinemaCon, “some big issue has blown up,” Cinemark CEO Tim Warner tells us. “I hope that doesn’t happen [this year] because the business is going so good.” Says National Association of Theatre Owners CEO John Fithian: “Sometimes we go into these conventions we go into this with one or two issues, but that’s not the case this year. We’ll be talking about product supply and movies, and how it relates to product returns. We’ll also be talking about technology.”
This all comes as the exhibition business is poised for dramatic, and possibly painful, changes as owners deal with consumers who say that ticket prices are too high, a creative community that wants better projection and sound quality, studios that want a bigger share of the box office pie, and investors who demand higher dividends.
Cheerleading is to be expected at a trade show, and there’s sure to be a lot as execs look ahead to a tsunami of sequels that could make 2015 a blowout year for box offices. Paramount, Universal, Sony, Fox and Warner Bros will show their product reels. Disney will feature its Jon Hamm-starring sports-themed Million Dollar Arm. Not to be outdone, Lionsgate will feature its sports-themed comedy-drama Draft Day from director Ivan Reitman and starring Kevin Costner, while Universal swings back around with a screening of the comedy Neighbors about newlyweds with a baby who must live next to a fraternity house. And filmmaker Chris Nolan (Inception, The Dark Knight Rises) will take part in a discussion about his career. The late Tom Sherak will also be honored on Wednesday night at The Pioneers Dinner.
On broad-stroke matters, exhibitors can pretty much cross off their top concern from last year: the dearth of family-oriented titles in Q1 followed by a summer onslaught. Exhibitors wanted family films spaced out better. “We had encouraged the studios to think about that more, and they did,” Fithian says. Family fare from this year’s early months included The Nut Job, The Lego Movie, Mr. Peabody And Sherman, and — this weekend — Muppets Most Wanted.
There’s also been progress on exhibition’s call for more small- and medium-budget movies. As the six big studios cut their output by 40%, “we’re encouraged to see other entities stepping into the fray,” Fithian says. He pointed to the new studio created by Bob Simonds, TPG Growth, Hony Capital and Gigi Pritzker, which plans to produce four, star-driven movies in its first year the $20M-$60M range. After that it will be six films the following year (2016) and then eight a year moving forward thereafter. The marketing and distribution budget on average of $35M domestically. “Additional content coming into the marketplace is great news for distributors, especially from such veterans,” Warner says. His message to them was to remember that “it’s a 12-month-a-year business.” The new studio, which will be hiring 63 employees – most of them in distribution and marketing – negotiated separately with each exhibitor for terms and screens. By making deals with exhibition, it gives the new entity credibility and comfortability to any filmmakers and stars that get into business with them.
Fithian says that Open Road Films — which was formed three years ago by the two biggest exhibitors, AMC Theatres and Regal Entertainment Group — also is helping to fill that mid-market niche. Its most successful film so far, Nut Job, has grossed more than $62.1M to date.
Per usual, technology companies will be all over CinemaCon, urging theater owners to invest in state-of-the-art audio and projectors that use laser light and offer high frame rates. But exhibition companies will cast a gimlet eye on these products. “We’re looking at everything [in terms of] what helps sell tickets and what doesn’t,” Fithian says. They need a payoff: It’s unclear whether theaters can continue to raise ticket prices after the average consumer outlay increased 2.1% last year to a record $8.13 — and as per-screen attendance at the major chains fell slightly, continuing the slide that began in 2002. There’s also a growing sense that technology has been overhyped as consumer enthusiasm for 3D movies begins to fade, and moviegoers shrugged at what some described as the cold look of director Peter Jackson’s high-frame-rate version of The Hobbit: An Unexpected Journey, released in 2012.
Theaters also are watching each dollar as they prepare to see subsidies expire for their transition to digital projection. That will begin slowly but ramp up over the next five years. “We are 93% digitally enabled right now in the U.S. and Canada,” Fithian says. The six biggest studios should save about $2B a year domestically as they distribute films via satellite or hard drives instead of reels of celluloid. To help exhibitors make the change to digital, studios had agreed years ago to pay a so-called virtual print fee — a subsidy that ends once the cost of digital equipment is recouped. Warner says that’s OK because “it was designed to go away, and it worked really well.” The switch to digital helped his company to create its Cinemark XD large-screen venues and “that gets great returns on investment.”
Theaters will continue to benefit from the new technology. “3D was enabled by a digital alternative product, and that allowed us to show all kinds of opera and music events that we haven’t been able to show before,” Fithian says. Several sessions at CinemaCon will deal with alternative content that might help exhibitors fill seats on weekdays when attendance is low. Execs also will hear updates about the Digital Cinema Distribution Coalition’s efforts to promote satellite delivery of content. “That will take a lot of cost out of the system,” Warner says.
Big-budget films remain the main attraction, though, and studios no doubt will hype the fact that 2015 is going to be crazy with tentpoles. The parade of sequels includes Avengers: Age Of Ultron, Mad Max: Fury Road, Fast & Furious 7, Jurassic World, Terminator: Genesis, Fantastic Four, Ted 2, the untitled next Bourne film, James Bond 24, Star Wars: Episode VII, The Hunger Games: Mockingjay, Part 2, Alvin & the Chipmunks 4, and Mission: Impossible 5. There’s also Fifty Shades Of Grey, Marvel’s Ant-Man and Assassin’s Creed.
Good news for exhibition? Sure. But Hollywood also wants a big payday from the potential blockbusters, and “studios could push for a larger cut of these films’ box office receipts,” Maxim Group analyst John Tinker notes. Theater execs who emerge bruised from those tough negotiations might feel a new sense of urgency to consolidate. More than 1,700 screens changed hands in 2013, and Regal CEO Amy Miles told analysts last month that “there is probably about another 2,500 to 3,000 screens now again trying to find an accretive deal.” The four biggest exhibition chains control 49% of all screens, while the five next largest account for just 6%, Barclays Capital’s Kannan Venkateshwar observes.
But CinemaCon’s charm comes from the way it mixes movie glamour and high finance with prosaic concerns. While studios attempt to dazzle execs with previews from their upcoming releases, many might be more impressed by the options they discover on the trade show floor to fill their theaters with reclining seats, restaurant-quality food, and — a potentially hot-button issue — liquor. Carmike, for one, has applied for liquor licenses at theaters that account for about 10% of its screens.
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