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How dire is the Hollywood collapse?

David Tiley

US ticket sales are the worst in 25 years. There is thunder in the mountains but no agreement on the storm to come.
How dire is the Hollywood collapse?

Dragged from their subterrranean pleasure palaces by industry accountants, a pair of US studio execs face an angry mob at the gates, chanting and waving their netflix subscriptions. Image: actually Valerian and the City of a Thousand Planets.

Exactly twelve months ago, the  New York Times published an article about problems with the summer box office for 2016. 513m tickets were sold, down 3.5%, although increasing prices seems to have sustained box office, which was $4.49b, level with the previous summer in 2015. But over the twelve months to that September, takings were up 5% to $8.11b, and attendances rose by 1.2%. 

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The summer takings were sustained by hits, which I have turned into a chart. After this four, the next film is Jason Bourne which took less than half Suicide Squad's returns. The figures fall off a cliff, so there were just four key tentpole films that kept everyone calm, along with some lower budget films. 

These films rely heavily on international box office; except for Suicide Squad, this is strongly helped along by China. 

There were, however, a staggering list of flops that ensured profits for the summer were well down for the studios. There were six franchises or sequels that bombed, and two tentpoles with prospects for repeat business - Tarzan and Warcraft. You can see the whole range on Box Office Mojo.

This year, the same story of decline and disappointment is back, but the figures are much worse. Here are the Box Office Mojo headlines - 

July 2017 Box Office Marks Third Straight Month in Decline

Summer Slows to a Crawl as 'Hitman's Bodyguard' and 'Logan Lucky' Debut

Summer 2017 Closes Out with the Worst Labor Day Weekend in 17 Years 

Returns are down15.7%, with the total at US$3.78b; this is the first time in ten years that the figure has been under US$4b. In our terms, that figure is $4.75b, while US$4b is $5.03b. Do a constant dollar calculation and we discover the figure so far compared to ten years ago is actually $1.63b in AU$ . 

According to Hollywood Reporter, the failures cost Hollywood an extra US$500m, and tickets were the worst in 25 years. Forbes - normally pretty sane - claims these are the worst figures since at least 1980, which is 37 years ago. 

In Australia, the 2017 box office is consistently lagging behind 2016; the cumulative take from the top ten films is down from AU$318m to AU$295m, which is around 6%. We can go even further, because Lion and Dunkirk have introduced two non-US titles into the set, so the American take in that top ten is down to $250m for the first seven months of 2017.

The lessons?

Franchises are not doing well. Studio pictures are being saved by higher takes from around the world - but those are being saved by China. Take that market away and the figures look much worse.

However, the system works on a small set of pictures which cost a big chunk of money to make and distribute, and a couple of dogs can make the results look pretty dreadful. Deadline points out that the box office was 4% up before May so the problem exploded over summer. The studios failed to work the holiday weekends with their usual acumen, climaxing with the Labor Day weekend which finished yesterday. And, Deadline says bluntly, 'The R-Rated comedy is broken.'

But, production does not a value chain make and the exhibition companies have been badly hurt. By the middle of August, the share price for AMC had plunged by 55% in fifteen weeks, while IMAX bled 40% and Regal dropped 29%. 

Bloomberg claims that Warners, Universal, Apple and Comcast -  Disney is an exception - are likely to insist on a deal with the cinema chains which forces a holdback period of only weeks. Then the VOD folks release a premium cost production which streams into homes, and splits the revenue with the chains.  What that does to the indy cinemas does not feel good. 

However, all this is likely to be overshadowed by the role of China. Last year the Chinese box office began to drop, leading to dire predictions, but we can see now that the Chinese market has continued to stabilise the US studio returns and is the highest ever. However, the Wanda Group is the majority owner of AMC Theatres (and Hoyts) and is under intense pressure from the government to pull back on its ambitious media growth, while founder and chairman Wang Jianlin is no longer allowed to leave China. 

The conclusion so far? A messy summer, which could be redeemed by a strong fall and winter, with pictures like the Stephen KIng story It on the catapault. The studios are not going bust, and the tentpole strategy continues to work. But the wobble had better end by the end of 2017, or financiers are going to realise that the studios have locked themselves into a 2018 schedule which the audience has rejected. So we watch and wait.

It is possible that the 'worst ticket sales in 25 years' could be a sign that something crucial broke this summer, and the audience will never come back. 

Here is a rough chart of success and failure. Once again we see the power of the overseas take and the staggering role of China, but I think these figures are generally substantially higher than 2016. I haven't been very complete because some of these films are still in play, and the analysis of returns versus budget is worth another article. Figures are all in USD. 

Here are the trailers for those four dogs... you might need a lie-down afterwards. 

 

 

  

 

The budgets are instructive. 

Baywatch - $69m; Dark Tower - $60m; Arthur - $175m; Valerian - $200m. These are estimates, but two of them seem comparatively sane, while the others needed all the cards to fall the right way. 

About the author

David Tiley is the editor of Screen Hub.

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