01 Sep Film Fund-amentals: Autumn Light

You know it’s the end of summer when the air turns a little chilly, the leaves begin to change their colors, and Quentin Tarantino slithers out from under a rock somewhere and begins insisting that he’s still hip after all these years. Yep, woolen jacket weather has arrived.

Which also means that it’s time to begin sifting through the debris field of the major summer releases. It’s a job full of pitfalls, especially since the figures are rarely presented in any detailed manner.

In an August 24th posting at Variety, Pamela McClintock does a fine job of describing the Hollywood mega-drink glass as half full. I was, however, struck by a few little oddities in her presentation. It seems that admissions are up for the summer (over last year) by 2.6 percent to 2.7 percent (with the total for 2009 up by 6.5 percent), with admissions running behind last summer by only 3 to 4 percent and only a modest increase in actual ticket prices.

Huh? Which way is it? In truth, she just did a good job of deftly saying two different things at once. Everything is slightly up though it is also slightly down, but not to worry because it is still pretty cheap to go to the movies.

According to Variety, this means that the summer did OK despite the current economy. Strangely enough, what they’re describing sounds more to me like everything is at a flat line. But let’s look at some of these figures a little more closely. In fact, let’s actually look at some figures rather than at the strange percentage points without any underlying numbers that the business traditionally prefers. After all, maybe there are some subtle waves in this line that went right past me.

For example, what exactly is the actual increase in the cost of tickets? According to the National Association of Theater Owners (NATO), the average ticket price in 2008 was $7.18. For 2009, a rough general estimate would place the average cost somewhere around $10 (not counting the steep increase due to IMAX and 3-D presentations). This is actually a 28.2 percent increase in the price of tickets. With this large of an increase just to get in the door, you would expect a healthy market to be producing a pretty significant increase in revenue. The increase being noted by Variety is actually a major drop in revenue by most traditional forms of business accounting. In other words, fewer tickets are being sold at a higher price in order to barely produce the same level of income that was possible just a year ago.

OK, this flat line does have some waves in it. Bad, scary waves. The kind that throws surfers off their boards.

But let’s press this comparison a little further. Let’s actually compare the box office returns on some of the major summer films with their earlier models (since they’re all sequels, this is pretty easy to do). We will not deal with either Angels and Demons or Land of the Lost; in each case, even Variety has not been able to put on a happy face.

So let’s start with one of the few big hits of the summer. Transformers: Revenge of the Fallen has taken in $398.5 million (US box office) and is still — sort of — hanging in there. OK, that’s not bad. In 2007, the original film only took in $318.8 million (US). A pretty big increase, right? Maybe. Actually, when the 2007 figures are adjusted for inflation (based on the Consumer Price Index Inflation Calculator provided by the US Government), the actual figure is closer to $331.1 million. So the sequel actually did about 27 percent better than the 2007 film. But let’s remember that the actual cost of tickets have risen by 28.2 per cent within just the past year. Once this is adjusted, the sequel did slightly less than the original (and according to NATO, the average ticket price in 2007 was $6.88) – the figures do not get any better.

Harry Potter and the Half-Blood Prince is as close to a stable franchise as you can get this side of Campbell Soup. Currently, it has made around $294,407,000 (again, US box office) and is presently limping toward a slightly higher wrap. In 2007 the previous installment, Harry Potter and the Order of the Phoenix, took in $292,000,000 (US) which now adjusts to $303,279,080 (2009 bucks). Though the new movie should still be able to match this figure (eventually), the actual drop in ticket sales strongly suggests that it will have taken a dip in real revenue.

So skipping all of the positive spin (and slightly skewed presentation) of the figures, the data strongly suggest that ticket sales are in decline. Actual revenue is, at best, flat. When compared with recent years, there is a measurable downward trend, and the more the figures are correctly adjusted, the worse it appears. Obviously, business is down (despite what the MPAA and other Hollywood big heads claim) and most likely will continue down through out the rest of this year. It will not be until well into the fourth quarter that we can correctly measure how steep ticket sales have dropped, but I suspect that the decline will actually be in the low double digits (say 10 to 12 percent at least).

And that is when the chill of autumn gives way to an icy winter blast.