Last year, we discussed the economics of the movie industry, the industry’s post-pandemic change, and the “downstream dangers” that were escalating from the actors’ strike (Box Office: The Barbenheimer Phenomenon Persists). Those dangers realized themselves in Q4 as the limited release slate resulted in an anemic box office total for Q4 2023 of $1.8B, down -$1.1B from the pre-pandemic run rate of $2.9B. Moreover, the $1.8B includes the completed Hail Mary passes to the exhibitors from Taylor Swift ($180M) and Beyonce ($34M)--films that were not initially planned as part of the season’s releases.
Compared to 2022, the Q4 box office was up +4.6% year-over-year in receipts and roughly flat in attendance. In terms of the major exhibitors, it looks like Cinemark and the independents took share based on Placer visitation data. Cinemark taking share is a welcome development for the brand, as it lost share during Q2 and Q3. As it relates to the independents, we suspect that the dynamics of concert films gave independents an advantage (i.e., the “party” could be a little livelier).
As a reminder, the Hollywood strikes lasted from May to October, taking out six months of development and production time. Obviously, November and December are holiday months which creates limitations. As such, production schedules are just now starting to move, with reports that production workforces are still down meaningful in January versus prior to the strikes. That leaves the first half of 2024 with a large air pocket in new releases. The box office is expected to be down high-single-digits in 2024 ($8B versus $8.9B in 2023) with the first half of 2023 down nearly 20%. Q3 2023 laps difficult comparisons from Barbenheimer, but Q4 2024 should shine. 2024 will see around 90 wide-releases, fewer than the 99 in 2023, 91 in 2022, and 119 in 2019. Q1 2024’s biggest releases should be Dune: Part Two and Godzilla X Kong: The New Empire. A tailwind for this year’s releases will be stars promoting their releases, which was restricted during the actors’ strike; a dynamic that many blame for 2023’s shortfalls. Additionally, the average quality of the top 10 highest grossing films in Q4, as measured by Rotten Tomatoes, was the second lowest Q4 in the last decade. We suspect that films were rushed to release once the strikes were resolved, undermining their quality. That dynamic should be resolved for releases in the second half of 2024. 2025 will benefit from having more releases pushed into it, releases that will show the full craft of their writers and actors because they will have been given sufficient time to practice it. Disney CEO Bob Iger has been very transparent over the past year that its studios pushed too hard on volume at the expense of craft.
In terms of the bigger picture, a recovery in release volume still looks to be a couple of years away. Compounding that are genres that studios have historically used to produce big results and high returns--kids and superheroes--are now wobbly. While new “studios” for box office releases have emerged–Apple, Amazon, and Netflix--and will add volume, the financial pressures on the “old” studios have meaningfully intensified this past year. Unfortunately, the only way out from those pressures is consolidation for the purposes of reducing expenses. Reducing expenses means reducing volume. As such, the years beyond 2025 are very much to be determined.
