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David Poland

By David Poland poland@moviecitynews.com

The Slump Scam: 2011 Edition

Explaining reality to people who have made up their mind to believe an outrageous falsehood is hard to do. They really don’t want to hear it. Once committed to the falsehood, everything is seen through the twisted prism of that misunderstanding. And if the internet mindset has proven anything, it’s that people can twist any statistic into a “realistic” argument.

The single biggest problem with the lie of The Slump, same today as it was in 2005 and in every alleged min-slump since, is that you have to avoid the facts to maintain the fallacy. And not just one occurrence of an exception to the rule. But, this year, you have to avoid the numbers from a full half of the year. Of course – shockedshocked – those who want to maintain the fallacy keep piling on excuses to make their case.

Understanding a business model for an industry can, at times, just be about counting widgets. But the filmed entertainment business is not a widget count. You start with seven significant revenue streams, only one of which is well-reported upon, in the first year of the life of each film. (Domestic Theatrical, Foreign Theatrical, DVD Sell-Thru, DVD Rental, Streaming, Pay-TV, International TV) And this doesn’t include VOD, International DVD, etc, etc, etc. And this is just the first year of top revenue streams.

The fear of Home Entertainment, starting with the VHS, was that it would cannibalize the theatrical business. And indeed, it has. And DVD after it. It had to. And so has cable television. And the internet. And video games. Etc, etc, etc.

And still, the overall market has grown massively. The cannibalization has been relatively minor issue because the industry has monetized most of the anticipated cannibalization. So they get paid by cable/satellite, paid for DVDs, paid for streaming, paid for licensed video games, invested in both international production as well as infrastructure. Even with piracy, the European and Asian markets have seen more and more screens being built and higher and higher grosses.

But all those pieces of the revenue puzzle… hard to report on these days. Most figures aside from box office grosses are not made public. There are glimpses offered, now and again, usually in some self-serving way like a new record for sales or ratings or a big dollar deal with Netflix or whomever. But it’s not a weekly game where details can be pushed around like baseball stats.

So what do we get at the end of the year? Narrow slices of reality which are then obfuscated by big slices of excrement pie.

It’s a bit too easy, on either side of this discussion, to throw out stats. That’s how we got into this bastardization of journalism. Statistics and scoundrels, right? Instead of “yeah, but”ing each other to death, I’d love people to consider, as they discuss the macro view of the industry, some basic questions.

If April – September 2011 domestic grosses were up (and ticket sales were flat or a little up) vs last year… and before that January – March saw a massive fall off from last year… do we think that there was some sort of significant cultural shift on April 1? And if Q4 (Oct-Dec) was off marginally, was there another shift on October 1?

When you read about an ongoing slump, have you considered that if you only counted April on, the year would be up at the box office, including some remarkable numbers in both August and September? And if you haven’t, does it still sound like an industry-shaking situation?

Would it surprise you, amidst all this slump talk, that 2 of the 6 majors were up for this year, and third will end up about even?

Would it surprise you that WB is likely to end up being down for the year by a bit over $100m or about the holdover in 2010 of 2009′s Sherlock Holmes?

Would it surprise you that, in spite of not having an Alice In Wonderland kind of film in Q1, the difference between this year’s total gross at Disney and last year’s will be about the difference in domestic gross between Toy Story 2 and Cars 2? (Is this The Pixar Slump?)

Would it surprise you that the difference between 2010 and 2011 at Fox… and ultimately, the entire domestic theatrical box office… is almost completely made up of the $466m Avatar holdover gross?

It’s only when you fail to ask any detailed questions that it becomes easy to talk about “a slump” and to then start diagnosing reasons on the presumption that the patient is actually quite ill. (Hysterically, the same false reasons laid out in 2005 and being laid out again this week by a profoundly undereducated media group covering the film beat. That darn internet! Piracy. Streaming. And oh, those video games!)

Are there real problems with exhibition in the US? Absolutely. Do the studios continue to take actions that seem intended to create bigger problems with exhibition in the US? Absolutely. Is there reason to think that people have gotten out of the habit of thinking about movies as a theatrical experience beyond their first 4 – 6 weeks of release? Absolutely. And is the fault for that the structure of business and intention to speed up the process by the studios? Absolutely.

But is there ANY reason to believe that people are sick of going to the movies and this is an ongoing problem on a cultural level? None at all.

There are flops in 2011, as in any year. But there have also been a parade of great box office surprises. From Fast Five to Bridesmaids to The Help to Horrible Bosses to Bad Teacher to the 3d re-release of The Lion King, who would have seen any of it coming?

It’s also fashionable to write off 3D right now… and there are some good reasons for that. But you also have to look at the fact that 6 of the year’s top 10 domestic grossers were available in 3D. You have to recognize that both Thor and Captain America did about what the non-Iron Man Marvel-made movies have done… plus the 3D bump, making that bump pretty profitable. And of course, overseas, 3D is still on the rise.

This doesn’t mean that the 3D train won’t crash in the rest of the world next year and that it will become, as it should be in my opinion, a tool for certain movies that is not ubiquitous, but a special thing for certain filmmakers. (I am excited to see Prometheus in both 3D and 2D.)

But all of these issues have been simplified to death by a media that doesn’t seem to want to do anything but to answer their questions with their own predetermined answers.

I’d love to have a major paper or NRG or someone do a serious trend study on filmgoing. But instead, we hear from this distributor or that producer about how bad things are while their movies are flopping and forget to ask, “Where was The Slump when you had a surprise hit 6 months ago?” It seems pretty basic, no?

29 Responses to “The Slump Scam: 2011 Edition”

  1. JS Partisan says:

    The slump is complete and utter bullshit, but what’s not bullshit is how totally BLAH this year has been. Do people want to write that story? Nah. It’s better to write about a slump then these movies boring people this year. Seriously, it’s been a blah year. A complete and totally blah year and that should be the story: how Hollywood went Mendoza Line with their films this year.

  2. Joe Leydon says:

    Just curious: Has anyone done any sort of demographic analysis to see whether there’s been any significant year-to-year decrease in moviegoing by people in certain age brackets? Foe example: Are the people in the 18-to-25 bracket now going to movies more or less than people in the same bracket 10, 5 or even 3 years ago?

  3. tsuru says:

    The rosy picture the studios paint is based on total gross in current dollars. Its all about inflation and population. In fact, when you look at actual ticket sales per capita, interest in theatrical distribution has been declining since the 1930s, about 1 to 2 percent per year. You can make billions on a sinking ship, but it is most definitely sinking.

  4. David Poland says:

    Oy. Like I wrote, people who are committed to not getting it will fight reality to the end.

    It’s nothing about inflation or population. It’s about the ENTIRE bottom line. Always has been. The difference between now and the 30s is that there ARE other revenue streams.

    I honestly feel the media’s failure to paint a full story is responsible for a probably smart person like you having these bizarre ideas.

  5. brack says:

    Great post, David.

    I wonder how much of a bump home video has gotten with the rise of Blu Ray. As a film lover, I’m finding myself watching way more movies on tv or Blu Ray, streaming, etc simply because the movies look and sound so much better than ever at home.

  6. Foamy Squirrel says:

    Okay, let’s turn this around – what WOULD a slump look like then?

    Because the entertainment industry is “lumpy” (in the sense that relatively few products are in the market at any time) there will be a high amount of variability. Which is what we’re seeing now, and will always see – regardless of any up or down trends in the industry. You dismiss the variability on the basis that some switch can’t be flicked on April 1 – but how would you consistently compare seasonal variability on a year on year basis? Just extend the season if a smash was still in theatres, so you end up comparing 90 days to 115?

    And the argument “It’s the films, stupid” has a lot of circular logic in it – “The reason X season was up was because it had a lot of hits. The reason Y season was down was because it had a lot of flops”. ORLY?

    We can say X movie “didn’t have the same interest” and so wasn’t as successful as Y movie, but that’s only with hindsight – in effect, the fact that a movie takes in X dollars becomes the reason it takes in X dollars. We can say that obviously 2010 Q1 was up because of Avatar holdover, but where was the $2.7billion worth of “interest” or inherent “hit movie”ness prior to its release? Witness the number of naysayers who couldn’t predict the massive success of Avatar – and even those who thought it would be a smash were over a billion dollars off in their estimates.

    Show what a slump would look like, in a real context, that couldn’t be dismissed with the same arguments you’re using now. I’m not saying there IS a slump (nor that there ISN’T), I’m just saying your argument is as goalpost moving as you claim the other side is.

  7. Geoff says:

    I think you could at least say that there has been a slump based on genre – family films significantly underperformed ALL year, animated or not. The only major family film that I can think of that actually over-performed was Smurfs. Kung Fu Panda 2, Cars 2, Happy Feet 2, Puss in Boots, Muppets, Rio, The Zookeeper, Rango…all of these films pretty much grossed at least $30 million less than expected.

    Now you can say that the scheduling screwed them a lot and sure thing, there was a complete logjam in the spring and the fall, but….

    Look at last summer: Toy Story 3, Karate Kid, The Last Airbender, Despicable Me all opened within a month of each other and all of them made mad cash. The family market actually expanded in that case.

    You could also say that one genre overperformed: R-rated comedies. Bridesmaids, Horrible Bosses, Bad Teacher, and The Hangover II all met or far exceeded expectations. But it wasn’t enough to make up the difference.

    Who the hell knows what a slump actually looks like? But to contradict something you have reiterated in the past, Dave, there certainly ARE trends to watch.

  8. palmtree says:

    Even if there’s no slump per se, the movies were indeed not spectacular. Aside from the indie and small film world, what big budget movie was nearly as galvanizing as Inception or Toy Story 3 or, hell, even the King’s Speech? And similarly, many of the big movies that were supposed to hit did only moderately to lousily (Green Lantern, Captain America, Cars 2, Kung Fu Panda 2, etc.)

    I feel like the slump theory isn’t so much about the industry as a whole but the lack of a big definable cultural iconic hit. If the press had that one film they could latch onto, then we’d be hearing about a great year for film. Fast Five and The Help were breakouts, but seemingly not across the culture as a whole like Avatar, etc. That accounts for the savaging of the data to match with the cliched notion trouted out every year that Hollywood is out of ideas.

  9. LYT says:

    Did The Last Airbender REALLY make mad cash? I thought if that were the case, they’d be starting the sequel by now, no? The ending certainly implied one was expected.

  10. hcat says:

    ‘ interest in theatrical distribution has been declining since the 1930s, about 1 to 2 percent per year’

    Since American’s interest in Junk Food has been rising at the same rate each year and theater owners make half their money on concessions you could argue that theatrical exhibition is as vibrant as ever.

  11. Geoff says:

    LYT, The Last Airbender cost about the same as Tin Tin and Hugo – if either of those films made as much as it did, their studios would be ecstatic, right now.

  12. Tom says:

    @Palmtree: Um, Harry frickin’ Potter?
    @Geoff, I certainly wouldn’t call Muppets an underperformer. It made much more than its budget and much more than Muppets in Space did. It essentially was the Batman Begins of the Muppets. It rebooted the franchise so that the next film can be an even bigger hit. Also, you forgot about Gnomeo and Juliet, which did quite well.

  13. LexG says:

    Eh, I’m-a risk it.

  14. tsuru says:

    Mr Poland, I was responding specifically to your comment:

    “But is there ANY reason to believe that people are sick of going to the movies and this is an ongoing problem on a cultural level? None at all.”

    Its simply false. There is no question that interest in theatrical distribution has been declining. The data I referred to is on the web: at Box Office Mojo and the US Census Bureau.

    You were talking specifically about “going to the movies,” NOT other revenue streams. Before you accuse people of having bizarre ideas, you should do some homework.

    In addition to the overall long-term trend, according to Paul Degarabedian ticket sales this year are at a 16 year low.

    hcat: thats funny about the popcorn.

  15. Johnnie says:

    All the films we’re considering when deciding if a year is a success or a failure are tentpoles and sequels. Studios need to get out of the tentpole business and stop trying to grow their industry on the backs of kids who have become too distracted to be consistently dependable as ticket buyers. There are three other quadrants that a film can hit, you know. Studios need to get into the “good movie” business. Christopher Nolan had to hit two monstrous tentpole home runs before Legendary and WB (etc.) would even consider bankrolling an original from him (a “something original” that was a huge worldwide hit). Filmmakers shouldn’t have to go through so many hoops before a skittish, terrified, job-protecting studio will trust him.

    You realize there was a time when Star Wars was completely original and not a sequel…

  16. cadavra says:

    Movie-going will never again reach its historic levels. Boomers have been driven away by a lack of quality films and theatres full of talking/texting kids, while those kids aren’t interested in anything that doesn’t fart or explode. Families can’t afford sky-rocketing ticket costs (in the Depression, theatres cut prices and gave away dishes and such to get people back), preferring to wait for the DVD three months later, a theatrical window hugely shortened by studios who don’t want to pay for a separate, second ad campaign. And of course, people in general have a lot less money for leisure activities. Throw in the internet and rampant piracy, and you’ve got a recipe for continued decline. In time, movies will become the equivalent of live theatre: an occasional event.

  17. hcat says:

    Movies will never again reach historic levels because people have central air.

    Comparing todays movie going with the 30′s seems to be a reach to me. It was an entirely different culture and population then (not to mention entirely different Hays approved content). The Eighty year decline has been compensated by rising movie prices and there is still enough demand out there that people pay them. If anything, think of all the constant threats theatrical has faced outside of regular business and financial cycles – Television, Home Air Conditioning (guffaw if you like, but summer movie going was driven more by tempature over titles for a long time) Pay Cable, Home Video, DVD, the internet. So yes, there is a steady eighty year decline in attendance per capita, not revenues. But this is hardly a reason to think that theatrical is going to go the way of the rotary phone and typewriter anytime soon.

    What was lacking this year was an EVENT. Something like Avatar or Big Fat Greek Wedding or Passion that gets people that normally do not go to the theater into the seats(What was the stat from the MPAA report last year, about a third to half of the US pop never enters a movie theater?). Event films like these expand the audience for a short term basis and then it shrinks back to its normal level.

  18. hcat says:

    And I just want to say I agree somewhat with what Johnnie says above. No one wants to make a King Kong anymore they just want to remake King Kong.

    But the flip side to that arguement is Dark Knight, True Grit, and Rise of the Apes. Three very popular movies based on existing material done well. As long as there is thought and talent brought to the material, audiences wont care if the story is familiar (my own must see list next year is a semi-prequel, comic book sequel, Gatsby remake, and the 137th entry in the Bond series). I would also like to see more original stories, if there indeed are such things, but excecution matters more than source material.

  19. Johnnie says:

    hcat,
    My issue is not with studios making sequels and tentpoles. In fact, I would argue that tentpoles and sequels are handed to more exciting directors than any previous time in contemporary cinema (Kenneth Branaugh directing Thor? Love it!) My issue is with studios DEPENDING upon sequels and tentpoles as the ONLY means with which to operate their businesses. Rich Ross has publicly stated that Disney is only interested in making makes sequels, tentpoles and films that can be spun out into theme park rides. I have no respect for that. If you want to make The Muppets (which I loved), than fine. But to say, “original material is no longer in our business plan” is just horrible.

  20. hcat says:

    I agree that Disney’s tentpole strategy is terrible from a movie fan standpoint (though I find it fascinating to watch the numbers). But honestly has Disney ever been any different? How many Shaggy Dogs have there been, how many Absent Minded Professors? With the exception of a number, not the entirity, of their animated stuff, Disney is and has always been a shithole that sells bland entertainment to families in order to cash in on their name to sell bland products to the same families. This new strategy of familiar product to sell merchandise is the same one that led to five Herbie movies, three Mighty Ducks, and countless direct to video sequels. They are just now doing it on a larger scale.

    So I get what you are saying about tentpoles and originality, and I do mostly agree, but I don’t think the case can be made with Disney as an example.

    As for the other studios, tentpoles are now simply the business, when you can make half your revenue on one worldwide hit why would you attempt to make 18 smaller ones instead? Quality is decided by ticket sales and while a studio will be proud of a breakout hit like the help, every last one of them would rather have a blockbuster like Transformers.

  21. palmtree says:

    Tom…Harry Potter….snoooze…

    Don’t get me wrong, it was a fine movie for what it was. But everyone who was going to see it saw it. Did it reach out to non-HP fans in any real way? Did people say you had to go see it for any reasons other than it’s the last HP movie?

  22. Johnnie says:

    This is all theoretical, of course, but I’m not sure 1 Transformers is better than 18, let’s say, mid-grossers. 18 mid-grossers are 18 opportunities to generate money in ancillary. And I don’t think Transformers has long-term value. Nobody will be renting/streaming Transformers in five years because those movies are terrible. What movies like Transformers really do is make the studio’s quarterly stock report look better so they all keep their jobs. Execs pray at the altar of short-term success because by the time the public stops renting, streaming, thinking about, yesterday’s Worldwide Blockbuster, they’re onto the next gig. Good films, the theoretical 18 mid-grossers, retain their value as library content for years and, sometimes, decades.

    I’m editing my comment to clarify something: I’m not against sequels and tentpoles. But they should be part of a studio’s slate, not the entire slate and certainly not the entire reason for a studio to be in business. To attempt an analogy that I admittedly haven’t totally thought through, imagine a restaurant that only served main courses, no appetizers, no side dishes, no drinks and no desserts. That restaurant would often serve delicious food. But sometimes the smaller components are more memorable, provide more choices and, therefore, inspire one to return. Of course, as long as that restaurant isn’t, you know, Golden Corral!

  23. hcat says:

    Looking back 5 years at say Fox, which had Night at the Museaum as their winter tentpole, you are suggesting that Museam will have a shorter shelf life for cable plays and streaming than their midrange films Eragon, Deck the Halls, and a Good Year? That those three combined will evantually play to tortise to Museam’s hare in terms of revenue? Which is the bigger asset to the library?

    Stranger Than Fiction and Holiday are more prevelant today than Casino Royale and Pursuit of Happyness.

    We are Marshall and Blood Diamond over Happy Feet.

    But to be honest I don’t know why I am harping on this since I do agree with your above comments about originality and variety. Its just I keep latching on to little bits of your examples. Maybe I should get back to some actual work.

  24. Johnnie says:

    Screw that. Working sucks!

    But you actually make my overriding point. There are no sure bets in film. Ever. Some years you cry over Green Lantern and other years you jump for joy over Holiday. So when you spend $200M all-in on Cowboys & Aliens and presumptuously start popping corks, you’re screwed when it underperforms. Spreading the risk amongst big films, mid-sized films and small films (teen comedies, kiddie fare, etc.) means there’s a better chance of yearly recoupment if one fails.

    Anyway, we’re the only two people on this thread anyway, so it’s back to work.
    LONG LIVE TRANSFORMERS!

  25. Joshua says:

    Geoff: The Lion King 3D was a family film that outperformed expectations this year.

  26. John says:

    No one knows anything about the motion picture business.

  27. Pete R. says:

    I know there’s at least one place where the endless fixation on industry “trends” will the proper burial they often deserve.

    So now that we’ve firmly (excessively?) slayed the dragon of the false paradigm-enslaved film journalists who pervasively nurture these ill-conceived notions of a recent “slump,” much like the phantom lull of 2005, I’d like to ask, can you cite a slump in the past decade that few will argue was a genuine, bona-fide downturn? (I know, I wouldn’t be asking if I’d just read your work more regularly. I come most unprepared and I apologize.) I think it would be most instructive for the king of the trend-slammers to show us what a real slump looks like, and more importantly, how and why.

  28. David Poland says:

    Well, Pete… the DVD downturn was apparent for a couple of years before it became a story the media was willing to discuss.

    It was a major bubble, blown up at record speed by studios who were truly experiencing a medium that not only generated a multiple of theatrical just months after theatrical, but made library values skyrocket as well.

    In the last couple of years of the illusion, overall numbers were buoyed by the release of TV libraries? Most of which had been vaulted for a long time, creating some really passionate interest. And then they got to the other 90% of the TV libraries and it became a numbers game, releasing so many box sets that the overall number didn’t drop much. But it was a scam. The devaluation of DVDs started eating into sell-thru about 4 years in. But for 5 years or so, a movie really did have a hard time losing money.

    Studio pricing wars were a big part of killing DVD as a cash cow, including the shortening window and pricing, starting with overflow pricing of used discs at Blockbuster.

    Another trend down that was not much written about was the death of 2nd run theatrical around the time when the exhibitors were “all” declaring bankruptcy. There were real estate issues and exhibitor issues contributing to the thinning of what had been a not-insignificant business, often contributing 10% of domestic gross or more.

  29. storymark says:

    “Okay, let’s turn this around – what WOULD a slump look like then?”

    Was this ever addressed? Im looking, not seeing it.

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