Often our industry seems so driven by the pursuit of novelty, emerging territories, new audiences and golden opportunities that it’s easy to overlook established markets — none moreso than the US. David Hancock scrutinises the Domestic box office.
Words: David Hancock/IHS Markit
While the cinema world’s focus is on emerging markets and driving new growth for rights holders and exhibitors alike, it is, nevertheless, worth remembering that one market has been the global underpinning of the cinema business for decades: the USA. The US market may have diminished in its overall contribution to the global box office, but that doesn’t make it less important to the health of the sector and the viability of the investment that is happening in new technologies, new infrastructure and other service-related elements by cinemas.
The data sources often address the North American market (USA plus Canada), but I have separated them out later where possible. North America registered a gross box office of $11.1bn in 2017, down slightly on 2017 but similar to 2015 and higher than any previous years before that. Growth is relatively limited as befits a mature market and box office movement is usually driven by the performance of the films at the top of the market. Having said that, the market is mature and stable, total box office revenue in North America reached $6.18bn in H1 2018, a 9.6% increase on the same total in 2017. The first six months is the largest on record (in revenue terms) and the first time box office for the first half of the year has exceeded $6 billion. In fact, in revenue terms, total takings for the first six months of 2018 actually exceeded total annual box office generated some 20 years previously ($5.8bn in 1997).
Hollywood — still home to the stars
North America represented 28% of global box office in 2017. This is down from 44% back at the beginning of this century. However, the USA remains the single largest box office market and is home to the studios, the entities that made the US the home of the film industry.
As an industry, we must not forget or take for granted that it is US films that drive the global box office, earning two-thirds of the revenues earned in cinemas every year. There are more than 7,000 films produced globally every year and yet the world’s cinemas rely on a handful of US films to draw in visitors and make money. Most domestic-produced films do not cross cultures like American films. In the USA, tentpole movies often make close to as much in their home territory as they do worldwide.
The number of films released in US cinemas is growing steadily every year (777 in 2017 compared to 638 in 2008) and yet the studios which are shrinking down their output to focus on these bigger films with greater marketing budgets are also increasing their market share. They are all operating within larger media entities, and while their output is significant in driving revenues across these groups, they themselves are relatively small parts of them.
The studios are also faced with larger, consolidated exhibitors. Although the media and consumption landscape is changing around them, they have proved to be relatively successful at adapting to a ‘Netflix and mobile’ world so far — certainly within the cinema space, bringing their market share back up to above 80% consistently.
The value of screen density
Until the rise of Chinese screens, the USA had been the largest market by screens for years. Though this changed in November 2016, the USA still generates more box office than China despite having fewer screens. In 2017, there were 40,246 US screens including 595 drive-ins, whereas China went past 50,000 at this point. Screen density per head is also higher in the US than in other markets: 123.9 screens for every 1million people in the USA and a lower 84.8 in Canada. China sits at 36 screens and the UK at 65.1, as a point of comparison. The USA is a land of moviegoers.
Despite this long-term stability of the world’s most important market, there are some less positive signs that need to addressed. The most evident indicator is the long-term decline in the average number of cinema visits per head: at its peak, the cinema drew an average of 5.1 visits per head per annum in 2002, only exceeded by Iceland at 5.7. This has come down to 3.5 in the USA since that year, although Iceland’s has also come down to 4.1. The UK has declined from 3 in 2002 to 2.5 in 2017, a less pronounced drop but a drop nonetheless. Overall, mature Western markets have all experienced a reduction in visits per head, even though population growth and ticket price increases have often maintained overall admissions volume and box office at consistent levels. Even with that decline, data from trade body NATO shows that threequarters of the North American population went to the cinema at least once in 2017, proving it remains popular. Despite concerns over younger audiences drifting away, the highest per capita attendance was the 12-17 year old age group, who see 4.9 films annually. Comparisons with previous years cannot be made due to a methodology change by NATO in its annual report (now called the THEME report), but the trend in this age group seemed to be slowly downwards as it was with the 18-24 age group.
Frequent moviegoers (who see at least one film a month) make up 12% of the population and 49% of the tickets sold. The issue would seem to be getting the less frequent moviegoers re-engaged with cinema. Amongst the categories of people that underperform at the US cinema compared to the population as a whole is the Caucasian/white population, which makes up 61% of the population and 55% of tickets sold. The 60+ age group could also be better served and more active cinema patrons, as could, to a lesser extent, the 50-59 age group.
Building up the cinema as a high-quality entertainment option is one of the reasons behind new investments, with high comfort levels and new technology driving up quality standards to the same level or above the plethora of devices that operate on the move or in the home. New technologies being installed, such as 4D, immersive motion seating and multi-format ScreenX, are more likely to attract younger customers, who enjoy these more than their older compatriots. Whereas a 12-17 year old will see an average of 3.8 3D or Large Format movies a year, the equivalent figure is 2.9 for the 50-59 age group.
There is also a link between frequent moviegoing and the cinema, with frequent moviegoers more likely to own technology, which undermines the argument often put forward that other technology competes with cinema. In 2017, in the USA, 30% of frequent cinemagoers own six key technology products compared to 18% for the total adult population. This suggests there is a strong link between a love for the cinema and the use of technology such as video games, tablets and, of course, smartphones. This has long been the case, as was seen with the symbiotic link held between VHS and subsequently DVD buying and cinema-going.
Still cinema’s strongest market
The cinema as a leisure industry is one of the oldest we have, certainly one that relied on invention to create it. In a crowded market for leisure and filling time (and spending money), it is a testament to the cinema’s unique nature that it still exists and the hard work, innovation and intelligence that goes into making, distributing and exhibiting films in this single static space are the main reasons that it is still thriving globally. The USA has stood as the industry’s leader for the past century, and still remains the bedrock on which this global growth is possible. As an industry, we must hope that this continues well into the future as there is no-one yet to replace it.