What You Need to Know About the State of Movie Theater Industry

Every year, theater owners descend on Las Vegas for CinemaCon in much the same way gamers do on Los Angeles for E3 and geek culture does on San Diego for Comic Con. While CinemaCon may not be as well-known as those other conventions, it is still a big event that paints a vivid picture about the future of film and the overall cinematic experience.

(Credit: Getty Images)

3D declining
In addition to every major studio screening never-before-seen footage and trotting out A-lister after A-lister, the annual convention is a time to look back at what's worked and what hasn't in the industry overall.

Perhaps the biggest takeaway was that 3D's not the golden child everybody thought it would be. For every film like Gravity that should without a doubt be in 3D, there are dozens of others that have no business being shown in the third dimension. In fact, according to a study released during the conference, only 27% of theatergoers on average opted for the 3D version of a film in the States. That's down from the over 45% that went for the premium option during the Avatar-infused 3D boom of 2010.

One thing to remember is that 3D plays incredibly well overseas. Foreign audiences can't get enough of the technology, so until that interest wanes it's not going to change anything. Check out the below grid compiled by Deadline.com for a deeper look at those results.

Credit: Deadline.com

What's so funny about this is that studios haven't even mastered 3D yet, and now executives are ready to move onto 4D with the first of those commercial theaters aiming to be ready in Los Angeles this July. The studios are missing the point entirely. Audiences aren't passing on in-theater enhancements because they aren't immersive enough; they are passing because it costs too much and is distracting from the actual film.

Still, 4D's not the only thing coming. During the show exhibitors were treated to new presentations about the rise of laser projection systems and enhanced audio. In addition, vendors are working on adding side screens to bring audiences further into the action. These are all novelties that theme parks have used for years, and they work well there because they play to tourists and families on vacation ... not your average moviegoer who doesn't want to go bankrupt and deaf while taking the family to the movies.

Incentives
Overall domestic sales are down just a tad from 2012 to 2013, which honestly isn't that alarming for reasons I'll get into later. What is troubling is the demographic that has declined. Young adults age 12-24 have begun going to the movies less often, with drops of 15% for ages 12-17 and a more troubling 21% decline with the 18-24 crowd.

Caucasian moviegoers are also going less often as well, with just 54% of all tickets attributed to their demo and that number dropping below 50% when factoring in repeat business. African-American attendance leaped 13%, however, thanks to strong year of urban films. Hispanic audiences are the most likely ethic group to buy tickets overall.

Now to keep those viewers coming and help win back others they've lost, movie chains like AMC (NYSE: AMC  ) , Regal (NYSE: RGC  ) , and Loews (NYSE: L  ) have started discussing plans that they hope will work. These range from adding more family-friendly pics for younger audiences (after seeing 2014 films The Nut Job and The Lego Movie do so well) to ramping up on blockbusters to lure in the older side of the spectrum.

Theaters are also looking at instituting a weekly discount night to draw in more cost-conscious crowds. In addition, Screenvision, the company behind many of those pre-show presentations, is expected to revamp its shows in an attempt to be more modern and add in more mainstream content.

The most controversial plan though is sure to be adding more alcoholic options for adult moviegoers. Theaters make most of their money off of concessions, so owners are all for it. They aren't dumb, however, and know the issues associated with that play.

The future

Credit: Lionsgate

As with anything, there will be ebbs and flows in the theater business. Last year may not have been the most dynamic year ever, but like this year it's also not going to be the worst. This summer's slate, for example, includes one of the best August lineups in recent years with the Teenage Mutant Ninja Turtles reboot, Sin City sequel, and third Expendables film keeping the back half of the summer season very interesting.

Analysts know that if handled right, next year could be a field day for exhibitors. Check out the roster: The Avengers, Star Wars, and Jurassic Park will all make cinematic returns, as will super spy James Bond and a new entry to the Jason Bourne franchise. That's not even counting all the animated fare coming to town, including two releases from Pixar.

The reason why the slight decline I mention earlier doesn't matter is that 2014 has already proven it will surprise. There are enough franchise hits and potential sleepers in the mix that theaters should be able to at least keep the status quo until the first of 2015 blockbusters start to unspool.

Overall, things are looking up. Yes, it's true that the film industry is not in its golden age anymore, that's clear. However it's not all doom and gloom. If long-term projections hold, studios are going to break the bank next year; the trick is going to be making sure they don't break consumer's wallets (and spirits) in the meantime.

At least owners recognize they need to make changes and are willing to discuss options. Now's the right time to experiment because next year will be here quicker than you think. Like the latest installment of a certain car franchise, the releases will be coming fast and furious.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 31, 2014, at 8:47 PM, vaderblue wrote:

    I can see concern about entertainment stocks but as an investor in RGC, I am not concerned as this business comes and goes. Careful programming., selection of the auduience, family films, less controversial films. I am long RGC. One great film can make their Balance Sheet. 2 lookout. People like movies. Bring down the price on concessions though.

  • Report this Comment On April 02, 2014, at 3:51 PM, GoetheDK wrote:

    The article failed to mention one of the most innovative initiatives going on in the industry, the motorized recliners being installed in hundreds of AMC theaters that I think transforms the movie going experience. While these roomy/comfortable recliners eliminate theater seating capacity by ~66%, early signs are that attendance at the theaters are up over 90% (granted AMC installed them in some areas where attendance wasn't so great previously, so the attendance increases will definitely drop off from 90%, but I predict they will still be impressive over time).

    My family and I travel an extra 30 minutes to see a movie at an AMC theater with reclining seats because the experience is leaps and bounds above the uncomfortable cattle herding of moviegoers at traditional seating configurations. Just like Cirque du Soleil re-imagined the circus, AMC is re-imagining the movie going experience.

  • Report this Comment On April 03, 2014, at 9:56 AM, RiderRider wrote:

    *** 15 reasons modern home HD TV movie watching is SUPERIOR to movie theaters ***

    by Richard Rider

    I love Hollywood action blockbusters, but I choose not to fund Obamaland West. Matt Damon, Brad Pitt et al are passably talented actors, but they are my activist, money dispensing enemies when it comes to limited government.

    Hence, if I want to see a movie (a very big IF), I wait for the movie to come out for home viewing via rental DVD or streaming -- whatever mode works best for me. Compared to going to the cinema, that option cuts Hollywood's per viewer profit 90+%, and that pleases me to no end. If the home viewing option grabs enough people, I suspect that there will be fewer big pictures produced by affluent if looney lefties, and I can live with that.

    Indeed, home theater HD TV viewing today with modern electronics is BETTER than a movie theatre. Here's 15 reasons why:

    1. MUCH less cost for tickets, let alone cost per viewer if more than one in your home audience.

    2. 90+% less cost for snacks, and usually even healthier!

    3. No annoying audience members (cell phones, cracking snack bags, chatting aloud, etc.).

    4. For seniors, the "pause" button is invaluable. I'll not tell why.

    5. Far better seating, and, if desired, cuddling.

    6. YOU control the volume, not the theatre.

    7. If you or your SO miss something, you can rewind to unravel the mystery.

    8. Previews and ads can be largely bypassed on DVD, and completely bypassed on Netflix, Amazon or most other streaming services.

    9. No car trip, parking, time wasted going to and from theatre.

    10. Closed caption TV option allows one to enjoy shows without comprehension problems -- either hearing or (primarily British) accents

    11. For some of us, the modern cordless headphone option is a blessing, for overlapping reasons..

    12. You can watch half a show at a time -- even on different days.

    13. You don't feel compelled to watch a bad movie in a theater to the bitter end -- compelled because you paid good money for a stinker of a flick. Also, if a couple, one might quit the home movie while the other remains enthralled (probably by either the love story or the violence)

    14. YOU control when you watch the movie -- not the theatre.

    15. Less chance of house being burglarized while you're enjoying a movie. (Okay, okay -- this last one is a bit of a stretch.)

    http://riderrants.blogspot.com/2013/08/15-reasons-modern-hom...

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