Why the Movie Industry Is Dyinghttp://www.fool.com/investing/general/2012/09/14/why-the-movie-industry-is-dying.aspx Jeremy Bowman
September 14, 2012
The movie industry received its latest negative diagnosis over the weekend as box office tickets sold fell to the lowest levels in over a decade with the top 12 grossing films bringing in just $51.9 million.
The weekend 10 years ago that was even worse? That was two weeks after the September 11th attacks.
The week after Labor Day is notoriously slow in the industry, and observers may blame the poor selection in theaters as September is known as a dumping ground for Hollywood, sandwiched between summer blockbusters and the end-of-year Oscar candidates, but there's something more than seasonality afoot here.
Much has changed in the entertainment industry over the last 10 years. The music industry has been turned on its head with the proliferation of MP3 players, and the advent of websites such as YouTube and Pandora, which give users free and almost instant access to nearly any song they'd want. Netflix has (Nasdaq: NFLX ) made traditional in-store video rental a thing of the past, and streaming and On Demand have become significant channels of at-home video entertainment. Meanwhile, social media sites like Facebook represent an entirely new channel of timewasting diversions, particularly appealing to the teenagers who are normally avid movie-goers.
Unlike their peers, the movie business, both in theaters and studios, has done hardly any innovating in that time. Aside from the occasional 3-D offerings, which many critics have called disappointing, hardly anything has changed in the movie-going experience in the last decade or even generation.
Despite the foodie revolution, which has made celebrities out of chefs, and brought years of industry-stomping growth to companies like Whole Foods and Chipotle, theaters continue to offer the same overpriced, pre-packaged snacks like popcorn and nachos that they always have. There's been no attempt to redesign or modernize theaters despite the loss of the unique single-theater cinemas of previous generations, which have given way to the cookie-cutter multiplex chains that now blanket the country. Theaters just don't seem to be experimenting with ways to enhance the experience.
The industry has what always been at odds with innovations in delivery channels, whether it be TV, the VCR, or streaming, which earlier this year led to the debate over SOPA and PIPA, but it now seems to have become a victim of its own stubbornness.
And the numbers bear this out. 2011 saw the lowest number of tickets sold at the box office in 16 years, though sales have come back slightly this year, rising 4% thus far.
Rivals Cinemark (NYSE: CNK ) and Carmike (Nasdaq: CKEC ) may be in better shape financially, but will still suffer from the same macroeconomic industry forces. In 2011, Cinemark paid out 84 cents on dividends per share on earnings of $1.14, a payout ratio of 74. Carmike, on the other hand does not offer a dividend, and just turned in a small profit after years of losses.