Tuesday, December 20, 2005

What Happened to the Boxoffice?

Every week we see another story about how box office attendance is down from last year. No one seems to have a clue why.

I do and it's rather obvious. People are playing more computer games so they don't have the time or money left for as many movies.

This happened a few years ago with music. CD sales dropped. The recording executives insisted that it was the Napster Effect, even though the first few years that Napster was in business, CD sales went up.

If they thought about it, they would have expected the rise in sales. Every year the recording companies spend millions of dollars promoting new music. This includes paying stations to play new songs (this is legal as long as the station gets the payoff instead of the DJ). If you hear a song often enough it becomes familiar and you want to buy it. Napster did the same thing for the recording companies and it did it for free. Yes, you could get a hold of new music for free, but it was likely to have been ripped at a low bit-rate. People who really liked the music bought the CD for the better quality audio.

despite a lot of whining, the recording companies were doing great. Then they got hit by a broadside. DVDs suddenly caught on and three new gaming systems were introduced. On top of that, CD singles were discontinued and the price of new CDs went up.

It is an iron law of economics that there are only so many entertainment dollars available. Recording executives don't think of themselves as competing with movies and games but they do. Once your money is gone, it's gone so you have to prioritize your purchases.

It's been happening again. Shared universe games like World of Warcraft are very popular. New game platforms are out. Plus new games are being released for all game platforms and many of these are movie tie-ins. This directly affects the boxoffice because teenagers get to choose between going to see a movie again or playing a game based on the movie. If you are playing Kong you are not sitting in the theater and you spent enough money to go see Kong again (or to see another movie) 5-6 times.

On top of that, DVDs are cutting into theatrical revenues. In order to save on advertising, they have pushed the time between theatrical and DVD closer together. The hops is that you will remember the publicity campaign from the theaters when the DVD comes out. Some movies are now out on DVD before they are out of second run - around three months for a B-movie.

This has happened before. When radio started playing records they thought that it would be the end of recording. They thought the same thing when it became easy to record music off of the radio. TV and the VCR would doom studios.

With all of these there have been adjustments. Radio turned out to be a medium for selling records. Studios produce TV shows. VCR and DVD sales can make the difference between profit and loss. Licensing fees from games are now big business.

Theaters have been hurt. 70 and 80 years ago it was an even to go to a theater and they were big opulent places. They got smaller and plainer until the 1990s when larger screens and more comfortable seating became a selling point.

There's no turning back, though. Things change. Movie audiences continue to move on to other forms of entertainment.

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