The Film Industry in 2015: 5 Areas Of Focus

by: Adam Rubins

1. International, International, International

It’s been the same story for 10 years now, but International continues to grow both in terms of screens and subsequent box office returns. Yes Europe remains a flat market, but growth in Asia and South America is driving the industry’s focus on International. Senior US executives are taking ‘global’ roles and international is no longer considered by some to be one market. Let’s look at the top 10 movies for 2014, their US and international box office grosses:

Transformers: Age Of Extinction (US: $245m/INT: $842m/cume: $1.08bn)
Guardians Of The Galaxy (US: $333m/INT: $440m/cume: $773m)
Maleficent (US: $241m/INT: 516m/cume: $758m)
X-Men: Days Of Future Past (US: $234m/INT: $512m/cume: $746m)
Captain America: The Winter Soldier (US: $260m/INT: $454m/cume: $714m)
The Amazing Spider-Man 2 (US: $203m/INT: $506m/cume: $709m)
Dawn Of The Planet Of The Apes (US: $209m/INT: $500m/cume: $708m)
The Hunger Games: Mockingly Part 1 (US: $311m/INT: $363m/cume: $674m)
Interstellar (US: $179m/INT: $471m/cume: $650m)
How To Train Your Dragon 2 (US: $177m/INT: $442m/cume: $619m)
Observations:

Movie titles are getting: longer
Originality is a waning resource though congratulations to Chris Nolan for bucking the trend
7 sequels in the top 10 and of the other 3, 2 will likely spawn further releases
But most importantly, there wasn’t a single movie in the top 10 that outperformed its international release in the US. The Hunger Games came close but with it still playing in some international markets, it will be the biggest international vs US performance in the Hunger Games franchise
Across the top 10 movies of the year, we are looking at a total variance of -$2.54bn from US to International. And yet I still hear studio executives say that the US is a launchpad for international markets even in a day and date market
With the emergence of the Chinese market (see point number 2), I expect to see even further growth for international in 2015, especially against a marginally declining US market which is in need of a radical marketing re-think.

2. China

In my previous blog (https://www.linkedin.com/pulse/20141121103114-8808432-china-the-film-market?midToken=AQEWl7C9SD76zA&trk=eml-pad-b-art-0&fromEmail=fromEmail&ut=15gS-gXbIrSSw1) I explored the emerging power of China in the film market. And whilst we may not see growth in terms of the volume of foreign product released (34 is the maximum not including Chinese co-productions), we will see expansion in terms of screen count, driving the market up from its current 20,000 screen count towards its 133,000 screen count capacity. Looking at the potential titles for release in China this year too (Avengers: Age Of Ultron, Jurassic World, Spectre, Minions, Furious 7, Terminator: Genisys, Ant-Man), it is set to be a bumper year. For the record, in 2016, China will host the likes of (deep breath):

Star Wars: The Force Awakens, Batman v. Superman: Dawn Of Justice, Kung Fu Panda 3 (a Chinese co-production), Mission Impossible 5, Finding Dory, X-Men: Apocalypse, Independence Day 2, Captain America: Civil War, Doctor Strange, Alice In Wonderland: Through The Looking Glass, Ice Age 5, Untitled Planet Of The Apes, Teenage Mutant Ninja Turtles 2, Star Trek 3, Suicide Squad, Ninjago, Deadpool, Angry Birds

So whilst 2015 will be a record year for China, 2016 is set to be a game changer.

3. Consolidation & Structure

With the vast majority of the globe a flat theatrical market and declining revenues in home entertainment, the industry is set for further consolidation and re-structure. There have been many rumours of studio acquisitions and I expect to see one of those come true within the next 2 years, possibly even this year. Other Home Entertainment structures are even merging with competitors to limit overhead expenditure and this is likely to continue further. Studios will continue to re-structure and we are seeing cuts being made currently at Warners and Sony. It is my belief that structure needs to be carefully considered in light of new distribution methods, alternative revenue streams and the changing nature of marketing with many businesses still structured to deliver against a marketing paradigm of old. Some studios have already re-defiined their structure, creating a more franchise or lifecycle based route to market. Other less franchise orientated studios are still promoting the classic silo’d line of business approach which for them, makes more sense. Still, we can expect more change here, especially with the power play over the growth markets we have discussed. In today’s world, business is more than ever focused on net profits and structuring your overheads to be more efficient is one way of doing that, especially if it fixes other longer term issues.

4. Re-alignment of Marketing Budgets and Tracking

If 2014 was about talking the talk, we can only hope that 2015 is about walking the walk. Unquestionably, something needs to change as it is still a market heavily prevalent on outdated tracking tools, leading to ineffective high cost investments in traditional media that drives net profits down. I have said this before, but if your market is 4 millions admissions, why advertise to 40 million? Usually, decisions are based on the past (what we’ve done before), sometimes vanity (to appease stakeholders) or more often pressure caused by inaccurate tracking data. The market is in desperate need of real time cost effective data that can be tracked over a longer period than just 2 weeks pre-release by which time your only choice is to invest in high cost inventory media, often TV. Marketing is less about your poster and trailer. It is less about talking at your audience, and more about conversing with them. I expect to see more creative, more defining marketing campaigns in 2015 with money being re-apportioned away from high cost traditional media into more cost effective channels. That’s not to say TV can’t be your principle investment, its just we need to look at the decision making process and ensure that the right money is being spent in the right places towards the right audiences. Tracking can help do that so expect to see the emergence of some new players this year.

5. Franchises rule the world

I consider myself a film fan first and foremost. This is a medium I have loved ever since I was a child watching the likes of Logans Run, Doc Savage: The Man Of Bronze and of course Star Wars. But I am also a student of the business, one I have admired and loved since I had the fortune to get my first job at Disney aged 21. Unlike many critics who still regard the film industry as art over commerce, I am a realist and a business man and understand that in order to make investments, you need to be able to quantify a return. Footfall in cinemas is not the enemy, it is the fuel that keeps this business alive and allows Fox Searchlight to celebrate its place as a champion of quality original independent product. As far as blockbusters are concerned, who am I to say that Guardians Of The Galaxy won’t have the same effect on a 10 year old that Indiana Jones had on me? The critics abhorred Transformers, but audiences went crazy for the movie, many seeing it multiple times. We must accept the business has changed and will change further. Just look at these stats:

Top 20 films 1995:

2 x Animated movies
2 x Franchises
5 x Sequels
12 x Original Stories (with only 1 going on to have a sequel, Get Shorty)

Top 20 films 2005:

3 x Animated Movies
2 x Sequels
5 x Remakes
3 x Franchises
5 x Potential Franchises

Top 20 films 2015:

ADAM’S ASSUMPTION (these aren’t really in any particular order):

Star Wars Episode VII, Avengers 2, Spectre, Furious 7, Jurassic World, Minions, Hunger Games 3, Mission Impossible V, Fifty Shades Of Grey, Ant Man, Terminator: Genesis, Hotel Transylvania 2, Ted 2, The Fantastic Four, Inside Out, The Good Dinosaur, Cinderella, Alvin and the Chipmunks 4, Tomorrowland, Pan

4 x Animated movies
12 x Sequels
2 x Reboots
19 x Franchises
1 x Potential Franchise

How about 2016?

ADAM’S ASSUMPTION (these aren’t really in any particular order):

Untitled Star Wars, Finding Dory, Batman v Superman: Dawn Of Justice, Suicide Squad, Ninjago, Independence Day 2, Fantastic Beasts and Where To Find Them, X-Men: Apocalypse, Captain America: Civil War, Sinister Six, Kung Fu Panda 3, Alice In Wonderland: Through The Looking Glass, Ice Age 5, Untitled Illumination, Doctor Strange, Star Trek 3, Untitled Planet Of The Apes, Angry Birds, Warcraft, The Mummy

(other contenders Inferno, Untitled Next Bourne Chapter, Tarzan, Teenage Mutant Ninja Turtles 2, Ben Hur, Deadpool)

6 x Animated Movies
11 x Sequels
1 x Reboot
20 x Franchises

So from 1995 we are seeing 3 times the amount of animated movies in the top 20, 2 times the amount of sequels and 7 times the amount of franchises. Less remakes, more reboots. Yes there will be some quality product along the way, my favourites from this year Boyhood and Whiplash, but the next 2 years will undoubtedly put the word BUSINESS in showBUSINESS