Information, Please: Why Hollywood needs movie theatres involved in its data revolution

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Cinemas Features

In the last few years, there have been endless articles on how studios are extracting data from platforms such as Twitter, Facebook and Google to make data-driven decisions to boost box-office numbers. As for theatres? Not so much. In the endless tug of war between studios and theatres, studios are miles ahead when it comes to leveraging big data. As the world is transforming from the digital era to the consumer-intelligence era, Hollywood needs to find a way to incorporate big data into its entire ecosystem.

In order to understand the nuances of this phenomenon, we need to take a deeper dive into the relationship between studios and theatres in the U.S. Unlike in other countries, cinemas in the U.S. do not offer as much diversity when it comes to content because of the limited number of studios they work with. Many theatres internationally offer a healthy mix of Hollywood films and their own domestic films, allowing them to work with more studio partners. If we take a look at Bollywood, for example, in any given year it produces three to five times more content than Hollywood. The supply-and-demand ratio of product favors movie theatres there and tips the scale of the relationship between studios and cinemas. If an exhibitor does not agree with rental fees for a film that has been offered from a big U.S. movie studio, they have an easier time finding a replacement because they have more options to choose from. This allows theatres in markets such as India to have stronger negotiation power, allowing for more flexibility in running their businesses.

Understanding the power balance between studios and theatres internationally is important when examining the U.S. box-office market. Let’s say you are a movie theatre and the majority of your product comes from just six or seven studios. Not only does it become more difficult to bargain for your content, it also becomes much more challenging to try new marketing ideas, since the studio has more leverage to enforce certain policies. Couple that with the fact that the movie industry in the U.S. is the oldest in the world and you have an entire business that is reluctant to change.

As a result, technological progress in the U.S. film industry has lagged compared to its counterparts overseas. For example, a couple of years ago the U.S. movie industry finally switched from analog to digital content, distribution and projection. It was a monumental transformation allowing for a lot more content diversity throughout the industry. However, the transformation lagged compared to its foreign counterparts by a few years. Furthermore, because of the influence studios still exert on U.S. theatres, many practices such as running a film via “clean schedule,” a practice in which a studio may require a cinema to play a single movie in a single auditorium for a set amount of time, still exists today. When theatre employees had to carry 70-pound 35mm films in order to switch between auditoriums, it made sense to keep a film in one auditorium for a couple of weeks at a time. However, now with all films going digital, movie theatres can easily switch auditoriums to play the right pictures at the right time and day to maximize occupancy. Because seating capacity is different among auditoriums, maintaining such outdated practices can adversely impact overall box-office numbers.  

Outside the U.S, many theatres have already started taking advantage of this digital era. Since many of the foreign film industries are ahead of the curve when it comes to going digital, it is important for us to study their markets to predict the future of the U.S. film industry.

For example, my company, Cinema Intelligence, which launched in 2011, has been working with several theatres to make data-driven decisions. By analyzing cinema-specific box-office data from the cinema’s point-of-sale system and accounting for variables such as weather, holidays and Google searches, we are able to provide data-driven insights and analytics. Our business-intelligence software provides the tools to empower movie theatres to make better and faster data-driven decisions on forecasting and scheduling. Many of our customers have reported an increase in net profit of up to 20%. Simply put, by switching from analog to digital films, schedule optimization for movie theatres can be completely redefined for the advancement of the entire industry.

Because of the conditions of the marketplace, business-intelligence software such as ours was able to penetrate the foreign markets sooner than the domestic market. Moreover, many film industries outside the U.S. have a relatively short history and theatres there are founded by young entrepreneurs who are interested in leveraging the latest technology. This type of culture has contributed to a faster growth rate in box-office attendance. According to the MPAA, box-office numbers internationally have grown at 3.8% the past five years, while domestically the growth rate has been 2.1%.

In order for Hollywood to maximize the benefits of big data, all parties need to be involved. In a recent interview with Film Journal International, our CEO Claudiu Tanasescu spoke about the U.S. film industry: “Studios had very strong opinions about the strength of their movie, how widely it needed to play and on which screens. Now, they are becoming more open to data-driven decisions because they themselves have also been empowered by those analytics.”

It is no secret that the movie industry is struggling to compete with home-entertainment companies such as Amazon and Netflix. In order to maintain its competitive advantage as an industry, Hollywood needs movie theatres to join studios in the data revolution.

Kevin Hong is chief sales officer of Cinema Intelligence (A Vista Group Company), co-founder of Dealflicks, and the author of The Outlier Approach. To find more articles and insights on business from Kevin, please visit outlierapproach.com.