Upbeat Forecast: NATO’s John Fithian predicts several strong years ahead

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John Fithian is “feeling excellent.” “We are nearing the end of the first quarter of a very exciting year,” declares the president and chief executive officer of the National Association of Theatre Owners during our annual state-of-the-industry conversation. Granted, we spoke as the first day of spring was approaching and the promise of sunshine was in the air (at least in this writer’s office), but Fithian is also one of our treasured industry members who always sees things as they are.

“I think it’s the beginning of a true resurgence, with several strong years ahead of us,” he predicts. “And it is nice to turn the page on 2014 and get into just a really strong slate of movies. So our members are coming into CinemaCon fired up about a great year.”

2015 has long been hailed as a potentially huge year, with more surefire hits lined up than maybe ever before. Yet Fithian foresees even more years of good fortune. “Well, there are certainly the safe bets, but there are a number of factors that are quite strong this year that are going to continue into 2016 and 2017, just in terms of the movies. And then there are all the exciting developments of what’s happening in the cinema space as well. The two together, I think, make for a stronger market.”

Asked to elaborate, Fithian begins with a progress report on one of this industry’s perennial topics. “We are seeing better use of all 12 months in the calendar by our distribution partners, along with more diversity in the genres and the demographic targets throughout the year.” By way of example, he mentions The SpongeBob Movie: Sponge Out of Water and Fifty Shades of Grey “doing a ton of business coming out in February,” and then adds Cinderella and Insurgent, of course. “These pictures are appealing to diverse audiences and they are doing it in typically ‘off’ months. So, that’s part of why the schedule looks so strong. It’s not only the big huge blockbusters. Yes, we do have Star Wars and Avengers and Bond and Hunger Games… The list goes on and on, with big titles in 2015 and more of those coming in 2016 and 2017. But we also see greater diversity in what the movies are and that’s quite encouraging to us.” (You’ll find even more about diversity and demographics below.)

Moving on to the cinema side, Fithian credits his member companies and theatres for implementing “just very, very exciting things…that patrons are responding to: Luxury seating is really taking off and expanded fine food and drink are becoming more the norm. The range of price choices that we offer to our consumers,” he continues, “from the very high-end IMAX and other Premium Large Format screens to the more affordable, traditional experiences” are part of the recipe for success as well. “So, it is the movies plus the cinema experience that I believe are going to be pretty strong for several more years.”

As with lovely spring weather, there is always the chance of showers. Not to rain on John Fithian’s or anybody else’s parade–FJI loves this industry as much as our readers–we still have to contend with film theft, video-on-demand and narrowing windows, potentially costly technology upgrades and other advances. “Well, there are challenges,” the NATO chief admits. “I mean, the film slate just looks so darn strong that we want to keep talking about that, of course... There are always challenges to realizing our full potential. And you named several of them. Movie theft continues to be a concern, although we are making some progress on pushing out little by little the speed with which pirates get quality copies of movies. There have been several important convictions lately, set as precedents for the world to see. The struggle continues. It is a long-term war and it moves along inch by inch, but I think we're making some progress on movie theft.”

When it comes to release windows, “which is a perennial top priority for NATO and our members,” Fithian says “gone are the days in 2011 with the big public food fights.” Instead, “we continue to have discussions with our distribution partners. We continue to try to work together to help them sell their home product, without being overly aggressive with crunching the theatrical window. There have been a few high-profile, sort-of experiments from companies like Netflix,” he attests. “But, frankly, they are getting a whole lot more press than they are worth. These are not ‘big’ movies and these simultaneous releases are not going to get played very widely. They are much more Netflix and ‘home play’ than they are a theatrical play. So, for most of our distribution partners, with most of their significant movies, a reasonable theatrical window is still very much part of the business mix.”

That said, NATO is keeping its eyes and ears open. “We are watching electronic sell-through [EST] dates. Those seem to be getting shorter. The Blu-ray/DVD, home sale and rental dates remain relatively stable. And as home sales shift more to EST from hard goods, that is a space that we’ll continue to watch closely. Again, the good news is distribution and exhibition are talking now. These are negotiated discussion points among the studios and their customers instead of the public fighting cry, if you will. At least with the major studios on significant movies.”

What about art-house and independent product? A recent look at specialized releases in New York City and Los Angeles counted five out of 15 new titles for one weekend as already available on some form of VOD or another, and one was coming out on disc. (Thank you, INDIEWire.) “It’s just a whole different world in the art-house space from traditional commercial cinema,” Fithian feels. “In a digital world, all you need is an inexpensive camera and some brains and some creativity. Anyone can make a movie now. So, there are lots and lots of movies that really have a hard time getting screen time. Some of those very small distribution projects that are trying simultaneous release or early release to the home are mainly about home digital play. Those movies play on a handful of theatrical screens only and get a little bit of exposure. They do not enter the business mix of the vast majority of our members. This is such a small part of the market that it is not really commercially significant.”

On the flip side, Fithian assures, “In exhibition we do care about a product coming to the screen and our theatre members continue to look for and recruit and encourage additional sources of movies. We have plenty of high-budget blockbusters now, but not as many in the mid- or smaller-budget ranges that have viability theatrically. We are encouraged when we see a new company like STX Entertainment come along. Open Road Films has been operating for a couple of years now, along with the Weinstein and the Relativity Europa-style companies.” Fithian gives credit to “companies beyond the majors that are bringing good quality movies to the screen. We want to encourage more of that.”

The thoughts and suggestions of NATO member circuits about the way in which the very same quality movies are brought into the cinema were summarized last year in a set of “Marketing Guidelines.” “As an industry and as an association, you take four or five interesting initiatives a year and you hope that most of them work.” Fithian chuckles before conceding, “The Marketing Guidelines did not have a big impact. The themes were raised, the discussions were important and there was some consideration to the fact that our trailers were too long. And that there are advertisements for movies that no one can see for an entire year.” He believes some of those themes have sunk in, however. “Can I tell you that there’s been universal acceptance of those guidelines for the industry? No.”

Everyone in the industry would find unacceptable the way in which retailers like Amazon or Best Buy try to hook onto the theatrical bandwagon. “Today in Theatres,” weekly e-mail blasts announce, with key art from the movie opening. “Pre-buy Now.” Would that not be another marketing guideline in need of revising? “Both the window of when the product is available and the window when the product is marketed to the home are of concern to us,” Fithian reassures. “We track each of those dates for every significant movie release by every major distributor. And we engage in conversations with our partners about that.” Everybody wants to profit from the theatrical release as much as possible, he knows as well as our readers. “We understand the theatrical release provides a big, big marketing push for their home sales. But there has to be a balance between when they are selling theatre tickets and when they are selling home products. That is a continuing conversation.”

And an ironic one, Fithian concurs. “We were trying to suggest for marketing to happen close in time to when you can actually make a ticket purchase. The whole idea of marketing inside cinema as being somewhat close to when the movie actually comes out, in our minds, makes the purchase decision that much easier. Instead of having it be a year off. Conversely in the home market, if they are selling movies way in advance of the home release, we don’t think that makes sense either.”

Maybe retailers could be encouraged to link to movie ticket purchases as well, just as imdb.com and many search portals do. That would make the slap-in-the-face of theatrical a bit less of a slap, perhaps? Another response has been for theatres to start selling ahead for second viewings at home. “We have had hard discussions about selling both,” Fithian notes. “Cineplex in Canada has begun to experiment with this type of sale and there have been a few experiments in the U.S. with so-called SuperTickets too. We would really like to see that grow, as the people who are coming to the cinemas are buying both the cinema ticket and the right to download the film once it becomes available.” In Fithian’s view, “there needs to be more flexibility and cooperation for this kind of dual marketing and dual sales. There is a way to do this without invading the theatrical window aggressively. Those discussions are ongoing.”

What else is on Fithian’s mind these days? “Technology is always a big issue at CinemaCon,” he gladly complies. “It is a means through which we can continue to make the theatrical experience unique and a must-do. People must experience movies in the best technologies possible. Some really exciting stuff is coming, such as High Dynamic Range, for example. The contrast between the blacks and the whites and what it does to the visual experience is truly amazing. Yes, we have laser illumination to improve the light output. And there’s immersive audio to further engulf the audience with sound.” On a note of caution, as there is always at least one, “these advancements are expensive. So it’s a matter of sorting through what really drives the market and what does not. That represents both a good thing and a challenge for us as an industry.”

Fithian on Demographic Diversity: Where Are the Young, as Audiences Get Older?

On March 11, the Motion Picture Association of America (MPAA) released its annual “Theatrical Market Statistics Report” for 2014. Thanks to 12% growth in the Asia-Pacific region, global box-office receipts for all films released around the world reached $36.4 billion, an increase of 1% over the previous record in 2013. One of the many other notable facts mentioned is that its member studios’ film output grew for the first time in five years—albeit with a continuing increased focus on their specialty labels and divisions.

While the report seemed to be arriving early this year because of the later date of CinemaCon, the announcement did not involve the traditional joint presentation with the National Association of Theatre Owners. “We supported the MPAA’s call,” confirms John Fithian. “It takes a long time to get this data out… The world lives in an instantaneous data flow now and so people already know virtually everything that we put out.” About the time this takes, he assures, “We are very methodical about making sure we establish the average ticket price correctly. NATO provides all the data from our members to a third-party accountant. The MPAA then takes our average ticket price and they figure out what the admissions were… By the time we do this in March, and we really did push to do this as fast as we could, it is really stale news. So I think this is probably more a reflection of the instantaneous data world that we live in than of anything else.”

While Fithian “did not have as much interest in the last couple of years” from media, the Theatrical Statistics are actually more interesting than ever in the demographic, and global, details that they reveal about attendance. Especially striking this year is that moviegoers are really aging. From a historic perspective, we used to say that movie theatres only get the teens and young people. As they have grown up, they continue to attend, but the share of the next, younger audience is diminishing these days.

“Well, there are two sides of that coin,” Fithian attests. “One side is that the share of the audience coming from older demographics is growing. That is encouraging. As the country and the world ages, finding movies that appeal to adult and mature audiences is crucial. In fact, we are working with AARP [American Association of Retired People] and other organizations on ideas how to better appeal to and schedule for mature audiences. That is essential, so I was delighted to see that statistic even in a down year. I was pleased to see some growth in the percentage of the marketplace that is coming from the older consumers and we need more of that. We need to do more in the way that our partners make their movies and we need to do more in the amenities that we offer at the cinema as well.”

As for the younger generation, Fithian brings up developments in society as a whole. “We have seen for several years now that young folks have a million different things to do with their time, and that is a challenge for us,” he admits. Population is down in general as well, with some exceptions, in the United States at least. “The strongest birth rates and therefore the strongest growth in young people in this country is among the Hispanic audience. And that is the group that comes to the cinemas the most often…about 50% more frequent in their moviegoing habits than other demographics. That is not the case in some other territories where the birth patterns are slow and declining even, with immigration rates from population bases that do not have a cinemagoing habit. We are pleased with the demographic trend in the U.S.”

As young audiences have so much on their minds, what are we going to do to get them to come back? “Giving them great movies is one way” is Fithian’s straightaway answer. “There are lots and lots of fantastic movies that appeal to young people. When we have this conversation in December of this year,” he believes all these movies will have delivered. Nonetheless, one of the oft-repeated arguments for accelerating windows is that the generation in question wants instant gratification. They want to see it when they want to see it and they want to have it now. Fithian begs to differ. “No, I think for young people the high-demand movie has to be seen socially and at the cinema. It needs to be tweeted about instantly, and this is different from other types of movies.” He brings up titles such as Furious 7, Avengers: Age of Ultron, The Hunger Games: Mockingjay Part 2 andStar Wars: The Force Awakens. “These are movies that will do a tremendous amount of business among a younger demographic. And they are movies that have to be seen during opening weekend in the cinema.”

“The other part about the truly young demographic is the need for family films all year,” he adds. “For many, many years, we have had this struggle about family titles primarily being released in the summer and winter holidays. I am just very, very pleased to see a different approach nowadays. We had several successful family titles already in the first quarter of the year and that usually seemed to be very fallow ground for such films. We have some big ones in the summer, of course, like we always do… If you go into the ‘off’ months, the biggest title in September, which was never thought of before as a place to release family pictures, is likely to be Hotel Transylvania 2. Sony has found a sweet spot for family titles,” Fithian notes, giving credit where credit is due. “We see additional family titles scattered throughout fall. Pictures like Goosebumps and The Good Dinosaur, The Peanuts Movie. As the list goes on throughout the end of the year, we are pleased that distributors realize that families will go to the movies any time of the year. And that is helping a lot.”