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The attendance treadmill: Running hard to stay still in the cinema business

Oct 17, 2013

-By Mark de Quervain


filmjournal/photos/stylus/1387588-Attendance_Treadmill_Md.jpg
Over the past 10 years, in most mature markets cinema admissions have been and remain stubbornly flat in spite of new innovations to improve how we show film. The overall cinema experience has certainly improved with 3D, better sound and new cinemas being built, but this has not necessarily led to a greater desire to visit the cinema.

The difference between a good year and a bad one often comes down to just one or two movies doing better (or worse) than expected. 2012 would have been a poor year if not for Skyfall breaking box-office records and performing way ahead of expectation. On an individual country basis, there have also been some outstanding performances from local films which push box-office/attendance figures to new heights, but exceptional “one-off” results cannot be expected or sustained every year. 

In effect, underlying admissions outside the one or two over-performers is flat, and this points to a potential weakness in our business which needs to be addressed. According to the MPAA, attendance per capita in the U.S. appears to be on a slow downward trend.
Box-office revenue, however, has grown and is on a more positive trajectory than admissions, but this is due to the market’s price inflation combined with additional premium offers such as 3D (from 2009), VIP seating and screens, large screen formats, etc.

So what’s going on?
To start with, the number of people who don’t go to the cinema at all (for any reason) ranges from 33% in the U.S. (MPAA) and upwards depending on the country. In the U.K., for example, that figure is over 60% according to the latest Fame report.

The number of non-cinemagoers is clearly going to be dependent on the infrastructure and “state” of the market, so not enough cinemas or the appropriate cinemas or other reasons such as the economic crisis (as in Southern Europe) all play an important role. Populations are also growing and their demographics are changing, many getting older.

To help remove this variable, rather than look at attendance per capita, it’s probably best to look at the number of cinemagoers.

First, our core base of Frequent Cinemagoers does not seem to be growing in number, but there is some indication that they are going slightly more frequently—this group represents at least 50% of all admissions and according to some reports over 80% of admissions. This group visits the cinema between one and two times per month.

Another interesting and possibly worrying fact about frequent cinemagoers is that they are also the biggest source of film piracy. On average, 25% of their viewed content is obtained from non-legal sources and the number rises to 50% with males 16-24, according to figures from the U.K. Industry Trust (2013). Potentially, this group is susceptible to lowering their cinema attendance due to increased piracy, although this relationship is more complex than that. So this, combined with reliance of the cinema industry on their current attendance rates, could be something of a double-edged sword—hence the importance to reduce or at least stabilize film theft.

Increasing cinemagoing frequency from within this group may be difficult, as many may be going as often as they can. That suggests a better strategy would be to focus on finding ways to increase their overall spend, which is where membership programs can be particularly effective.

There are almost twice as many Occasional Cinemagoers as Frequent Cinemagoers and on average the former group visits the cinema between four and six times a year, or once every two months or less. I believe this group shows huge potential for growth.

This group of consumers will be only spending between 12 and 18 hours of their total annual leisure time going to the cinema. It is reasonable to say they are not engaged in or connected with cinema in any significant way. They may know about the latest blockbusters or be late adopters for other films if word of mouth is strong, but cinema generally won’t make their priority list and their “intended visit” may often be bumped or relegated as other “more important” things come along. These people do not operate at the same “speed” as the industry does, thus movies simply pass them by.

So while there is a big upside, the marketing challenge is to reach out and talk to this group in a different way than currently the case, simply because in most cases they will not be listening and therefore won’t have the necessary information on films to know what they might like and why. Our aim must be to increase their knowledge and understanding first, as this will drive intent to go to the cinema.

Total Film Revenues
Total film revenues have fallen significantly: In the USA, between 2004 and 2012 total consumer revenues for filmed entertainment have fallen over 13% net and over 28%, inflation adjusted. In the U.K., the numbers are even higher with a 20% net fall and 38% decrease adjusted for inflation. A contributor to this drop-off has been the poor performance of video, and in particular premium DVD/Blu-rays, although there are signs according to various reports that sales are on the up in some markets.

The consequence of lower total film revenues for the studios is that they will be under pressure to make fewer movies, rely more on tentpoles, take less risk and have less budget to market films, which on smaller releases becomes a major issue when wanting to drive admissions. There have been several articles this year relating to this subject from some of the world’s biggest and most influential filmmakers.

As a consequence of poor performance of physical sales in the home-entertainment sector and cinema ticket price inflation, cinema’s share of total film revenues has grown from 30.5% in 2004 to 40.8% in 2012, a 34% increase, according to data from IHS.

Around 54% of people who watch video content do not go to the cinema and 25% of people who go to the cinema do not consume video content, according to BVA/KantarWorldpanel 2013, so there is a great incentive for us in the cinema industry to step outside of our silo and work with our colleagues in the video industry to mutually drive incremental attendance and purchase of film content.

So what next?
We need to take a step back and review what we are actually doing from a marketing point of view, because it is probably not driving attendance growth and at best it is maintaining the status quo. We (cinemas) are certainly good at talking to frequent cinemagoers but much less so to everyone else. A customer needs to be engaged with us already to derive the greatest value from our communications to them. Our loyalty and reward programs will be enjoyed by our best/better customers who may well not need all the incentives on offer to visit the cinema, so we may well in effect be giving away unnecessary profit.

We have to get better at engaging with and encouraging occasional cinemagoers to visit more often than they do, and for that we need to employ new techniques such a personalization and discovery, gamification, great UX, more relevant information and possibly new pricing mechanisms and better CRM, all wrapped in digital and social media.

Using customer and preference data to help improve programming and choice is something we can and should probably do more of too, as this will help match choice to potential demand.

I am a firm believer in the maxim “If you are not really sure what something does, even if you have been doing it for a long time, then switch it off in a controlled way and see what happens.” Prime targets for this, for example, might be the volume of e-mails sent out set against what they achieve. As Borys Musielak from Filmaster said at his presentation at CinemaCon this year, “I get excited about the e-mails I get from my cinema…said no one ever”—an exaggeration perhaps, but he has a point.

There are a number of companies, ideas and tools out there to help cinemas get better at talking to our customers. At my recent panels at CinemaCon and CineEurope. companies including Filmaster, We Want Cinema and Independents United all showed great thinking and vision. During ShowEast this year, I will have another group of talented and forward-thinking companies with me (Highland Technologies, Movio and Zheta Pricing) who can help continue and add to this story/journey, so please come and listen if you can.

I firmly believe that we can get more people to go more often to the cinema. But we need to be more knowledgeable and understanding of how people think and behave. By employing the best and innovative marketing techniques and applying them across all touch points where film is consumed, we will be able to drive incremental admissions and convert them to help build our businesses and increase film box office.

Mark de Quervain is managing director at U.K. consulting firm Action Marketing Works Ltd. He will conduct a panel on cinema marketing at ShowEast on Monday, Oct. 21, at 5:15 p.m.


The attendance treadmill: Running hard to stay still in the cinema business

Oct 17, 2013

-By Mark de Quervain


filmjournal/photos/stylus/1387588-Attendance_Treadmill_Md.jpg

Over the past 10 years, in most mature markets cinema admissions have been and remain stubbornly flat in spite of new innovations to improve how we show film. The overall cinema experience has certainly improved with 3D, better sound and new cinemas being built, but this has not necessarily led to a greater desire to visit the cinema.

The difference between a good year and a bad one often comes down to just one or two movies doing better (or worse) than expected. 2012 would have been a poor year if not for Skyfall breaking box-office records and performing way ahead of expectation. On an individual country basis, there have also been some outstanding performances from local films which push box-office/attendance figures to new heights, but exceptional “one-off” results cannot be expected or sustained every year. 

In effect, underlying admissions outside the one or two over-performers is flat, and this points to a potential weakness in our business which needs to be addressed. According to the MPAA, attendance per capita in the U.S. appears to be on a slow downward trend.
Box-office revenue, however, has grown and is on a more positive trajectory than admissions, but this is due to the market’s price inflation combined with additional premium offers such as 3D (from 2009), VIP seating and screens, large screen formats, etc.

So what’s going on?
To start with, the number of people who don’t go to the cinema at all (for any reason) ranges from 33% in the U.S. (MPAA) and upwards depending on the country. In the U.K., for example, that figure is over 60% according to the latest Fame report.

The number of non-cinemagoers is clearly going to be dependent on the infrastructure and “state” of the market, so not enough cinemas or the appropriate cinemas or other reasons such as the economic crisis (as in Southern Europe) all play an important role. Populations are also growing and their demographics are changing, many getting older.

To help remove this variable, rather than look at attendance per capita, it’s probably best to look at the number of cinemagoers.

First, our core base of Frequent Cinemagoers does not seem to be growing in number, but there is some indication that they are going slightly more frequently—this group represents at least 50% of all admissions and according to some reports over 80% of admissions. This group visits the cinema between one and two times per month.

Another interesting and possibly worrying fact about frequent cinemagoers is that they are also the biggest source of film piracy. On average, 25% of their viewed content is obtained from non-legal sources and the number rises to 50% with males 16-24, according to figures from the U.K. Industry Trust (2013). Potentially, this group is susceptible to lowering their cinema attendance due to increased piracy, although this relationship is more complex than that. So this, combined with reliance of the cinema industry on their current attendance rates, could be something of a double-edged sword—hence the importance to reduce or at least stabilize film theft.

Increasing cinemagoing frequency from within this group may be difficult, as many may be going as often as they can. That suggests a better strategy would be to focus on finding ways to increase their overall spend, which is where membership programs can be particularly effective.

There are almost twice as many Occasional Cinemagoers as Frequent Cinemagoers and on average the former group visits the cinema between four and six times a year, or once every two months or less. I believe this group shows huge potential for growth.

This group of consumers will be only spending between 12 and 18 hours of their total annual leisure time going to the cinema. It is reasonable to say they are not engaged in or connected with cinema in any significant way. They may know about the latest blockbusters or be late adopters for other films if word of mouth is strong, but cinema generally won’t make their priority list and their “intended visit” may often be bumped or relegated as other “more important” things come along. These people do not operate at the same “speed” as the industry does, thus movies simply pass them by.

So while there is a big upside, the marketing challenge is to reach out and talk to this group in a different way than currently the case, simply because in most cases they will not be listening and therefore won’t have the necessary information on films to know what they might like and why. Our aim must be to increase their knowledge and understanding first, as this will drive intent to go to the cinema.

Total Film Revenues
Total film revenues have fallen significantly: In the USA, between 2004 and 2012 total consumer revenues for filmed entertainment have fallen over 13% net and over 28%, inflation adjusted. In the U.K., the numbers are even higher with a 20% net fall and 38% decrease adjusted for inflation. A contributor to this drop-off has been the poor performance of video, and in particular premium DVD/Blu-rays, although there are signs according to various reports that sales are on the up in some markets.

The consequence of lower total film revenues for the studios is that they will be under pressure to make fewer movies, rely more on tentpoles, take less risk and have less budget to market films, which on smaller releases becomes a major issue when wanting to drive admissions. There have been several articles this year relating to this subject from some of the world’s biggest and most influential filmmakers.

As a consequence of poor performance of physical sales in the home-entertainment sector and cinema ticket price inflation, cinema’s share of total film revenues has grown from 30.5% in 2004 to 40.8% in 2012, a 34% increase, according to data from IHS.

Around 54% of people who watch video content do not go to the cinema and 25% of people who go to the cinema do not consume video content, according to BVA/KantarWorldpanel 2013, so there is a great incentive for us in the cinema industry to step outside of our silo and work with our colleagues in the video industry to mutually drive incremental attendance and purchase of film content.

So what next?
We need to take a step back and review what we are actually doing from a marketing point of view, because it is probably not driving attendance growth and at best it is maintaining the status quo. We (cinemas) are certainly good at talking to frequent cinemagoers but much less so to everyone else. A customer needs to be engaged with us already to derive the greatest value from our communications to them. Our loyalty and reward programs will be enjoyed by our best/better customers who may well not need all the incentives on offer to visit the cinema, so we may well in effect be giving away unnecessary profit.

We have to get better at engaging with and encouraging occasional cinemagoers to visit more often than they do, and for that we need to employ new techniques such a personalization and discovery, gamification, great UX, more relevant information and possibly new pricing mechanisms and better CRM, all wrapped in digital and social media.

Using customer and preference data to help improve programming and choice is something we can and should probably do more of too, as this will help match choice to potential demand.

I am a firm believer in the maxim “If you are not really sure what something does, even if you have been doing it for a long time, then switch it off in a controlled way and see what happens.” Prime targets for this, for example, might be the volume of e-mails sent out set against what they achieve. As Borys Musielak from Filmaster said at his presentation at CinemaCon this year, “I get excited about the e-mails I get from my cinema…said no one ever”—an exaggeration perhaps, but he has a point.

There are a number of companies, ideas and tools out there to help cinemas get better at talking to our customers. At my recent panels at CinemaCon and CineEurope. companies including Filmaster, We Want Cinema and Independents United all showed great thinking and vision. During ShowEast this year, I will have another group of talented and forward-thinking companies with me (Highland Technologies, Movio and Zheta Pricing) who can help continue and add to this story/journey, so please come and listen if you can.

I firmly believe that we can get more people to go more often to the cinema. But we need to be more knowledgeable and understanding of how people think and behave. By employing the best and innovative marketing techniques and applying them across all touch points where film is consumed, we will be able to drive incremental admissions and convert them to help build our businesses and increase film box office.

Mark de Quervain is managing director at U.K. consulting firm Action Marketing Works Ltd. He will conduct a panel on cinema marketing at ShowEast on Monday, Oct. 21, at 5:15 p.m.
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