“My comments about the state of the exhibition business are very positive and very strong,” John Fithian assures. Contrary to rumor, the president and chief executive officer of the National Association of Theatre Owners (NATO) will not be going all
Avatar by wearing blue face paint at ShoWest. But he admits that could possibly “be a very good idea… I actually might consider it.”
Emulating Pandora or not, Fithian wants to address politics on our planet. “There’s a
lot going on in Washington, D.C. right now.” In tune with that momentum, “we are getting more technologically facile in effecting the policy debates,” he explains. “We have begun to use online networks so that our members can express themselves to their elected representatives. NATO is getting better at marshaling grassroots support for our policy initiatives as well. We are doing a better job at representing the exhibition industry in Washington. There are a lot of big issues, as Congress and the President are very active.” Among those “that we have to respond to,” are healthcare reform, taxes on sugared beverages, menu labeling and calorie counts on menu boards. Plus there are the issues of employer mandates and “whether or not there are overly costly burdens on businesses that employ young and part-time people.”
Since all of these and more have what Fithian calls “multiple effects on our membership” in broader terms, how is that NATO membership developing internally? Asked about AMC Entertainment acquiring Kerasotes ShowPlace Theatres and
Rave Cinemas incorporating certain locations of National Amusements, he doesn’t really see a new trend emerging. “We’ve had consolidation in this business over the last decade. The trend has been on hiatus for a couple of years because the markets froze and money was too hard to get.”
Speaking of hard-to-get financing, where is d-cinema headed these days? “Money is becoming available and the broader rollout will accelerate relatively soon,” Fithian replies. “But I have believed that for years, so I sound a bit like a broken record,” he deadpans. “At the same time, people are getting creative with self-financing as exhibitors are obtaining loans from their local banks or vendor-financing…to help them in the transition. All of this is being supported by the studios’ virtual print fees. We just had to get more creative in offering several different ways for exhibitors to move forward.”
Upward was the only way to go for our industry last year. “2009 was a record-breaking year at the box office,” Fithian says about the $10.6 billion that has been widely reported. “That’s up almost 10%. We also showed a substantial increase in the number of tickets sold.” In fact, “we closed out the fourth decade in a row of admissions growth. That’s all very, very positive.”
With an average ticket price of $7.50, including all the surcharges for 3D and IMAX presentations, he finds not only does moviegoing continue to be “the most affordable out-of-home entertainment,” but it also runs counter to cost-of-living increases. (See our interview with
NATO’s Patrick Corcoran) “It’s that affordability that helps us during recessionary times. However, we still have to have good movies. Without them, it doesn’t matter if moviegoing is affordable.”
Speaking of the latter, “a number of good movies of different genres were spread out throughout the year,” he notes, “and they appealed to different demographics.” Although many things “came together to make 2009 a very good year that signals some continued viability in our business,” Fithian expresses some concerns as well.
“Because of whom we represent, the difficult thing [for him to address] is that the economics of the studios in the broader sense were challenged. The theatrical business was one of the only positive aspects, as DVD sales continued to run a rapid decline for the studios and without the replacement income stream from other home markets. Legal downloads and video-on-demand-type alternatives have not taken off in a way needed to replace declining disk sales. That’s a problem… When the consumer gets to rent movies for a dollar and stops buying copies, the studio economics have changed dramatically. That is of concern to us,” he admits. “Even though our business was very strong in 2009, we need the studios to be strong as well so they can continue to make and distribute movies with the kind of budgets that bring up quality levels.”
“Everyone is talking about how huge
Avatar is, and so it is, indeed.” But, he cautions, “it also had a huge production budget. If the studios continue to lose film revenue and do not find ways to replace those income streams, setting up such budgets becomes more challenging. Our take on the business is a mixed bag. Exhibition is very strong, our revenues are way up. We’re very excited about how people all around the world are coming to the cinema in growing numbers, but we are also concerned about the economics of our studio partners because we need them.”
At this point it might be appropriate to note that the studios still need the proverbial engine that drives the train too, especially as it has been showing a stronger pull than ever. Isn’t it ironic—or at least a case of poetic justice, with exhibition’s longstanding position on windows—how studios are now establishing additional windows on the home front? In response to the previously mentioned sales drops, Warner Bros. and Netflix, for instance, agreed to hold off subscription services until 28 days after the sale date. Similarly, some in the industry have suggested that Walmart’s and Target’s limits on the number of disks their customers can buy are a direct response to attacks from the dollar-rental kiosks.
Fithian wouldn’t want to call it irony, but prefers to see these kinds of negotiations as a smart move. “It makes a lot of sense that…studios establish window patterns to maximize returns on their movies. Not giving the consumer a really inexpensive, devaluing rental experience early in the chain is good for the entire business. If you suggest to consumers that this very valuable, special product—a movie that costs hundreds of millions of dollars to make—is worth a buck, you are really saying that a major theatrically released movie is just like a television show or direct-to-DVD movie. In the consumer’s eyes, the product becomes homogenized. More power to Warner Bros. and others who are establishing these windows.”
Isn’t a dollar in rental fees better than stealing on the Internet? And does this mean that Fithian supports the idea of addressable television sets, for instance? Those that can access—at a premium—new theatrical movies earlier? After all, that would open up new revenue streams for producers. “No,” he heartily laughs at the suggestion. “There’s a balance in all of this. Where the appropriate windows are is a matter of negotiation between the distributors and all of their partners in the various release markets. Higher value is certainly better than lower value in the release scheme. Of course, we are very, very cautious about how early in the theatrical release the movie goes into the home. The studios have to understand the fine balance when the theatrical business is damaged more than their business in the home is actually helped. There is some very good and constructive thinking going on between the studios, theatre operators and those who are involved in the ancillary markets about these release patterns. I believe the models will evolve in ways that maximize the return for everyone.”
Fithian also feels that the industry “has moved away from those rather radical destructive ideas” emerging back in 2005. When reports of the death of cinema were rampant, he recalls, “some Hollywood executives were talking about simultaneous release of pictures.” Instead, “there is a much more sophisticated analysis of the models that work. There is flexibility with release windows and some differentiation in the home releases.” Exhibitors are part of that “very progressive dialogue,” he confirms. “Our members understand that and they want the studios to build a better model that helps the overall business. But they don’t want them to develop one with windows that are so short that they begin to impact the theatrical release, because that’s truly the only the part of the business that is currently healthy.”
In large part, that health is also due to digital stereoscopic technologies, which not so long ago were hailed as exclusive ways to enrich the theatrical experience. As 3D TV sets are becoming a reality, Fithian illustrates the differentiating factor. “There will be very significant differences between the 3D experience in the cinema and the 3D experience in the home. The stereoscopic effect is a factor of distance and screen size even more so than 2D is. The premium experience of going to a cinema is even more heightened in a 3D world… I don’t fear 3D in the home at all,” he states. “In fact, I believe it is a great development because it will help the flow of product and the quality levels will be substantial.” After all, “how much money could be pumped into making 3D movies if the only place you can show them is the first release market in the cinemas? And how much can be spent if there is also a home outlet at a later release? It makes perfect sense for the entire food chain to experience 3D.”
“We are not against the studios making good money in the home,” he reiterates in closing. “We are all for it as long as windows are maintained at the appropriate level and the product is differentiated.”
And as long as we in the exhibition industry do not have to say it again and again, until we are blue in the face.
