The box office isn’t trailing so badly

After a mammoth marketing campaign that was launched during the Super Bowl, the July 4 weekend saw the Steven Spielberg/Tom Cruise blockbuster War Of The Worlds invading almost 4,000 cinema screens across the US. Summer season at the US box office is in full swing.

Cinema-going has been a central part of American culture since celluloid first hit the big screen, and attendance levels during the summer months in particular are considered crucial to the movie studios. Not only do they look to summer box-office takings to boost their bank balances, but they also use it as a barometer to gauge the health of the industry as a whole. It is an appropriate time, therefore, for Hollywood marketing executives to gather together to discuss the current state of play, as they did last month at the Star Power Conference in Los Angeles.

By most accounts the mood at the conference was a positive one, yet recent press attention has tended to portray an industry on the slide and under attack. What is clear is that American cinema is in a significant degree of flux.

Celluloid blues

Total US box office sales for January to April this year were $153m (&£85.8m) – 5.8 per cent – down on the same period last year, while takings since the first week of May stand at $1.34bn (&£752m), the lowest since 2001, and $120m (&£67.3m) – 8.2 per cent – behind takings for the same period last year.

So far this summer, only five pictures have crossed the $100m mark; this time last year, seven films had done so. With each weekend since January bringing in lower takings than the corresponding weekend in 2004, the industry is on a 17-week losing streak, tying a record set in 1985 for year-on-year underachievement at the cash registers.

At the same time the industry is grappling with a major piracy problem. The Motion Picture Association of America (MPAA) estimates that piracy is costing its member studios about $3.5bn (&£1.9bn) a year. Contributing to this is a growing illegal online trade in movie files. Owing to tracking difficulties, the income lost through online file trading is hard to gauge, but BigChampagne (a research company specialising in file sharing networks) estimates the number of feature films posted on file-sharing sites more than doubled over the course of last year to over 44 million. The industry is taking it very seriously: recently the FBI and Department for Homeland Security closed down a file sharing site that was facilitating the illegal distribution of the new Star Wars movie, Episode III Revenge of the Sith.

Product placement and movie tie-ins are also coming under increased scrutiny. The Cat in the Hat, with over a dozen promotional partners, was considered by many (including its distributor Universal) to have been a victim of overkill that reduced the value of the core product. Once regarded an area of almost limitless growth potential, there are signs film placements are being more cautiously considered by both studios and promotional partners. According to research company PQ Media, paid placements in movies were up just 12 per cent to $412m (&£231m) in 2004, overtaken for the first time by television, where paid placements increased by 84 per cent to $552m (&£309m).

The importance of the DVD to the studios’ coffers continues to rise unabated meanwhile, and the time between cinema and DVD release is getting narrower. Despite a record year at the box office in 2004, with total takings of about $9.5bn (&£5.3bn), these were dwarfed by DVD and video rental and retail sales, which according to the Hollywood Reporter reached $24.5bn (&£13.7bn).

Some suggest that theatrical releases for movies have become little more than a marketing platform for the real money-making part of the operation, the DVD release. According to the National Association of Cinema Owners, studio pictures arrived on DVD an average of four months and 16 days after their cinema releases last year – 11 days earlier than in 2003, and over two months sooner than in 1994. The pressure is on for movies to deliver at the box office from the first day of release as the scope for “slow burners” is dissipating. The big-budget flop Surviving Christmas, for instance, played in cinemas for just two weeks after its release, and was for sale on DVD less than two months later.

Yet despite the turmoil, the industry continues to be upbeat, not only about its long-term prospects but also about the performance of the US movie business during the rest of 2005.

The box office in the first half of 2004 was boosted by the movie The Passion of the Christ, which attracted a highly atypical audience to the cinema – one that is unlikely to venture out to see a man in a rubber bat suit. Cancel the effect of the Passion film on sales and this year’s box office picture is pretty much the same as last year. Individual movies can have a dramatic effect on the box office. With this in mind the release of War Of The Worlds could easily push industry-wide receipts in the US beyond 2004 levels.

Though the internet presents problems for the movie industry, the experiences of the music industry and the hard line being taken by the MPAA provide some hope that Hollywood can tackle the problems. In fact, for Hollywood – one of the earliest adopters of the online campaign – the internet poses an opportunity. Steven Spielberg recently confessed that he watches more trailers online than he does at the cinema, and it is not uncommon for popular websites to have all of their ad space bought up by movie studios on Fridays as they attempt to reach and influence their target market before they head home for the weekend.

Dial m for movie

Studios are also considering other technologies to reach consumers. Warners recently ran a mobile marketing campaign through Verizon for the new Batman film. Other studios are sure to follow suit in exploring this medium in their pursuit of the crucial 18- to 34-year-old demographic.

So the optimism of the Star Power delegates may not be misplaced. In many areas Hollywood is showing itself willing to adapt and change to a shifting market. This year’s box office may have got off to a weak start, but with a slew of big-budget pictures set to hit the screens, there is potential for it to be another record year. Either way, with Governor Schwarzenegger issuing policy directives from the California State Capitol Building, Will Smith talking up the possibility of a future run at the White House and Tom Cruise’s engagement being carried on the Associated Press urgent newswire, we won’t be forgetting about Tinsel Town yet.