It’s the Movies!
No Seismic Shift in Consumer Preferences
Compels Unwise Simultaneous Release
by John Fithian
For my column this month, I offer this statement
we released to the press last August, a response to recent
comments made by incoming Walt Disney Co. chairman Robert
Iger regarding consumers’ alleged demand for movies
to be released on DVD and in cinemas simultaneously.
WASHINGTON, D.C. – National Association
of Theatre Owners (NATO) President, John Fithian, issued
statement in response to comments by Walt Disney Chairman
Robert Iger during a conference call with Wall Street analysts
last Tuesday, August 9.
“Walt Disney’s Robert Iger says American consumers demand
it all and demand it now. To placate this instant-everywhere
appetite, Iger suggests it may be necessary to release movies
in theatres, on DVDs, and everywhere, at the same time.
Mr. Iger knows
better than to tell consumers – or
Wall Street analysts – that they can have it
all, everywhere, at the same time.
“Mr. Iger knows better than to
tell consumers – or Wall
Street analysts – that they can have it all, everywhere,
at the same time. He knows there would be no viable movie
theatre industry in that new world – at least not a
theatre industry devoted to the entertainment products of
Hollywood. And he should know that Hollywood studios would
be merely one shriveled vendor among many in that new world
“Iger considers the slowdown in
theatre box office and DVD growth a ‘wake-up call’ for the industry. I’m
not sure who was asleep, but it wasn’t the exhibition
industry. Here’s what we know about 2005 – the
movies are not as good. They’re not terrible. They’re
just not as good. And so the industry has experienced a temporary
drop-off compared to 2004 – the biggest box office
year in movie history.
“Further, factor out last year’s big grossing specialty
surprises – ‘Passion of the Christ’ and ‘Fahrenheit
911’ – and add in the fact that there are
fewer wide general releases this year, and the alleged
industry ‘slump’ disappears.
“Just to reinforce the point that our industry cycles are
driven by movie quality, it is interesting to note
that DVD slow-down has roughly tracked the theatrical window. That
is, movies that have done poorly at the box office
have tended to fare poorly when released on DVD.
“On the other hand, DVDs that sell well benefit enormously
from the advertising platform and national conversation
generated by theatrical release. Does it really make good business
sense to plunder that $25-billion-plus worldwide theatrical
window without a very solid assurance that even more
DVD sales will make up for the lost theatrical revenues? And
if you answer that question based on number-crunching
in your home entertainment division, are you really willing
to bet the farm on the proposition that consumers will
rush to watch even more movies at home after you’ve whacked
the advertising platform of theatrical release? And
have your number-crunchers accounted for the possibility that
consumers have basically bought their DVD libraries,
and will hereafter be increasingly conservative about their purchases?
“It’s a product-driven industry. When the movies are
really good, the industry does really well. And vice versa.
New gizmos and conveniences regularly influence consumer
patterns – but there is no seismic shift in the simple
fact that good movies make people want to go see movies.
Consumers are smart that way. Analysts can get that.”
The National Association of Theatre Owners is the largest
exhibition trade organization in the world, representing
movie theatres in all 50 states and in more than 40 countries.
NATO represents all of the ten largest movie theatre operators
in the country, as well as over 500 smaller exhibition companies,
for a combined total of more than 29,000 U.S. movie screens.
NATO is headquartered in Washington, D.C., with a second
office in North Hollywood, California. The association has
a website at www.natoonline.org.