Less is more. Except when it’s not. And in the current case of movies, it is most decidedly not. The film industry is shrinking—by revenue, volume, value and old fashioned chutzpah. The past poor decisions by major executives and the present market realities are creating an ecosystem with heightened risk for theatrical films, a declining number of buyers in the market, and an economic model that favors alternative mediums. That’s bad for business and audiences. Let’s pop a lexapro and take a closer look at how we arrived at this point of diminishing returns, what’s changing, who’s winning and what it means for everyone involved.
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Fewer major studios are making fewer movies
As Blood, Sweat & Tears made famous, what goes up must indeed come down. From 1995 to 2009, the six major Hollywood studios—Disney, Warner Bros., Universal, Paramount (PARA), FOX (FOXA) and Sony—combined to release nearly 112 theatrical films per year on average. In the ensuing 14 years, excluding the phantom 2020, that number shrank to an average of just 83. The quiet demise of 20th Century Fox under Disney didn’t help. The five remaining big legacy studios still largely drive the box office and pop culture conversation and stand as Hollywood’s bellwethers of fortune. Yet their Jurassic Parkian T-Rex sized footprint is shrinking. Over the last 10 years, the number of theatrical movie tickets sold in the U.S. has dropped by 38 percent while the average ticket price has increased by 33 percent, per The Numbers. That means we are paying more for less wide-release studio product.
Last year’s domestic and global box office returns were around 20 percent smaller than 2019’s pre-Covid gravy days. This year is projected to be even worse. To give you an idea, The Super Mario Bros. Movie earned more domestically in April 2023 ($490 million) than all movies in the same month combined this year ($437 million). Overall, film accounts for just 8 percent of all media corporate revenues, per Price Point. If the pandemic, directly followed by dual Hollywood strikes and current labor unrest within IATSE, hasn’t crippled the film industry, it sure has kneecapped it. (If you are wondering why there seems to be more blockbusters than ever over the last 15 years, box office projection models are more accurate with higher budgeted titles versus lower budget fare. Skittish green light studio executives understandably prefer more known quantities over uncertain risk.)
Movie theaters are over-leveraged with far too many screens (roughly 40,000 in the U.S. alone) and not enough consistent products to fill seats. AMC, the largest theater owner in the world, is relying on meme stocks to keep its share price afloat while Regal owner Cineworld is returning from bankruptcy. Closures and downsizing seem inevitable.
Streaming hasn’t picked up all the slack either. Nearly 77 percent of all global movie libraries for subscription video on demand (SVOD) services are comprised of theatrical films, according to data from research firm Parrot Analytics (where I work as an entertainment industry strategist.) Original movies from major streamers such as Netflix (NFLX)—which released an average of 221 scripted English and non-English films annually between 2019 and 2023, per What’s on Netflix data—account for just a quarter of total film catalog demand, which includes both original and licensed titles. That’s a pretty lopsided victory in favor of non-originals.
This probably isn’t even rock bottom either. As everyone knows, Paramount Global is up for sale and it is widely expected that the Sony and Apollo Global Management contingent will downsize the movie studio should it catch its quarry. This would reduce the number of major legacy studios from five to four. At the same time, Netflix – long one of the most generous buyers in the market – is reducing its annual volume of original English films from 80-plus to “about 20-30 movies,” Puck reports. Warner Bros. Discovery (WBD) can now legally chase additional consolidation without major tax consequences too.
Film is contracting. Fewer major players are releasing a smaller number of titles for a shrinking revenue pie. That’s bad news for consumers as it means less high-quality movies to enjoy. Even with earned concessions from the various strikes, this means less money flowing to the creative community overall.
The rise of TV
For decades, big theatrical blockbusters have been the centrifugal force behind Hollywood’s infamous flywheels. Hit movies delivered beloved characters, which could be used to anchor spinoffs, prequels and sequels (i.e. repetitive cash flow), sell merchandise, be featured in video games, and integrated into theme parks and experiences. That’s still the case; there’s a reason 2023’s most popular Halloween costume was Barbie.
But less volume from the major studios (even with an expected bounceback in 2025), declining ticket sales, and rash of combined cross-company streaming content bundles all imply less confidence in big screen solidity. The data makes a case for this: During the first three months of 2024, six of the eight premium SVOD services in the U.S. saw TV shows account for a larger share of total catalog demand than movies, per Parrot Analytics. This implies that TV, which typically elicits sustained engagement over a longer period of time than film, is doing more to attract new subscribers and retain existing customers. Therefore, as everyone other than Netflix tears its earnings reports to shreds in attempts to reach consistent streaming profitability, TV shows are the more efficient investment over films. (Even Netflix has seen its supply of original movies outstrip audience demand over the last two quarters, suggesting that investment could flatten out).
Yet even as TV holds the upper hand against original film from a streaming library perspective, traditional entertainment as a whole is fighting a battle of relevance. YouTube accounts for a leading 9.6 percent of all streaming viewership on TV sets in the U.S., according to Nielsen’s The Gauge. That’s bigger than Amazon Prime Video, Hulu and Peacock combined. Building consistent conversion funnels between the short-form user-generated content of YouTube, TikTok and Instagram and their own walled gardens remains as vexing to Hollywood as George R.R. Martin’s manuscript for The Winds of Winter.
Content is still king, but it takes more than quality programming to maintain low churn rates and high consumer spend. Distribution, a high priority on user experience, and investment in alternative formats are needed, too. Studio priorities are stretched thinner than ever and success is dependent on beyond just tentpole features.
The market will always have a place for movie theaters – if the business survived world wars and the Great Depression, it can survive a patch of audience apathy. But film’s ability to serve as the sun for a streaming-obsessed Hollywood’s solar system is being questioned by the studios. This changes the prospective value of the movie business and, therefore, the flow of talent around it.
Where will the creative talent migrate? Longer-term, the painful contraction Hollywood is currently enduring may create a long-lasting leak of clever writers, directors and producers to TV (similar to what occurred in the Peak TV era) even as the small screen business faces impossible challenges of its own. Netflix is on pace to generate $10 billion in profit this year while largely pulling back from its previous volume of original movies. What does that say about the directional flow of talent and strategy? Cinema will always be bigger and more prestigious than TV at its best. But at this moment, it is not being viewed as quite as necessary.
