Hard to Predict the Future of Out-of-Home Film Entertainment

James T. Berger headshot

James T. Berger
Senior Marketing Writer

Published June 17, 2021

One of the most puzzling questions coming out of the COVID-19 pandemic relates to predicting the future of out-of-home film entertainment, i.e., movie theatres.

Several dimensions define the problem. First are the continuing rounds of disruptive innovation that have affected the film industry. In the not-too-distant past, if you wanted to see a current motion picture, you had to go to a movie theater or a drive-in.

Hard to Predict the Future of Out-of-Home Film Entertainment

The first disruptive innovation affecting this industry was the ability for moviegoers to see films in their homes and on their TVs via a series of technological innovations from tapes to video disks (CVDs). Consumers flocked to stores like Blockbuster where they browsed recent releases and had the ability to rent thousands of movies.

The next disruptive innovation was streaming, which eliminated the need to go to video stores. Multiple films became available through the Smart TV or Roku menus. Films could be viewed at any time in the comfort of one’s living room or den. If you wanted a drink, you could pause the film and visit the fridge or make some popcorn in the microwave. If you wanted to watch a recently released movie, you could pay a few dollars and rent it from the streaming service.

These streaming companies have since stretched the in-home movie experience even further by building their own production companies through which they create new content such as movies, documentaries or multi-part serials. They feature top Hollywood stars and, most importantly, these lavish made-for-TV films and serials are money-makers.

In my Wiglaf Journal article in May, 2017, I explored the business models of streaming services and showed that a typical 10-part season of a premium production such a “Game of Thrones” will cost HBO about $60-$70 million, which is in line with studio costs for a typical first-run movie. Within that budget, the production studios and actors achieve comparable compensation, and the services like HBO, Netflix and Prime balance their costs against the marketing cost of acquiring subscribers.

The big-time streaming industry has seen first-run films opening simultaneously on streaming platforms and movie theaters. In fact, during the pandemic, streaming was the only game in town for new releases.

With the pandemic ending, movie theaters unveiled various re-opening strategies. But before this could happen, Amazon’s Jeff Bezos threw the proverbial monkey wrench into the system with his $8.45 billion purchase of the iconic MGM studio and its vast post-1983 film library.

Now it is clear that the in-home film industry is becoming an oligopoly consisting of Netflix, Prime (Amazon), HBO Max (Warner Communications) and Disney (ABC, ESPN). What are left of the streamers will soon be acquired or become affiliated with  these four giants.

How then will the out-of-home film market cope? They are not giving up. Some strategic scenarios that have recently been presented. Keep in mind that the out-of-home film entertainment industry has also become an oligopoly consisting of a few vast movie theatre chains: there is Cineworld, the U.K. owners of Regal, AMC and Cinemark. The movie theater business had revenues in pandemic 2020 of $2.2 billion compared with $11.4 billion in 2019.

The out-of-home industry does not know if customers will return to theaters.

Forbes contributor Bob Salkowitz, in his Jan. 8, 2021 article entitled “Here’s Why the Future of Movie Theaters May Be Brighter Than Looks,” sees theaters benefiting from their real estate values in addition to showing movies, “serving as distribution and return points for merchandise ordered online.”  He adds that he envisions theaters becoming potential hubs for other kinds of social activities.

Shirly Li, author of the April 24, 2021 Atlantic article “Your Moviegoing Experience Is About to Change,” sees four new dimensions for movie theaters.

  • Theaters Will Be More Digitized with more online ticketing and seat reservations and online ordering of drinks and popcorn.
  • Theaters Will Be More Private with lucrative private auditorium rentals, added content and a feeling of “coziness.”
  • Theaters Want to Be Your First Stop Away from Home. She writes: “executives want to change the way you think about theaters; they want frequent moviegoing to the norm, not the habit of a dedicated minority.”

This author (Berger) goes back to Theodore Levitt’s Marketing Myopia thesis and believes that the movie theater industry must re-define itself as being “the out-of-home entertainment industry.”

About The Author

James T. Berger headshot
James T. Berger, Senior Marketing Writer of The Wiglaf Journal, through his Northbrook-based firm, James T. Berger/Market Strategies, offers a broad range of marketing communications, research and strategic planning consulting services. In addition, he provides expert services to intellectual property attorneys in the area of trademark infringement litigation. An adjunct professor of marketing at Roosevelt University, he previously has taught at Northwestern University, DePaul University, University of Illinois at Chicago and The Lake Forest Graduate School of Management. He holds degrees from the University of Michigan (BA), Northwestern University (MS) and the University of Chicago (MBA). Berger is an often-published free lance business writer who has developed more than 100 published articles in the last eight years. For more information, visit www.jamesberger.net or telephone him at (847) 328-9633.