Welcome to the seventh annual CinemaCon convention at Caesars Palace! The NATO and CinemaCon teams are proud of what we have to present to our exhibitor members, studio partners, equipment and concessions suppliers, and other industry friends. From the exciting studio product presentations (ten different companies in an all-time record), to the sold-out trade floor and demonstration suites, to the timely educational programming, to the networking, meetings and socializing, you will have a busy and productive week.
This year at CinemaCon NATO will emphasize two themes—one to be expected, but one out of the ordinary. As should come as no surprise, NATO will champion the moviegoing experience and discuss very strong numbers at the box office. Given the rapidly changing nature of the public-policy focus in many territories around the world, though, NATO will also speak out about the benefits exhibitors derive from global economic and policy integration.
First, let’s celebrate the strong state of our industry by looking back at the year just completed. When the year 2016 began, many pundits predicted that moviegoing would take a dive in 2016 but rebound the following year. The movie slate in 2016, suggested some, just wasn’t strong enough. Too many sequels. Too big a focus on tentpoles. Exhibition stock analysts and buyers factored in a discount based on these predictions.
But one beautiful aspect of this magical business is that no one knows anything until tickets go on sale and our guests begin to speak with their wallets and purses. Despite earlier harbingers of decline, we did just fine in 2016, thank you very much! According to comScore—NATO’s Official Data Partner—domestic box office receipts broke a new record at $11.37 billion in the U.S. and Canada. That is a 2.1 percent increase from 2015’s $11.13 billion and the eighth straight year revenues have exceeded $10 billion.
In fact, 2016 box office ran ahead of 2015 for the entire year, led by a stellar first quarter, which outstripped the same quarter in 2015 by 12.77 percent. Q2 trailed the same 2015 quarter by 9.75 percent. Q3 again outperformed 2015 by 12.3 percent, while summer box office was dead even with 2015 at $4.48 billion. The final quarter of the year managed to stay close to Q4 2015, despite the enormously difficult comp with The Force Awakens. Q4 ended with a slight 3.94 percent down.
Yes we had some big hits. There were nine titles that grossed over $300 million in 2016, while there were only six in 2015. But in an equally encouraging sign that runs counter to earlier trends, films that grossed between $50 and $100 million accounted for $250 million more in 2016 than in 2015.
On the international scene, the numbers are more complicated even though they remained strong. comScore estimates that the international box office came to $27.4 billion, which means that the worldwide box office hit $38.8 billion. That global number is but a fraction below comScore’s 2015 estimate of $38.9 billion. In other words, when measured in American dollars, 2016 came within $100 million of beating the all-time record of 2015.
Had it not been for currency devaluations in many important territories, global box office would have set a new record in 2016. In China, for example, the box office was down $200 million when measured in dollars, but actually posted a 3.7 percent increase when measured in local currency. In the United Kingdom, box office totals when measured in dollars were damaged by Brexit and the devaluation of the pound.
In the end, 2016 proved to be a much better year than most predicted. Will 2017 beat the record? We’ll know when we know!
NATO’s second theme for CinemaCon 2017 has not been discussed at previous conventions. In many territories in the world, including Europe and the United States, nationalism is on the rise. Voters in many countries are supporting candidates who seek to reduce immigration, to pull back on international alliances, and to impose barriers on free trade. In this author’s opinion, those trends are bad for the exhibition business. Or stated another way, globalism is good for NATO members and should be championed.
Immigration can drive movie attendance and improve the available work force. In the United States, for example, Hispanics have constituted the largest source of immigration in recent years, and also the most frequent moviegoers. comScore’s data for 2016 indicates that Hispanics were more than 21 percent of the moviegoing audience, even though they make up less than 18 percent of the population. Similarly, immigration provides a significant labor pool for exhibitors in many territories. Theater operators need many entry-level minimum-wage employees to do basic jobs that do not require a higher education. Often, immigrants fill these positions. Yet policy makers in many territories seek to reduce immigration. In the U.S., for example, legislation has been proposed in the Senate that would reduce legal immigration by half.
Globalists also believe that free trade is good for business, yet new nationalist leaders in several territories seek to cut back on free trade agreements. What does this mean for the exhibition business? First, in many cases, it means higher costs. NATO member Alejandro Ramirez Magaña of Cinépolis wrote recently that his company buys popcorn from Iowa and Indiana and cheese for their nachos from Wisconsin because the trade policies between Mexico and the United States make those products affordable. Should free trade policies between those two countries change, and prices rise, Cinépolis would likely buy what today is slightly more expensive popcorn from Argentina, and would have to find another source for cheese as well.
Exhibitors in many territories import their equipment, and the average movie-theater-equipment import duty around the world is between 9 and 10 percent (with some countries going as high as 100 percent.) Nationalistic policies will likely drive those duties higher, while greater free trade would lower them.
International agreements and international institutions also serve to protect intellectual property and combat movie theft. Exhibitors around the world lose billions of dollars each year to movie theft, and the losses would be much greater if not for a global war on piracy. Nationalists will reduce the use of these agreements and institutions and damage the global effort to reduce movie theft.
Finally, exhibition is itself becoming a global business. American-based AMC is going into Europe with the acquisitions of Odeon and Nordic. Chinese company Wanda has invested in AMC and has acquired Hoyts in Australia. Korean-based CJ-CGV has acquired Mars in Turkey and is opening cinemas in the U.S. Mexican-based Cinépolis operates now in four continents, with cinemas across Latin America, India, Spain, and the U.S. And these are only a few examples of an accelerating trend of international consolidation.
CinemaCon, too, has become a global convention. We will champion our international business throughout the week. Thanks for coming to the show!