In an Uncertain Future for Theaters, Owners’ Faith in Moviegoing Remains Strong

In 2021, movie theaters faced the long struggle of reopening after a yearlong pandemic shut down. Then 2022 brought months-long box office slumps from COVID-19 production delays, and 2023 brought the strikes.

In 2024, are exhibitors out of the woods?

Larry Etter, SVP of Malco Theaters in Tennessee, said he’s not going to try to predict the future after the curveball of six months of Hollywood labor stoppages.

“In the first half of 2023, we were seeing a significant increase in business at our theaters compared to 2022, and we were making some pretty ambitious plans based off of that, but then movies got delayed because of the strikes and we had to pull back,” Etter told TheWrap. “Moviegoing is habitual. It’s all about momentum, and consistent momentum is the big thing that we’re really missing.”

This week, Etter and thousands of other execs, owners and employees in exhibition will gather in Las Vegas for CinemaCon to discuss how to reverse the trend of inconsistency that has plagued the business since the pandemic. Exhibitors that spoke to TheWrap said that despite the rough last few years, they are confident that the rate of wide-release films in theaters will continue to tick up over the second half of 2024. And 2025 figures to be a solid year, with major IP such as “Avatar,” “Superman” and “Jurassic World” on the slate, as well as films from acclaimed filmmakers like Bong Joon-ho and Paul Thomas Anderson.

But more labor strife — IATSE is in the midst of contract talks that will run at least into May, with Teamsters, the Basic Crafts and the Animation Guild still to come — could upend theaters’ economic recovery, the exhibitors said, as could more industry consolidation.

For now, to boost their bottom lines theater owners are largely focused on trying to diversify their release slates, and leaning into premium formats like Imax.

“The strikes slowed the flow of titles coming through the production pipeline, but we’ve seen more than enough evidence and heard enough from the people we are working with in production, distribution and exhibition to know that the fundamentals of our industry are sound,” said John Fithian, former president of the National Association of Theater Owners and founding partner of the exhibition consulting firm The Fithian Group.

Those fundamentals will be discussed on Tuesday by Fithian’s successor at NATO, Michael O’Leary, in his first keynote speech at CinemaCon. The new president of the theater trade organization plans to invoke the pop culture phenomenon of “Barbie” and “Oppenheimer,” two films that combined for $2.3 billion at the global box office and whose same-day launch propelled theaters to their best weekend of business since the opening of “Avengers: Endgame” in 2019.

Merger danger

The last few years have shown that a huge hit like “Barbie” or “Top Gun: Maverick” can lift the theater business to great heights, but a months-long slump soon follows. Recent March hits like “Dune: Part Two” and “Kung Fu Panda 4” have helped end a rough winter for the box office that lacked a massive moneymaker like “Avatar: The Way of Water” or “Spider-Man: No Way Home” and was exacerbated by release delays from studios that did not want to promote films while actors were on strike.

The next big threat to theaters’ economic recovery may not be a virus or a strike, but mergers and acquisitions bringing consolidation that would further shrink the number of competitors in Hollywood.

“It’s simple to me: We need more studios,” Etter said. “If the film industry consolidates down to three or four major studios, the quality of the films isn’t going to go up. It just means less studios putting out films in theaters, even if there are still some independent distributors in business.”

Right now Paramount has received multiple acquisition offers, including from private equity group Apollo Global Management and from one of the studio’s production partners, Skydance Media. But the company might not be alone. Disney has been at the center of multiple M&A rumors in recent years, and Warner Bros. Discovery only recently abandoned a bid to merge with Paramount.

But consolidation has already had an impact on post-COVID slates via Disney’s 2019 acquisition of 20th Century Fox, a studio that released 18 or more films each year prior to that merger during the 2010s.

Some of those Fox films, like the $70 million-budgeted Jennifer Lawrence spy thriller “Red Sparrow,” have been deemed theatrically unviable due to their mid-to-high level budgets and have largely become the domain of streamers like Netflix. But theaters are in a situation where they need any and all films that studios can provide.

The transformation of Fox to the Disney-owned label 20th Century Studios has led to less volume for exhibitors, even as Disney insiders tell TheWrap that the studio is exploring ways to increase its theatrical output with non-franchise titles such as 20th Century’s recently announced Bruce Springsteen biopic “Deliver Me From Nowhere.”

If another studio like Paramount becomes the next domino to fall in the M&A chain, it increases the likelihood of more frequent box office slumps due to a lower volume of releases.

A new normal forms

With the future of these potential M&A talks so nebulous, all theaters can do is take advantage of the release valves available to them. Some of the lost Fox output has been replaced by streamers like Apple, which has partnered with legacy studios to release films like “Napoleon” and the upcoming “Fly Me to the Moon.” And Amazon has continued to release films in theaters through its recent acquisition of MGM. Independent distributors like A24 and Neon have found a foothold with a new generation of discerning moviegoers, and Angel Studios is seeking to turn its landmark success last year distributing “Sound of Freedom”into a sustained presence at the box office.

Theaters are also searching for various forms of alternative offerings, from concert films to sports broadcasts to independently released international films like “RRR” and “Godzilla Minus One.” The search for theaters to fill in the gaps left behind by the big studios on the slate has made distributors like Fathom Events into a force in niche markets, and the alternative sphere hit its peak last year as “Taylor Swift: The Eras Tour” became the highest-grossing concert film ever.

“There is a real hunger for non-studio, independent product,” said Patrick Corcoran, founding partner of The Fithian Group. “The major studios account for 85% of our annual box office, but if you look at the most successful overseas markets right now, you see markets that are diversified, that are not entirely dependent upon that sort of global type of title that we are mostly dependent on. They have strong local film markets that are actually driving a more profitable market than we’re seeing in the U.S.”

That diversity can come from the distributor or from another sector of entertainment, but it can also come simply from a diversity of narratives. At CinemaCon on Monday, Focus Features distribution chief Lisa Bunnell and Neon distribution chief Elissa Federoff joined National Amusements marketing VP Rebecca Stein and B&B Theaters president Brock Bagby for a panel in which they discussed what they needed from the other side in order for studios and theaters to better collaborate on promoting original films with smaller budgets like “The Holdovers” to audiences.

For her part, Bunnell asked the exhibitors in attendance for patience when it comes to when movies from specialty distributors come to theaters. Films like “The Holdovers” often have a slow nationwide rollout to allow word-of-mouth to build, and that means that some theaters may have to wait longer for a hot title that got big reviews at Toronto or Venice longer than they may like.

She also noted that when those specialty and small-budget films hit theaters, they need as much promotion as possible on theater chains’ websites and social media platforms as well as full theatrical support. Bunnell warned that she’s seen instances where a specialty release loses critical weekend screen times to alternative content like UFC pay-per-views or to add more screen times to a wide release tentpole that is in high demand.

“If you don’t nurture and take care of these movies, then we can never go wider with them,” Bunnell said. “Please be patient with us, because we go slow so that we can build a movie.”

In response, Stein suggested that studios offer more and earlier opportunities for exhibitors to screen films so they can have a better idea of how they can promote the film to their customers and collaborate with studios in how they can support the film. She told Bunnell that “The Holdovers” was one of her favorite films of the year, but felt like she would have been better prepared to sell the film to National Amusements’ loyalty program members if she had been able to see the film sooner.

“We may not get [the film in theaters] earlier, but we need to see it sooner. I know when I see something at CinemaCon, it gets me excited and it sticks with me. It helps when I’m able to see it earlier and not just a week and a half beforehand at a trade screening,” Stein said.

Premium rush

While the Hollywood landscape that shapes the theatrical release slate continues to face new changes, there is one trend in exhibition that will definitely play a major factor: Premium formats.

In 2023, Imax took in $1.06 billion in global box office revenue, making it the second-highest year in the company’s history. Dolby, which offers its own premium format screens at select AMC Theaters locations, had a big presence on the CinemaCon trade show floor as it announced plans to offer its Dolby Vision projectors a la carte to theaters that have auditoriums already equipped with the company’s Atmos sound system. It’s an option the company hopes will expand its footprint at multiplexes across the country.

“The movie theater business is one that always requires reinvestment,” said Paramount domestic distribution chief Chris Aronson. “If a theater can’t keep its picture and sound quality up, it should be closed. Nobody wants to go to a run-down theater.”

Whether it’s because they offer the biggest screens possible for the biggest blockbusters or they simply serve as a guarantee of quality for moviegoers burned by a bad experience at a theater, premium formats are becoming the next edge that theaters can have over their competition.

“I remember when stadium style seating was first introduced to theaters, and the ones that adopted that early in the auditoriums got more business than those that didn’t,” said Etter. “Then we had the addition of recliners, and that became the competitive edge. Now it is premium formats. If you have those, you’re going to have a strong chance of selling out those auditoriums on a big opening weekend.”

Indeed, that was the case with the recent release of films like “Oppenheimer” and “Dune: Part Two,” which were such a hot ticket for Imax that theaters had to schedule screenings as early as 4 a.m. While that level of demand only comes along a handful of times a year if at all, it’s an example of how premium formats, with their surcharges, are a way for theaters to make a little extra from a popular film. They can also benefit from premium concessions and collectible popcorn buckets. The extra revenue can be marginal, but it allows theaters to profit more from the boom periods and stem the tide for when the next slump rolls around.

“In the 50s and 60s, we had giant single screen auditoriums,” mused Etter, recalling the days of the Orpheum theater circuit and locales like the famous Cinerama Dome near Hollywood Boulevard.

“Those auditoriums had state-of-the-art technology. It was innovation for Hollywood. It built Hollywood. Then those single-screen theaters made way for multiplexes. But now it is the biggest screens in those multiplexes, the Imaxes and other [Premium Large Formats], that are the hottest ticket. In a way, what’s old is new again.”

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