August 31, 2021
Movie theaters may be open and operating at near capacity worldwide, but ticket sales aren’t translating into blockbuster revenue for studios and exhibitors. Total revenue in 2021 is projected to reach 50% of 2019’s pre-COVID level, according to new data from Omdia.
The London-based research firm said global box office revenue remains impacted by alternative studio distribution strategies, which include shortened release windows, PVOD and concurrent SVOD retail options, as well as a change in consumer confidence due to the Delta variant.
Omdia said one of the major challenges faced by studios with the move toward hybrid PVOD and SVOD strategies has been the increased issue of online piracy and accessibility of titles from launch.
Overall, in 2021 consumer spending on movies across all platforms including SVOD, traditional home entertainment and theatrical will account for $60.4 billion, down $5 billion from pre-pandemic levels. At the height of the pandemic, total movie spending reached $46 billion, with the largest share from an ever-growing SVOD base.
By 2022, Omdia forecasts that total consumer movie spending will rise to a record $80 billion globally. Mid recovery, exhibitors will generate just 33% of consumer spending this year compared with more than 55% pre-pandemic.
“The COVID-19 pandemic has had a significant effect on studio revenues and shifted the way in which movies have been released,” Charlotte Jones, principal analyst at Omdia, said in a statement. “Theatrical windows are still a key revenue generator for studios and whilst there has been experimentation with alternative platforms and distribution models, over the course of the next few months studios will return to theatrical exclusivity for key blockbuster titles before releasing on other platforms.”
To reach its fiscal projections, Omdia compared the box office and home entertainment revenue of the top 50 movies in 2019 across different pandemic-era release strategies. The projection models took into account a relative cannibalization of traditional windows by each distribution strategy and suggested how much missing revenue needed to be made up for SVOD subscriber gains or incremental PVOD revenue.
The baseline transactional revenue for a typical major blockbuster is around $300 million per title, with cinema revenue at $178 million per title. In the U.S., typically, 60% of aggregate revenue is generated by theaters, with 75% of this tally generated within first 17 days (three weekends) of release.
The biggest impact for exhibitors from shifting windows has been the introduction of day-and-date release windows across both SVOD and PVOD platforms, including some of the largest titles of the year.
Concurrent releases accounted for 54% of box office revenue in U.S. theaters through mid-June 2021. Omdia expects that studios will predominantly migrate back to a theatrical strategy for major titles over the next few months.
Omdia contends day-and-date releases to SVOD impacts a title’s box office upwards of 20%. Whereas minimally cannibalistic strategies such as a 45-day window negatively impact box office revenue by 5%, and alternative distribution models, such as PVOD and concurrent PVOD also negatively impact box office by 5% to 20%.
More importantly, the report contends that traditional home entertainment revenue was put at greater risk by alternative distribution than theatrical.
“Blockbusters will continue to drive the most amount of box office revenue for exhibitors, however it is the Tier 2/Tier 3 titles that will see their window models shift, resulting in a larger decline in the traditional revenue measurement for studios,” said Jones. “Conversely, flexibility in release windows will also admit a wider variety of content into cinemas.”