State of the Exhibition Industry
2009-2010

Presented at the 2010 ICSC / RECON | Las Vegas, NV

JMS Advisory is a consulting firm which provides cinema market due diligence, strategic planning and real estate deal making as well as cinema valuation services to institutional investors, developers, redevelopment agencies and colleges and universities. We facilitate and inform your deal making with these executives of the exhibition industry.

These uncertain times offer unprecedented opportunity for those who can position themselves for the future.

In order to provide a context for the public conversation between and among the panelists and you, the audience, regarding the current state of the exhibition industry, its challenges and forecasts and speculations about its future, Chuck has asked me to provide the defining industry statistics and “headlines” from  2009 and early 2010.

The initial frame is of box office revenue, admissions and ticket pricing. the sources of these statistics and others in my commentary include: Motion Picture Association of America – MPAA --  National Association of Theater Owners – the other NATO -- Neilson/EDI,  Rentrak and Screen Digest.

Cinema Industry Metrics

As you can see, domestic B.O. revenues in 2009 – at 10.6 billion – were up more than 10% over the previous year.  There was a 5.5% increase in admissions – that is body count.  Parenthetically, for the first time since 2002 movie goers increased their visits to 4.3 times a year from 4.2 times in 2008. Moreover, domestic tickets sold reached a 5 year high of 1.41 billion, the first increase in admissions in 2 years. In addition, the average ticket price jumped 32 cents to 7.50.

Frequent movie goers – people who attend a movie once a month or more and people between the ages of 18-39 are the dual populations that energize the box office.  For an exhaustive compilation and analysis of the demographic statistics profiling the movie going public, I invite you to log on to mpaa.org; click on: “research and statistics” then scroll down to “theatrical market statistics/2009”.

I have not included a revenue breakdown per person of concessions on this first frame. Food and beverage menus and sales, so integral to the movie going experience and at the core of the proliferation of emerging specialty venues and their total revenues is a topic that I am certain the exhibitors on this panel will address: covering the gamut from vodka martinis to beer and pizza to healthy snacks.

Now, with a drum roll: to a major industry transforming event: in 2009 and early 2010 we witnessed the drama played out on screens and at the box office:  the promise of 3D came into full view – Avatar of Pandora was front and center followed by young Miss Alice of Wonderland.  3D ticket sales accounted for 11% of domestic B.O. revenues compared to 2% in 2008. not only was there a dramatic increase in the number of 3D installations – take a look/see at this frame –  but this roll out is providing greater movie experience value allowing an extraordinary opportunity for an up charge at the box office. As a matter of fact, NATO reported premium ticket prices for 3D movies fueled the biggest quarterly increase in domestic admissions charges on record during the first calendar quarter of 2010. The three month spike was so dramatic – yielding a nationwide average of 7.95 a ticket – it nearly doubled the typical 12 month increase in average ticket prices of 3% or so.  

Digital 3D Movie Growth

FYI: Rentrack lists over 20 scheduled wide release 3D movies for 2010 and hardware technology installation furiously continues. Will this price surge be sustainable?  I suspect our panel will have points of view on this issue as well.

The top five grossing films released in 09 - and played into 2010 - represent almost 2 billion of the 10.6 billion annual gross -- or nearly 20%. Incidentally, even though the number of films released in theaters was down to 558, a sharp 11.8%  from the 633 released in 2009, major studios released a slightly higher number than last year – demonstrating the dramatic drop in releases came from the indie sector. Moreover, the drop in indie pictures is continuing into 2010.  Neilson/EDI reported for Q1 that Landmark – the national leader in operation of indie screens – is down 16 % at the box office while the industry is up 9% and Regal, Cinemark and AMC are all finishing well above the industry average.

Top Five Domestic Grossing Movies Released in 2009

During 09 and into 2010 year to date we witnessed further industry consolidation. There were two major transactions, which, in fact, realigned the ranking of exhibition industry giants. First, in December 09 Rave acquired 35 units totaling 519 screens from National Amusements and in January, 2010 -- AMC announced the acquisition of substantially all the assets of Kerasotes Showplace Theatres: 96 units with 973 screens.

This frame profiles the top five domestic exhibitors by B.O./screen and location count – Regal Entertainment is clearly the domestic   industry leader in all three categories. Moreover, these top five exhibitors on 47 % of the screens account for 51% of the domestic box office revenue.

Top Five U.S. Movie Circuits

Nevertheless, exhibition is a highly fragmented industry -- later, in this discussion Ira will address the proliferation of other players – traditional, regional operators as well as specialty venue/premium exhibitors and art and indie product exhibitors – each of which has distinct points of differentiation and risks and opportunities attendant to them and, therefore, to the success of your project and its synergistic co-tenancies.

As you can see, in 09, for the first time since 2001, We witnessed an actual decline in the number of indoor screens. the closings (or ‘shutterings’ as Chuck calls them) outweighed the openings. Nevertheless, 57 new units housing 631 screens opened in 2009.  Geographically disparate – 24 different states -- these openings were mostly real estate opportunity driven or replacement units.   Incidentally, 25% of these 631 new screens added to the movie going experience inventory are premium or food concept venues.  More on that  emerging business shortly.

Number of U.S. Indoor Screens

New U.S. Movie Screens

New 2009 U.S Theatre Locations
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