By Marty Shindler

"There is some work necessary to fine tune some of the traditional mechanisms," said an executive of a major theater chain in a year-end wrap-up article in the Los Angeles Daily News.

He was talking about the conventional film business, which grossed a record $8-billion-plus in North America in 2001. When all the results are in (shortly after I write this), the total for the year should be about $8.38 billion. According to the Hollywood Reporter, this will put attendance up to "a hefty 1.49 billion ticket units in 2001, a respectable increase of nearly 5% on the previous year’s 1.42 billion and up slightly but statistically tied with 1998’s total."

Theater chains are poised for a resurgence in 2002. Many have gone through, or are emerging from, bankruptcy reorganization, and they have been helped by the record box office. The executive also talked about the changing habits of moviegoers during the past few years, particularly the phenomenon, accentuated in 2001, of exceedingly strong openings.

Another important fact about 2001 was that family films dominated. The top three films — Harry Potter, Shrek, and Monsters, Inc. — fell into this category, each taking in well over $235 million in North America. Families are going to the movies together and some family members (the kids) are undoubtedly seeing some films more than once.

These changing habits have caused the exhibitors to look more closely at their financial relationships with the studios and how revenue is shared. The theater executive continued, "The benefit for us is, as studios make more money, the studios make more movies."

He could have been talking about the LF film industry, where many of the traditional formulas for splitting box office, print costs, and marketing are being scrutinized.

After several tumultuous years, 2002 may indeed be a turnaround year for LF. However, like our Hollywood counterparts, we must look closely at the habits of our patrons and determine what drives them to, or away from, our theaters. The world has changed. Viewers’ habits have changed. How have our LF theaters and host institutions fared? Was our programming substantial enough to reach annual goals? Did we show innovative films or the same old same old?

As we look forward to 2002, we must address our habits and traditional ways of doing business. The conventional film industry is taking stock of its basic business model; the LF industry must as well. Now is the time to create economic stimuli all along the LF food chain, and propel the industry to a record year in attendance, box office, and profits.

Let’s look at a few of these areas:

Box office and attendance. The fact that Hollywood has been tracking these numbers for decades and has a reliable estimated annual total so early in the year is a sign of its sophisticated and long-term business model. No confidential information is revealed, yet these two measurements help guide the industry.

I continue to insist that universal film-by-film reporting on box office and attendance must become an a norm for the LF industry.

Financial terms. Just as mainstream theaters are reviewing financial terms with the studios, so, too, must the LF industry renegotiate. As mentioned above, it is essential to return sufficient revenue to the studios to ensure a continual flow of new product. The LF industry must completely understand this cycle.

The industry also needs a sharp reduction in the cost of prints. After allocation of box office, print costs are the most important obstacle to achieving a financial turnaround. Once print prices come down, reworking the allocation of print costs between distributor and exhibitor will improve the bottom lines.

Quantity and type of product. One of the changing patterns in the conventional business is the dominance of opening- and early-weekend business. While institutional theaters need to show films for more than just a few weeks, I question whether films are changed frequently enough to encourage return visits, a customer habit that LF exhibitors must expand and exploit.

While it is too soon to tell how Beauty and the Beast will perform, early indications are positive. For commercial LF theaters the reasons to play the film are obvious. The institutional theaters on board recognize that entertainment for the whole family is an important and growing trend.

Presentation formats. Last year saw a dramatic increase in the number of 8/70 theaters, both new and conversions. This trend will continue as exhibitors evaluate the costs of competing formats. Nearly every distributor now makes its films available in 15/70 and 8/70, simplifying the decision to build an 8/70 theater. What may have been the obvious choice in the past may not be so obvious in 2002 and beyond.

Judging from e-mails I have received, LF organizations on both sides of the negotiating table have begun to take a positive approach to the changing financial terms. Thus, 2002 may be the year in which the economic stimuli that I and others have proposed will propel the LF industry into more growth.

Here’s wishing everyone a peaceful and prosperous New Year.