Shindler's Site: Heeding the Wake Up Call 2: What Has Changed?

By Marty Shindler

As I contemplate what has changed since I wrote Heeding the Wake-up Call more than 2 ½ years ago (see MaxImage!, October 2000), I am reminded of a Wall Street Journal ad from a few years back and of advice I received early in my career.

 In the ad, two people are talking, but only one appears to be listening.  One was recently promoted again, we find out, getting a corner office on an upper floor.  Both started at the unnamed company at the same time and the one not getting promoted asks the other several times how that can happen so often.  He keeps getting the answer, “I read the Wall Street Journal.”

 The advice is something I was told while working at Twentieth Century Fox.  A mentor told me that I could work for a long time in the Fox accounting department and have an okay job, but if I really wanted to be more than that, reading the trades (Variety and The Hollywood Reporter) was necessary.  As he put it, knowing what is going on in the industry and being up on it can make the difference between being an accountant and a knowledgeable executive.  I chose the latter, and to this day regularly read Variety and a host of other publications. 

 Over the past few months we have seen the following headlines in LF Examiner:

•  LF Theater Growth Down in 2002, Third Year in a Row

• Brisbane may not lose IMAX

• Megasystems Folds

• Euromax Voices Opposition to IMAX’s DMR Process

• Monterey IMAX still in court

• Star Wars Opens Big

• Adelaide sold, Sydney renamed

• Two Japanese theaters close

• Two German IMAX theaters close

• Drop in 2D and 3D production

• Johannesburg theater to close

• Brisbane IMAX closes in March

• And in the mainstream media: “Video rentals hit record.”

 The common thread running throughout many of the stories is how difficult it is to be in the LF business these days.

Sure, Star Wars opened big, but its LF gross of about $8 million is less than stellar for the #12 film of all time.  Of course, it was released to LF theaters more than six months after its initial release and less than two weeks before its home video release.  Perhaps even Star Wars has a saturation point.

And there are a number of positive headlines as well, including theater signings, people being promoted, etc.  But the trend is still the same, and it is not up.  Is reality setting in or were matters inflated previously?

In Heeding the Wake-up Call in October 2000, I cited the following as challenges facing the LF industry:

• Maximizing producers’ revenue.

• Developing a stronger marketing focus.

• Returning a larger share of the box office to producers.

• Sharing more information.

Let’s look at these points.

 Maximizing producers’ revenue. One of the easiest ways to stop losses is to increase revenue.  There has been some movement to maximize revenue as more LF producers have sought home entertainment releases for their films.  Despite a slight increase in average booking length cited in the LF Examiner 2003 Large-Format Bookings Yearbook, the need for additional revenue is readily apparent.  With attendance trending down, overall revenue generated is probably also down.  As such, ancillary revenue is vital to producers, but some still have not exploited alternative sources.  How many have investigated home entertainment or the emerging high-def TV market?

Developing a stronger marketing focus. There is never enough marketing.  The producer does not get a sufficient return to warrant a wide marketing campaign and the theaters have little left after paying for prints, royalties, maintenance, and overhead.  It is an expensive industry in which to work, but marketing is an area that deserves more than it gets.  There are too many other options vying for our customers’ entertainment and educational dollar.  Marketing is fundamental.

Returning a larger share of the box office to producers. The biggest risk takers in the whole production/distribution/exhibition cycle are the producers.  Yet the model provides little in the way of incentive to continue producing quality films.  I often wonder how investors can continue to invest in films, considering their chances for a return.  When quality films are produced, the number of leases they obtain often does not provide an adequate return.  So far, no one has taken the lead in changing in the business model, despite a general consensus that change is needed.  This is called NATO: No Action, Talk Only.  Without a change, the LF industry will not remain viable.

 Sharing more information so that decision making is improved. Providing more information would benefit those already involved in the LF industry, regardless of where along the food chain they are found, and would help those outside the industry to assess whether they should invest in the LF industry.  Although LF Examiner provides the most comprehensive information available, there must be a concerted effort to provide more and more useful data.  The GSTA has begun this process, with its new attendance reporting system.

What has changed since Heeding the Wake-up Call appeared? Who has tried to improve the LF industry?  It seem to me that there has been little positive change.

Heeding the Wake-up Call concluded with:

“It is time to wake up. The bells have rung before, but were put on snooze.  Now the alarm has sounded.  There is still time to heed the wake-up call.”

It is still true. It is time for action.

Marty Shindler is CEO of The Shindler Perspective, Inc. an organization specializing in providing a business perspective to creative, technology, and emerging companies. Marty may be reached at Marty@iShindler.com. Visit the firm’s web site at iShindler.com.