See you at the movies, the darling statement of every movie star, witnessed a spanner in the works in March 2020. Since then, the world of cinema has never been the same again. While some may say that the cracks had begun to appear even before the pandemic, the reality is that two and a half years post our first brush with COVID-19, we have had more than enough time to observe and infer things about the world of cinema, understand the seismic changes the creative world has undergone to survive and thrive, and contemplate the one big question that remains unresolved—is cinema as we know it coming to an end?
The movie industry is changing
The movies and entertainment industry was valued at US$90.92 billion in 2021. Tens of millions of people working in these industries depend on a good box office collection for their livelihood. From an average of 700-800 movie releases a year in North America, 2020 saw a substantial fall to just 334. The next year, there was only a 20% increase in releases, still 50% less than pre-COVID numbers. In Singapore, from an attendance of a massive 18.9 million in 2019, the number fell to 4.6 million in 2020 according to the Singapore Film Commission. This number went up to 7.63 million in 2021, following the global trend. There is an improvement in footfall but nearly nowhere close to what the 271-screen strong network in Singapore would like.
Unpredictable lockdowns and the fear of going to theatres during a pandemic have hit the movie industry hard. This time off from cinema has also (possibly) made viewers introspect on the kind of content they want to see in movie theatres. Add to that the convenience of watching something in the comfort of one’s home and the result is that well over half of Singaporeans in our survey said that they would rather watch new movie releases at home than at the cinema.
The lead time between a movie release in theatres to appearing on an OTT platform reduced considerably over the past few years too. Earlier, one could expect at least a six-month gap between the two, but the pandemic saw movies released on OTT within weeks, and some even directly to online streaming platforms.
The industry is split between movie studios and movie theatre owners, tussling for an exclusive theatrical window that is constantly under negotiation. The longer a movie stays in the theatrical window, the more it benefits a theatre owner. However, for a movie studio, the revenue continues to come when the movie is released on OTT and television or even pay-per-view. The sooner the movie releases on these other mediums, the higher the chances are of it making more money.
Earlier, a studio depended on theatre chains to build the buzz around a movie. Moviegoers have been vocal about their opinion, and when it is good, it can catapult a good movie into a hugely successful one. However, entertainment consumption didn’t stop during the pandemic, and with an increase in large screen TV sales, the need for making the trip to a multiplex has now reduced considerably.
While the pandemic’s impact is muted now, it can still be felt in filling up seats at cinema theatres and multiplexes. The bargaining power with movie studios has reduced too since studios have seen that there will always be avenues to air their content, even without a theatre chain backing it.
Inflation and the rise of OTT
Global money printing and change in consumption patterns during COVID-19, coupled with pandemic-induced disruptions and the ongoing Russia-Ukraine war, have led to the kind of inflation that we have not seen in many decades. In such times, forking out an average of S$9.00 for a movie ticket on weekdays and over S$12.00 per movie ticket on weekends isn’t something a majority of Singaporeans are inclined to do. And then you add up the peripherals – travel to the multiplex either by public transportation (a two-way trip can cost about S$5.00 for one adult) or your car (petrol prices are averaging S$2.50 per liter now after spiking to S$3.40 in early July 2022), parking your car at the multiplex adds another S$3.00 for the 1st hour with S$1.50-S$2.00 per additional hour in some places. Top that with food and beverage costs of approximately S$10.00-S$12.00 and you are looking at a total of S$25.00-S$30.00+ per individual.
Meanwhile, OTT platforms are growing at almost 30% a year with a projected CAGR of 29.4% till 2027. Content variety is growing online as the entertainment industry is learning user content consumption patterns and delivering quality content right to not only your house but also your smartphone. OTT has not just put a dent in the cinema industry but in the television industry as well. However, all is not well in the OTT world either, with our survey showing that 61% of Singaporeans are likely to cancel at least one of their streaming subscriptions in the next six months. In fact, in a recent Blackbox poll, an overwhelming majority of Singaporeans (86%) said that the pinch of inflation has made them cut down on/restrict how much they spend on entertainment.
Cineworld was one of the notable cinema chains to crumble under pressure of the pandemic and shut down, shocking the industry and consumers who were yet to fathom the impact of the pandemic on this industry. The Cineworld chain of multiplexes in its hay days, like with most multiplex chains growing before the pandemic, had taken on high debt with the objective to expand rapidly. Six months of the pandemic led to zero footfalls, the only way a multiplex can make any money, and on one fateful day, the announcement was made to shut shop. Globally, multiplexes have suffered too. PVR, India’s largest multiplex chain, reported a major drop in revenues last year, almost a third of what the company made pre-pandemic. Singapore’s Golden Village cinema chain made a loss of S$2.9 million in just the first half of 2020. Both companies hope to return to pre-pandemic levels sometime this year.
The Singapore Government has shown initiative to support the arts sector by including cinema operators and their employees in the Job Support Scheme until things get back on track. The drop in OTT subscriptions in recent times indicates that people are getting back to work and out of the house. Consumers stepping out is good for the cinema operators as they depend on them making the effort to make it to their screens.
Movies failing at the box office
According to the Motion Picture Association’s annual THEME report, global ticket sales in 2020 were a dismal US$11.8 billion, a quarter of US$42.3 billion in 2019. If not for the three clear months before the world went into lockdown, this would have been even worse. In 2021, the number almost doubled to US$21.3 billion, but this was still 50% short of pre-pandemic levels. The recovery path is going to be a rough one. While several movie theatres and multiplexes have shut shop due to worsening financials, streaming platforms have drawn away several releases from cinemas.
The split in market share between digital and theatrical mediums from 2017 to 2021 is evident. From almost an equal split in 2019 – US$45.5 billion (digital) to US$42.3 billion (theatrical), the 2021 numbers show over a threefold increase in digital. It now stands at US$71.9 billion for digital to US$21.3 billion for theatrical market share. What this also shows is that the market hasn’t shrunk; just that the flow of money has changed course.
It seems that moviegoers are heading back to multiplexes but only for entertainment that they deem worthy of being aired on the big screens. Big-budget action movies like Spider-man: No Way Home and Top Gun: Maverick have done exceptionally well. However, it is not a sure-shot way to success. In a country like India where more movies are made than anywhere else in the world, a mega-budget film released recently called Brahmastra hasn’t been able to even recover the investment in the movie. Made at a budget of US$45 million, the movie has only netted US$24.5 million so far. RRR, another Indian movie made on a similar budget, managed to more than double it at the box office, setting a blockbuster record of sorts for Indian cinema. Many content experts felt that it was RRR’s relatability and connection with the Indian culture and ethos that made it do so well.
Where do we go from here?
While we are yet to witness the end of cinema as we have known it, the pandemic has shown that content consumption patterns have shifted for good. Movie studios are reaching their audience in one way or another, and if that is at the cost of movie theatres losing their sheen, then so be it. For cinemas and multiplexes to survive, let alone thrive, they will need movies worthy of that big screen. Movie studios cannot push sub-standard entertainment to movie theatres anymore and hope a marketing push will help draw footfalls to the big screen. Cost is another factor that will continue to be important. The audience has more discerning taste now, one of the few positives of the pandemic.
If your business depends on the success of the entertainment industry and you are looking to understand how these insights can be turned into growth-oriented strategies, reach out to us at connect@blackbox.com.sg.
Author: Blackbox Research Team
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