The American Movie Theater

 

 

Today 90% of all media interactions are screen based, with the average person spending 4.4 hours looking at a screen per day, according to research by Google. These range from the three and a half inch screen on the LG L40 smartphone, to over a hundred feet for the largest IMAX screens. Meanwhile the entertainment industry has adapted to produce content for the full range of devices. But it all began with movie theaters, the places that introduced screen based entertainment to the masses.

Today, one hundred and ten years after 1905 when the first American theater to focus solely on movies was opened in Pittsburgh, movie theaters remain the premiere venue for viewing films. In the decades since Harry Davis and John P. Harris opened their first theater in the Howard Block, theaters have changed numerous times in terms of their appearance, their business models, their demographics and their ownership structure. The simple Nickelodeon’s of the early days gave way to grand and lavish Picture Palaces. By the end of World War II, the Hollywood studio system was at it’s height.      

The Big Five, Metro Goldwyn Mayer (Loew’s), RKO, Paramount, Warner Bros. and Fox, were vertically integrated. Not only did they produce and distribute, they also directly owned many movie theaters. This allowed them complete control over the industry. Even the independently owned theaters were more or less helpless if the oligopoly made up their minds about something. Block booking was standard. In other words, the distributors– the big studios– would sell a group of films as a sort of package deal, whereby the theaters would be required to lease all films or none at all. These “blocks” would frequently include only one or two desirable films, with A list stars and blue chip budgets, that would be sufficiently in demand so as to effectively force the exhibitors to buy the whole lot, most of which were of low quality. This practice benefited producer/distributors in that it guaranteed their movies would be exhibited, no matter how bad they turned out. It also helped to keep out independent production companies in that theater rostras were always full, even if the major studios where failing to produce a great deal of high quality productions.

This system hit it’s height in 1946, when the studios grossed a staggering $120 million, or more than $1.4 billion adjust for inflation, more than the entire GDP of Greenland this year.

Things went downhill from there. The studios had at that time not only limited competition within the film industry, but also limited competition within the entertainment industry as a whole. During the war, many nightclubs had shut down. Rubber, gasoline and many other commodity items were rationed, and people had little to do on a Friday night but go to the theater. With the end of the war, that changed. The rise of television and a creative stagnation within the industry all contributed to the slump that followed.

Then in 1948 the United States Supreme Court famously handed down it’s US v. Paramount Pictures et. al. decision. The court ruled that the business practices used by the majors was monopolistic and in violation of the Sherman Antitrust Act; 15 U.S.C. § A– which states “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” The court interpreted this rather open ended law to mean the majors needed to divest themselves of their theaters. Though this did not immediately affect theater attendance, it is generally regarded as the end of the classical studio era, and would set in motion a variety of long terms trends that have colored the film industry ever since.

This shift in theater ownership, as well as the new ban on block booking, meant that studios could no longer skate by with a mediocre film. Every theatrically released movie now had to be an A lister. The studios decreased the number of films produced and instead pumped increasingly large amount of money into a select handful of what would come to be called “blockbusters.”

This simultaneously opened up new opportunities for independent production companies and filmmakers, as the newly empowered theaters tried to compensate for decreased studio output, and to explore more cutting edge filmmaking.     

Many of these trends are again true today. Now, more than ever, studios spend fortunes on a small number of tentpole films, with nine figure budgets, high end visual effects and blue chip talent. Yet, at the same time, many major entertainment conglomerates are now bolstering their independent acquisitions departments– brands like Fox Searchlight, Disney’s Miramax and Universal’s Focus Features, in part to fill their quantitatively shrinking rostras as well as to capitalize on the increased popularity of independent fare.          

As always, the film industry is changing. The movie theaters themselves, long as institution of American society, are facing an uncertain future. In the recession of 2001 to 2002, all but four nation theater chains filed for bankruptcy. In 2012, AMC Entertainment Holdings, INC, one of the largest theater chains in the United States and survivor of the ‘01-2 recession, was taken over by Chinese company Dalian Wanda Group in the largest Chinese buyout of an American firm ever. Last year, theater attendance hit a nineteen year low.  

On the other hand, in February of this year, stock for Regal Entertainment Group, another of the largest theater operators in the country, hit the highest it’s been in years, and as of 2013 there are more movie theaters operating in the US than at any other point in decades.

While these latter statistics are moderately promising, everyone in the industry is aware that there are more alternatives to movie theaters than ever before. Now, more than at any other time, theaters themselves must step up and differentiate themselves. And yet, many of the nation’s leading movie theater chains are failing to meet even basic quality standards. For many patrons, entering a movie theater has become distasteful experience, something to be endured for ultimate goal of seeing a film as it was intended to be seen.

It is my strong belief that going to theater should be part of a holistic experience. While the bulk of the responsibility for turnout falls on the shoulders of the production and distribution companies, the exhibitors must also do their part.

Movies are cool. Many theaters, unfortunately, are not. So often they tend to be dirty, unfriendly places that fail to differentiate themselves, fail to create a fun/positive environment, fail to maintain high quality playback standards (such as projector brightness) and instead choose to assault their patrons with lengthy insurance commercials and cringe worthy attempts at branding. Then they complain to MPAA that theater attendance is down.

Before blaming them too much, however, we must remember what a difficult business movie exhibition in the United States is. Despite the Paramount decision, the majors studios still control the industry at every level. This was made clear earlier in the decade when the studios effectively forced every theater in the country to switch over to digital projection systems (a decision that seemed bitter sweet, but necessary).

More to the point, the distributors are taking the lion’s share of the profits. In the fourth fiscal quarter of last year Warner Bros. reported net profits of $4 Billion, according to Variety. In the same quarter, Regal Entertainment Group, the largest theater operator in the country, reported net profits of just $46.3 million, according to a press release on the company’s website. That same quarter the company spent over a billion dollars just on film rentals (and advertising), by far the company’s biggest operating expense.

In more simple terms, the American movie theater is a business with very narrow profit margins. If they seem sometimes to not have it all together, it could be because they actually are struggling to get by.

Certainly I don’t expect the majors to start making charitable donations to the exhibitors, but as an industry we do need to think long term. Continued theater attendance depends not only on the quality of content produced, but also on the theaters creating a desirable movie going experience. If the theaters fail to do that, then everyone else up the food chain will suffer in the years to come.

Some months ago, after reading about Disney’s successful entry into Broadway, I began to wonder if perhaps the industry would be better off if the distribution companies began taking a more active role in the places their movies were shown. What if movie theaters were run with the same vision and attention to detail with which Disney and Universal (and to a lesser extent Paramount) run their theme parks?

I imagined smile inducing interior design, comfortable seats, friendly staff and algorithmic pricing.

This is unlikely to happen, however. The precedent set by the Paramount case still stands, and even if it were legal for the distributors to buy out the theater chains, we must remember that the Paramount decision was made for a reason. A return to a fully oligopolic system would have effects on American film far worse than finding two day old popcorn on your arm rest.        

Fortunately, a third option exists, and is already beginning to take affect. Diversification. In recent years, there has been much talk about what America’s movie theaters “should” be like. As one journalist put it: “Different theaters need to offer different advantages…. Movies are for everyone, which is why there are a hundred different ways to enjoy them. Now, the hour has come for American theaters [to] recognized that” (Osterndorf 1).   

The sect of the diversification revolution that has gotten the most attention in recent years is the ultra high end movie theater. Companies like iPic, Cinepolis, and Silverspot Cinemas are on the forefront of the new high end movement, characterised by luxury lounges, fancy cocktails, cheese plates and caviar brought by black clad waiters directly to your reserved hand sewn leather lounge chair.  

Some of these theaters have claimed opera houses are there main competition, rather than other movie theaters. While paying sometimes more than twice as much for a movie ticket has many would-be customers balking, these high end companies have actually met with some success in certain markets, even sold out theaters. Their appeal is not to the masses, but rather to a select group of affluent intellectuals who view film as a serious art form. One Silverspot spokesperson called it an “entertainment lifestyle destination” (Ronan 1).

Just as the changes in theaters after the Paramount decision, this rise in high end theaters could provide an increased market for more independent, intellectual fare, due to changes in perceptions of going to the movies.   

On the other hand, ticket price is a significant consideration. While increased ticket prices allow for higher quality theater’s, high ticket prices are also one of the most commonly cited reasons for “catching it on DVD.” To explore the cost of movies tickets and the effect the cost has on overall theater attendance I took ticket cost data from the Motion Picture Association of America (MPAA) and Box Office Mojo and compared the numbers to the consumer price index for the same years. I then calculated ticket cost as a percent of consumer price index (CPI) from 1924 to 2014. [Charts included at end of paper.]

I found that in 1924 tickets cost just 1% of the national CPI. Today average ticket costs are at 4%, where they have been since 2010. That price point is not unprecedented, however, as tickets cost 4% from 1967 all the way up to 1980, after which point cost went back down to 3% until 2010, excluding a two year spike in the late 80s.

According to DaveManuel.com, a highly regarded economics blog, movie ticket costs hit their all time high, adjusted for inflation, in 1973. Today movie tickets are somewhat cheaper (adjusted for inflation) than they were for much of the 70s, although still much higher than the cost of a 1910 movie ticket, which in today’s currency would be about $1.71.

I also included a graph of “Percentage of the US Population That Went to the Cinema on Average Weekly” (created by Michelle Pautz of Elon University) for comparison, though there is not an obvious correlation, besides perhaps that relative ticket costs have gone up over time to compensate for decreased attendance.

For comparison, tickets to luxury theaters can cost as much as a staggering 9% of CPI. If all theaters in the country priced tickets in that matter, going out to the movies would no longer be an outing for the masses.

The closest counterpart in American history would be the Picture Palaces, luxurious movie theaters that were built in the US as early as 1913. The nickelodeon’s which existed prior to that time had catered primarily to the middle and working classes and had focused on inexpensive buildings and affordable ticket prices. The Picture Palaces were just the opposite. The precedent they followed was that of vaudeville. At it’s inception vaudeville had been a somewhat low brow form of pop culture, but by the early 1910s “big time” vaudeville theaters had already been embraced by the upper classes. The building style for these higher end destinations often imitated that of more traditional high brow theaters in an attempt to give vaudeville more legitimacy as an art form and a cultural outing.    

Many of these high end vaudeville theaters played films as part of their shows, giving upper class people their first taste of cinema.

In 1913 movie theaters in the United States began receiving the same face lift vaudeville had previously. That year The Regent, often regarded as America’s first “picture palace” opened in New York. In subsequent years picture palaces in the United States proliferated, often occupying prestigious real estate like Broadway in New York, and ornate buildings that were themselves great works of art.    

Many of these picture palaces were still quite popular in the boom years of the 1940s. During the first part of World War II, a building ban prevented construction of new theaters in the US. The Medical Corps and the Armed Forces also commandeered all new projectors for use in training new recruits. This unofficial cap may have been beneficial to existing theaters as competition was limited despite the fact that the market was expanding.

The artificial cap on movie theaters in the US lasted until 1943 when a Navy backed study found that “a lack of movie theaters stateside contributed to delinquency and high labor turnover” (xroads 1). The Navy subsequently requested construction of new movie theaters, and the industry complied, taking advantage of the few materials, like concrete and glass, that remained unrestricted and somewhat available during the war.  

With the end of the war came the suburban exodus. Americans, with money in their pockets, bought cars and moved to developments at the outskirts of town, delivering a significant blow to the downtown movie theaters of the day.

Meanwhile, theaters struggled to adapt to the age of television in part through the installation wide format screens, leading to the alteration of many classic theaters. Color and stereo 3D also became more common at this time for the same reason.

The auto boom meant theaters now felt pressured to offer free parking, which could be challenging and expensive in some downtown setting. This also lead to the alteration of some classic theaters.

Drive through theaters, with convenient drop off locations became more popular. Soon, drive ins boomed as well.  In 1947 there were 548 drive ins operating in the US, by the mid 1950s there were over 4,000.

In stark contrast to the seriousness and formality of the picture palaces, drive ins are all about casual fun. They were an excuse to run into your friends on a Saturday night, an excuse to cuddle with that cute girl from math class in a dark car.

Comparatively speaking they were democratically affordable and quite popular with young people. They became an integral part of 1950s youth culture. Yet a few decades later they became practically extinct. Film historians point to a wide variety of causes for the decline of drive ins including the increased value of suburban commercial real estate, the shrinking of American cars, the oil embargo, the decline of car culture, the invention of VCRs, economic pressure from the studios and the rise of conveniently located multiplexes that offered higher quality picture and sound.

What no experts at the time could’ve predicted was the gradual but very real resurrection of drive ins that began in the first decade of the 21st century and has continued to the present. In an era of great cynicism towards the multiplexes, drive ins offer a nostalgic and unique movie going experience. Hundreds across the country have opened or reopened. Many of these old drive ins have become community centers providing space for farmers markets and other regional events in addition to showing movies. Even some traditional theaters are offering special outdoor showings in the summer months.

It is unlikely that drive ins will ever return to the height they reached in the 1950s, but the relative boom is an exciting piece in a larger movement. The fact that revival drive in and high end theaters, apparent opposites on the spectrum of theaters, could both find renaissances at the same time implies that America is at the beginning of significant diversification in its movie theaters. It seems likely that over the course of the next few decades, theaters will stop trying to be all things to all people. While many cineplexes will no doubt remain, it seems apparent that we shall also see a great rise in the quantity, diversity, and popularity of different types of speciality theaters.

In contrast to the clear theater movements of the 20th century, the nickelodeon boom, the picture palace boom and the rise of drive ins, the 21st century will likely have a variety of theaters coexisting at the same time, each showing slightly different types of films (with much overlap) and catering to slightly different demographics. This new generation of theaters will do more to create a holistic experience, cater to specific tastes and become integral parts of their communities. From high end theaters, to drives ins, to funky mom and pop two screeners, to IMAX experiences, to other species that have not yet been invented the American movie fan will continue to have more choices than ever in how they watch movies, in theaters and out. The continuation of this genesis of diversity will benefit moviegoers, will benefit communities, will benefit independent theater entrepreneurs, and ultimately will increase the stability of the movie industry as a whole.               
Owen Essen is a writer, filmmaker and entrepreneur based in Chapel Hill, North Carolina. 

Movie Ticket Cost as Percent of Consumer Price Index (USA)

 

2014 4.00%
2013 4.00%
2012 4.00%
2011 4.00%
2010 4.00%
2009 3.00%
2008 3.00%
2007 3.00%
2006 3.00%
2005 3.00%
2004 3.00%
2003 3.00%
2002 3.00%
2001 3.00%
2000 3.00%
1999 3.00%
1998 3.00%
1997 3.00%
1996 3.00%
1995 3.00%
1994 3.00%
1993 3.00%
1992 3.00%
1991 3.00%
1990 3.00%
1989 3.00%
1988 4.00%
1987 4.00%
1986 3.00%
1985 3.00%
1984 3.00%
1983 3.00%
1982 3.00%
1981 3.00%
1980 4.00%
1979 4.00%
1978 4.00%
1977 4.00%
1976 4.00%
1975 4.00%
1974 4.00%
1973 4.00%
1972 4.00%
1971 4.00%
1970 4.00%
1969 4.00%
1968 4.00%
1967 4.00%
1966 3.00%
1965 3.00%
1964 3.00%
1963 3.00%
1962 2.00%
1961 2.00%
1959 2.00%
1956 2.00%
1954 2.00%
1953 2.00%
1951 2.00%
1949 2.00%
1948 2.00%
1945 2.00%
1944 2.00%
1943 2.00%
1942 2.00%
1941 2.00%
1940 2.00%
1939 2.00%
1936 2.00%
1935 2.00%
1934 2.00%
1929 2.00%
1924 1.00%

          

 

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Cinema” photo by Marcelo Acosta

Author: Owen Essen

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