The movie industry is in a heap of trouble. I covered this for much of the past two years. The situation is getting so bad that even Hollywood is starting to realize it.

Deadline is an industry resource that covers what is taking place. For this reason, seeing the article that I will cite was very enlightening. No matter how they try to spin it, things are bad.

The focus is on the theater end of the business. Box office receipts are crucial to the success of films. Movie studios long have tried to squeeze as much from that facet of the process as possible. Unfortunately, that is rapidly declining.

All of this spells trouble for the industry. As noted in previous articles, this is not due to COVID, woke films, a lack of quality or superhero fatigue. Instead, we are looking at disruption due to technology.

In this article we will discuss how this feedback loop could spell even more trouble.

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Hollywood Entering A Negative Feedback Loop

The footprint is getting smaller. This means that blockbuster films do not have to reach the same level with regards to the number as before.

It is a positive in the short term but means we are likely to see further pain down the road.

The number of screens in the U.S. has declined to about 35,000 from 41,000 before Covid struck in 2020, with exhibition also facing big challenges in 2023 and 2024 due to the strikes. That smaller footprint might help theater owners in the near term, but it could end up hastening the decline of the overall business, Creutz believes. Downsizing “risks having more films skipping theatrical and going direct to streaming services…and now you have all the ingredients for a negative feedback loop.”

In the past 5 years, we saw a decline of 6,000 theaters (in the US). That is roughly 15%. Here is where we see less screens showing films, meaning the options are already dwindling.

This was no problem over the past 5 years. We had the lockdowns due to COVID, which not only affected viewing but output. Then we saw the strikes which shut down production in 2023. Industry sources (the studios) cited how this carried over into 2024. It is reflected in the numbers with the number of films (and shows) on the decline.

Some assert this was a ploy by the studios to cancel certain projects it found to be unprofitable. That is likely the case and should not come as a surprise. The entire industry misread the streaming potential, something the major studios are still trying to figure out (and doing a poor job of it).

What we can take away from this is the fact that more content will head directly to streaming. Hollywood is still convinced this is the golden goose. Unfortunately, with the exception of Netflix and Google, this does not appear to be the case.

Sequel-itis

Hollywood has long being focused upon franchises. We saw a number of Disney and Marvel films that fit into this structure.

Once again, the data supports it.

The top 20 films at the domestic box office accounted for 64% of total domestic box office, compared to an average of 52% from 2015 to 2019. “Audiences also continued to stick to known quantities, as eight of the top ten films last year were sequels, spinoffs, live-action reboots, or ‘universe’ extensions,” Creutz added.

Movie studios keep looking to their own IP for the answers. It did product fantastic results for a lot of years but seems to have run its course.

The bottom line is the industry is not getting the money at the box office it once did. This spells doom for the a number of the remaining theaters.

It is also a sign of the revenue paths drying it. We are seeing a similar situation on the international front.

International box office, which long was a comfort to studio bean-counters, has also been cratering for wide domestic titles, Creutz points out. The top 100 domestic grossers in 2024 earned just 19% in additional box office beyond the U.S., the lowest ratio since 2007 and well shy of the pre-pandemic norm of a 50% international bump. While the stark decline in China is partly to blame, Creutz noted that even when China is excluded from the equation, international box office for domestic wide releases is still at its lowest level since 2006.

The challenge is to produce blockbusters and franchises tend to offer the safest route to this. Here is, however, we some of the factors listed above might be affecting things to a degree.

Ultimately, it is the dilution of attention that is the nail in the coffin of Hollywood. There are simply other options as compared to what is produced by the movie and television studios. We are looking at the "new media" arising and this applies to entertainment as well as news/information.

Of course, I write this with generative AI (video) still in its infancy. Just wait until that starts to rival the traditional methods in output.

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