What next? That is what we are all hearing every day. When might cinemas re-open? What might we expect when they do? What levels of box office might realistically be achieved in 2020?
These are all vital questions, and no-one can claim to have the definitive answers, but Gower Street is working to try and find plausible scenarios and offer possible answers to as many of these questions as we can.
To begin with, where are we?
At the beginning of this year Gower Street’s 12-month forecast for 2020 had predicted a strong Q1, estimating a 6% domestic box office gain year-on-year despite an anticipated slow March. The year did indeed start strong with box office tracking 12% up on 2019 by the end of January. However, that lead was eroded by a disappointing February (albeit one that came in on par with 2019) and as March began we were anticipating a 4% deficit year-on-year by Q1 end. Year-on-year box office slipped behind 2019 in early March.
Mass closures across the US and Canada saw the number of domestic theaters reporting grosses drop from nearly 5,000 on March 15 to just 200 on March 22. By Thursday (March 26) year-to-date box office results were tracking 20.5% down on 2019 at $1.81 billion.
There is no certain answer to the question of when cinemas might re-open. Some smaller cinemas in China had begun to open a week ago with social distancing measures in place, two months on from initial closure, but news came Friday that they have once again been told to close. Gower Street is tracking reporting cinemas by market on a daily basis in our “Road to Recovery” report for any early signs of potential recovery (see Home page).
When cinemas are able to open in specific states or nationwide there must inevitably be a period of time during which audiences will need to be encouraged back and distributors will need to prepare for the release of new titles.
Gower Street has looked at two such scenarios below. If business were able to resume after a period of either two or three months closure where would we forecast the year-end results if all titles in the back-end of the year currently stayed as they are – nothing moving out, nothing displaced moving in (or like-for-like transfers of titles e.g. a distributor moves one title into a slot taken by an equivalent sized title that then moves out of year)?
These scenarios consider two concepts – an optimist view that business could immediately return to normal levels at point of re-opening; and a tempered view that business would need at least a four-week period to rebuild audience confidence and a release-calendar of enticing new product.
In this tempered view we have considered a base level of business for the first four weeks of operation. This is based on business seen during the weekend of March 13-15 when the impacts of the virus, including social distancing measures and audience concern, were already being felt but 95% of domestic theaters were still reporting numbers. Given swift closures coming later that week the weekend ended up accounting for 91% of the week’s box office as opposed to the usual 72-75%. Had the week played out to a normal ratio we can suppose that the full week could have delivered a box office of between $71.5-74.5 million. This would make it the first full week to gross under $100 million in the domestic market since the beginning of September 2014 (when GUARDIANS OF THE GALAXY, in its 6th weekend, led business in a week with no new openers in the top 10). This suggests that weeks of approximately $70 million in business could be a realistic expectation of a re-opened market needing time to rebuild confidence and with no major new releases on offer.
In the above scenario we consider the potential year-end market based on existing titles on the release calendar and assuming a two-month complete closure until the end of May. Scenario-1 (the green-dash line), the optimist view, supposes a “business as usual” resumption from June 1. Scenario-2 (the blue-dotted line), the tempered view, supposes a month of $70 million-average weeks (scaled to suppose a lower level in weeks 1 and 2 rising to higher than $70 million by week 4). The optimist view suggests a two-month closure could return a year-end box office of $8.84 billion (on par with 2005 totals); while the tempered view suggests $7.85 billion a likelier prospect.
In the below scenario we consider the potential year-end market based on existing titles on the release calendar and assuming a three-month complete closure until the end of June, with the same parameters for an optimist “business as usual” view (Scenario-3) and a tempered view (Scenario-4). On this scale the optimist view suggests a three-month closure could return a year-end box office of $7.63 billion, while the tempered view would offer $6.71 billion.
These scenarios would suggest an annual box office in a range not seen since the beginning of this century or earlier. The year 2000 was the last to see full-year box office below $8 billion ($7.51bn).
This is, of course, a base view using information we currently have and stated assumptions. The period taken from re-opening to reaching a “business as usual” level in the tempered view might be longer than four weeks; complete closures might not last two months or may last longer than three; many displaced titles will be looking to move into any remainder of the calendar year and may have potential to help close the gap.
Gower Street estimates that displaced and currently unset titles have a collective box office value of around $1.56 billion. If all were able to find room in the calendar that still allowed them to maximize potential without cannibalizing other-title business this would offer some relief.
However, some of these titles may opt for 2021 dates. Others may displace other titles where studios might see an opportunity to switch one displaced title for a late-summer or fall-set title and, in turn, move that title into next year to replace a title delayed in production stages due to the pandemic.
Plus, there are likely to be further displaced titles. The recent move of WONDER WOMAN 1984 from June to mid-August must inevitably call into question the likelihood of moves of other key titles currently still dated in late-May and throughout June.
These scenarios also assume there will be no resurgence of the virus and therefore no additional lockdowns.
Gower Street is working on more complex analysis to understand any potential “best case” scenarios that we will look to share in coming weeks.
This article was original published in Screendollars’ newsletter #110 (March 30, 2020)