One of the things about being older is you are around long enough to see things transition.
Do you remember the film The Karate Kid with Ralph Macchio? The was released in 1984 although there was a remake in around 2010.
The reason why I mention this film is there was a scene where they went into an arcade. For those who are not familiar with this, that was a location where people use to go and play video games. This was before in home gaming systems like Atari and Nintendo. Basically you went with your quarters to play Pac-Man, pinball, and a host of other games.
It seems pretty archaic but that is how things were. Of course, this business was destroyed in the 1980s with the explosion of gaming devices. Suddenly, people could buy the system and get cartridges for the games.
Cinemas Are In Trouble
This is how technology can change things.
Many thought the VCR was going to kill the theater business. Ironically, due to an increase in distribution, that technology actually made the movie industry even more popular. People started to consume even more films. It caused a massive explosion in the creation of movies, with new studios popping up.
So what makes me question things this time?
Cinemas are in trouble. Without a crystal ball, it is impossible to know if this is just a temporary situation or if we are facing a change in behavior.
Unlike the arcade, where technology drove it, we have a change in behavior that I think is difficult to overcome.
Four years ago, the global economy was shut down. Obviously, people were not able to head to the movie theaters. The studios already had their streaming services in place, so what was released went right to streaming.
This is, naturally, not a model that is great for the theaters. While they were closed, it was what everyone had to deal with.
The challenge arose after things reopened. While new films did not go right to streaming, the studios were losing a fortune on those services. For this reason, they had to do what they could to try and stimulate interest.
Here is where things get tricky. In the studios' estimation, the way to do this is to get the films on there in a quicker period of time. This is a practice that started so long ago people are conditioned at this point. When a new film comes out, it will likely hit streaming within a couple months.
Therefore, the incentive is not to rush out to the theater. This is coupled with the fact that a movie ticket can easily run $25 per person. Add in popcorn and sodas and you can see how it could be an expensive night.
All of this is putting cinemas in a tough position.
The Industry Fragmentation
Another factor in this is the fragmentation of Hollywood. It is a topic I wrote a great deal about so I will not dive too deeply into it.
The point being is that we can find entertainment in many different areas. As the fragmentation occurs, what happens to these theaters. In many instances, they were part of the distribution channel for the movie studios. If those entities do not have a monopoly on content distribution, there are other channels to consider.
One final point is the televisions themselves.
In the developed countries, $500 can get one a 60 inch television that has a terrific sound system. While this might not compare to the theater experience, it can be paid for with a few trips to the cinema with the family.
The point is we came a long way from watching on a 21 inch television.
We are seeing some horrific numbers out of Hollywood ticket sales. Obviously, the success of Barbie and Oppenheimer means that people will turn out when so moved. The problem is, according to many, that not enough movies are of that quality.
While this could be the case, perhaps it is even more basic than that. It might be the situation where someone will take the plunge once in a blue moon. This means a visit for a major blockbuster but the other fringe films, wait until it hits streaming.
Ultimately, we saw the movie and television industry make some major strategic errors. The push into streaming, promoted as the golden goose, ended up being a major money loser. They companies took a wildly successful television model and blew it up.
Are they doing the same with movies?
In the past, they could get away with errors since there was basically a monopoly. That is no longer the case. Competition is coming from many sides.
Who is going to survive?
For the moment, we will question the viability of the theaters.
Are they going the way of the video arcade?
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