Wednesday, April 22, 2020

A Couple of Opinions About Movies

Opinion One: Movie theaters were dying before the COVID-19 panic, and they're probably dead now. I'm not happy about that, but I think it's true.

Opinion Two: Since Opinion One means streaming is going to be the new default release model, it's time to talk about prices. In my view, the highest reasonable price is $10 to rent a new release movie. I'm not saying that's what the market will settle on, just that I think it's what's reasonable.

Thus endeth the two opinions, but here's the TL:DR on my $10 price assertion:

The average price of a movie theater ticket as of mid-2019 was a little under $10.

The studio/theater split of ticket revenues is about 60/40.

I wasn't able to (easily) find a statistic on the average theater viewing group size, but I think two is a reasonable assumption. That is, there are some individuals who go to movies at a theater, and there are some families, school groups, etc., who go to movies at a theater, but on average, it's probably two people (married or dating couples, etc.) who go to see a movie together.

I also wasn't able to find any stats on the average streaming group size, but I'm going to assert that it's probably lower. Still lots of couples and a certain amount of family/friend-group streaming, but the the single-viewer component is probably higher.

So, if we want the studio to gross as much on a movie at home as it did at the theater, $12 sounds about right. That's the equivalent of two ticket sales.

BUT: There's probably a lot less overhead of various kinds with release-to-stream than with release-to-theater.

AND: If everything is direct to stream, there's a lot more competition. Instead of "there are 4/8/16 films playing here, which one do we want to watch?" it's "there are 50 new releases this week and the entire catalog of past releases to choose from, which one do we want to watch." And competition should drive prices down.

So I think $10 to rent a new release is about right.

What I've seen so far in the COVID-19 panic is studios renting new releases for $20 a pop when they normally sell for that three months after release. I don't think that's going to fly in the market for very long. People will just wait and spend the same $20 for a keeper instead of a loaner.

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