Box Office More Boffo Than DVDs in ’09

2009 may have been a year of recession, but don’t tell that to the blue-skinned aliens of “Avatar,” the hormonal teen wizards in the new “Harry Potter” film or the needy talking dogs of “Up.” Their adventures in special 3-D theater screenings helped push U.S. box office receipts past home DVD sales for the first time in seven years, according to a new study.

Entertainment data company Adams Media Research released findings Monday showing that box office accounted for US$9.87 billion in ticket sales, a 10 percent increase over 2008’s figures. Yet sales of DVDs dropped 13 percent to $8.73 billion, as consumers looked to digital movie rentals and other less-expensive options for their in-home entertainment. It was the first time since 2002 that theatrical box office surpassed DVDs, although total disc purchases for all entertainment including TV shows and non-feature fare remained higher than movie ticket sales.

“Our preliminary volume and spending estimates for 2009 show that U.S. consumers are still in love with movies,” AMR president Tom Adams said. “In this environment, however, they’re seeking the biggest bang for their buck, resulting in a record year for the 3-D-fueled theatrical box office and an explosion in all-you-can-watch subscription and dollar-a-night video rental. On top of that, early adopters are finally starting to embrace all the new electronic rental and purchase propositions being offered on subscription TV platforms and the Internet.”

Therein lies a mystery for Hollywood worthy of “Harry Potter’s” young magician/sleuths: how to keep those technology trends from whittling away at profit margins, even as studios spend more money on event entertainments like “Avatar.”

It’s the Story, Stupid

It wasn’t just the James Cameron spectacle that helped fuel the rise of box office last year, Sharon Waxman, founder, CEO and editor in chief of TheWrap.com. In her Monday column, “Hollywood Cuts, Retools and Looks to the Future,” Waxman cited “Paranormal Activity,” a horror movie that cost just $11,000 to make and became a late-summer smash for Paramount due to Internet-driven word of mouth.

“It didn’t have the same distribution and marketing push as other movies, but it packed the theaters because people found it entertaining,” Waxman told the E-Commerce Times. “There’s a correction going on in the movie industry. There is salutary pressure for everybody to make a better product, and the same is true for the movie industry. They have to be smarter with their money, more careful with budgets and make movies that will find an audience.”

Yet “Avatar” may be one of the most expensive movies ever made, and it’s playing in 3-D theaters that cost exhibitors more to build. However, Waxman argued that writer-director Cameron used technology to make a movie “that felt like a new moviegoing experience. That is incredibly hard to do.”

When it comes to declining DVD sales and rising online movie rentals, Waxman said the studios and media conglomerates need to follow the consumers and start thinking deeper about digital delivery. “It’s really hard to get off the DVD teat because it’s so much cash. They’ll hang onto it as long as they can. But it’s not only a mature industry, it’s past maturity,” even with the advent of Blu-ray technology. The studios remain fixed on finding solutions for control of downloads and content protection.

A Shift in Entertainment Habits

Movies have become even more of an “American amusement park ride,” said Hanson Hosein, independent filmmaker and director of the University of Washington’s digital media program. However, the economy is forcing consumers and studios alike to make some difficult choices.

“I think we’re coming to a new bifurcation in film consumption,” Hosein told the E-Commerce Times. “When it comes to big effects-driven movies, people still want to see that as a communal event. But for the rest of it, if it’s not worth my money and I can get it on Netflix, then I’ll wait for that.”

That may have the most direct impact on low- to mid-budget movies and niche productions, which could end up going direct from final editing to online marketplaces like Hulu or Netflix. Hosein himself has directed two independent documentaries. Both have had theatrical and film festival showings, but he’s also going the digital route. His first film had a November premiere on Hulu.com, and the other, a look at post-Hurricane Katrina New Orleans, “Rising From Ruins,” will soon be available on Netflix.

“It’s a little frightening for a filmmaker. It’s better to make bank on the box office before it goes to Netflix. But then I get people who know I’ve got a film out and they say, ‘Let me know when it’s on Netflix,'” Hosein said.