Hollywood ending a lackluster year at the box office

This year's movies are expected to gross $10.4 billion in the U.S. and Canada, about 5% less than last year

President Obama last week urged Americans to go to the movies.

That was a welcome message in Hollywood, which was struggling through a lackluster year at the box office even before the hackers who launched a crippling cyberattack on Sony Pictures Entertainment made threats against U.S. movie theaters. Amid security and legal concerns, major theater chains breathed a sigh of relief last week when the studio decided to pull "The Interview" from its Christmas Day release.

But the unprecedented decision to scrap the film's release also means that theaters stand to lose at least $100 million in potential box-office revenue, leaving a void for an R-rated comedy during a key period for the industry.

Sony Pictures executives have suggested that their decision was forced by theater owners who didn't want to play the movie. But some theater owners have disputed that characterization, saying they were prepared to show the film even after Sony gave assurances that the studio would not take action against them if they refused to screen it.

"We were willing to play it and we were hoping to play it and we were disappointed" by Sony's decision, said Lyndon Golin, president of Regency Theatres, the Southern California-based theater chain that operates nearly 200 screens. "We had been promoting ["The Interview"] for a long time and it was great comedy programming at Christmas. I was thinking it was going to have a huge draw."

The Art House Convergence, a coalition of independent theater owners, on Monday also offered to screen "The Interview." A spokesman for Sony declined to comment.

The decision to pull "The Interview," which depicts a fictional assassination of North Korean leader Kim Jong Un, was just another blow to an industry that has had little to celebrate this holiday season.

After setting a record level of ticket sales in 2013, the industry experienced one of its worst summer seasons in years and struggled to rebound in the fall. Rentrak estimates that the 2014 movies will end up grossing $10.4 billion in the U.S. and Canada, about 5% less than last year's $10.9 billion.

"July really hurt the industry," said Tim Warner, chief executive of Cinemark, the nation's third-largest theater chain. "We never really recovered."

Eric Wold, an analyst with B. Riley & Co., recently lowered his earnings estimates for the major chains, noting that there has been a "pretty significant deterioration of the box office since Thanksgiving."

Other than some surprise hits, notably "Guardians of the Galaxy" and "The Lego Movie," there were fewer blockbusters this year than there were in 2013 — and plenty of sequels that didn't live up to the hype.

"This was not the best year for film," said Phil Zacheretti, president and chief executive of Phoenix Big Cinemas Management in Knoxville, Tenn. "Every time there was a little excitement for a good, solid box-office weekend, it just never seemed to appear.... I can't wait for 2014 to be over and 2015 to start."

Although the final installment of "The Hobbit" has done a brisk business, two other holiday movies have underperformed. Fox's "Night at the Museum: Secret of the Tomb" grossed just $17.3 million during its opening weekend, well below the $54.2 million generated by the franchise's previous movie in 2009, Wold noted in a report.

Meanwhile, "Annie," which was among several Sony titles released online by hackers, pulled in $16.3 million during its opening weekend, considered a mediocre result for the family musical, he wrote.

Even surefire box-office bets like the most recent "Hunger Games" movie from Lionsgate didn't do as well as expected.

"There's been a lot of sequels that have underperformed expectations," said Chris Aronson, head of domestic distribution at 20th Century Fox.

Nonetheless, Fox had a strong year with such films as "Gone Girl," "Dawn of the Planet of the Apes" and DreamWorks Animation's summer movie "How to Train Your Dragon 2." Analysts, however, were disappointed by DreamWorks' latest animated movie, "Penguins of Madagascar."

"If movies have compelling stories and characters, people turn out," said Rob Moore, vice chairman of Paramount Pictures. He cited the Paramount and Warner Bros. release "Interstellar" and Disney's animated film "Big Hero 6."

Both films debuted to more than $50 million.

Unusual circumstances also hurt the industry this year. The Fourth of July fell on a Friday, deterring the American public from going to theaters. And the World Cup, which ran from mid-June through mid-July, also offered up an alternative form of entertainment.

Then there was the sudden death of actor Paul Walker in November 2013, which pushed back the opening of "Fast & Furious 7" from July 11, 2014, to April 3, 2015, taking a big summer movie out of the mix.

"This year the industry couldn't catch a break," said Paul Dergarabedian, a senior media analyst with Rentrak.

Additionally, the exhibition industry has faced long-term stagnation in attendance as theaters face growing competition from Netflix, video games and other sources of entertainment. Theaters have been adding more premium services such as extra-large screens, improved sound systems and in-theater dining to give patrons more incentive to trek to the multiplex.

Theaters also are taking advantage of new digital technologies and a satellite distribution network to beam alternative content, such as operas, live concerts and even television shows.

Another challenge for theaters is keeping up with how quickly audiences react to movies on social media.

"If a movie like 'Transformers' doesn't go over the top in surpassing the previous installment, people are tweeting about it immediately and not bothering to come see it," said David Passman, chief executive of Carmike Cinemas, the fourth-largest theater chain based in Columbus, Ga.

Passman and other theater executives are more upbeat about next year's slate, which includes "Fifty Shades of Grey" in February, "Jurassic World" in June and "Star Wars: Episode VII — The Force Awakens" in December.

The combination of films in 2015 could propel the industry to $11 billion in North America for the first time, Dergarabedian of Rentrak said.

"After back-to-back record years in the movie industry in 2012 and 2013, we're expecting a bounce-back year in 2015," said Gerry Lopez, chief executive of AMC Entertainment, which operates the nation's second-largest theater chain.

Hollywood resident Ely Marim, 23, trekked to Pacific Theaters at the Grove on Sunday night to catch the final film in "The Hobbit" franchise.

Although Marim is an avid moviegoer, he said this year there weren't many titles he could think of that he loved other than "Guardians of the Galaxy" and "Interstellar."

"TVs are getting larger and larger, so people can enjoy good experiences at home and don't have to come to the movies anymore," he said. "And tickets are expensive. It's hard to get out of your home and sit through traffic just to see a movie."

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