U.S. theater owners get lump of coal at box office

U.S. theater owners aren’t in a festive mood.

They were counting on a slew of high-profile holiday films to end an erratic moviegoing year on a high note. After a strong rally at the box office this summer — when ticket sales soared to record levels — the U.S. exhibition industry looked as if it had reversed a slump earlier in the year.

But those hopes have been dampened by unexpectedly weak ticket sales in recent weeks from sequels “Alvin and the Chipmunks: Chipwrecked” and “Sherlock Holmes: A Game of Shadows,” as well as new films like the Aardman Animations holiday-themed “Arthur Christmas” and Martin Scorsese’s critically acclaimed “Hugo.”

As of Monday, year-to-date box-office revenue in the U.S. and Canada dropped 4% to $10 billion compared with a year earlier, while the number of tickets sold was off 5%, according to The box-office tracking firm is forecasting admissions for the entire year will be down 5% to 1.27 billion, the lowest level since the mid-1990s.


“I would characterize this as a schizophrenic year,” said Gerry Lopez, chief executive of AMC Entertainment of Kansas City, Mo., the nation’s second-largest theater chain. “We went from the depths of despair right back to historic trends in the second and third quarters. We anticipated the fourth quarter would be much stronger than it was.”

In response to the anemic box-office results, stock prices of most of the nation’s top circuits took a hit. Shares in the largest chain, Regal Entertainment of Knoxville, Tenn., dropped 14% in the last month, while those in Columbus, Ga.-based Carmike Cinemas, the fourth-largest chain, declined 7%. Shares in the third-biggest cinema circuit, Cinemark Holdings of Plano, Texas, were virtually flat during the period, although the stock price has fallen 3% in the last five days.

Analysts also have lowered their earnings estimates for the theater circuits, which are especially vulnerable to box-office performance because, unlike studios, they aren’t part of larger media conglomerates that can offset declines through DVDs, video on demand, television sales or other entertainment revenue. With the exception of Cinemark, most U.S. theater companies haven’t been able to cash in on the rapid growth in international box office because their business is mainly limited to the U.S. and Canada.

“To end the year on a whimper is disappointing because we made so much progress,” said James Marsh, a media industry analyst with Piper Jaffray & Co.

Regal’s revenue declined 4% to $2.1 billion in the nine months ended Sept. 29, while net income dropped 43% to $36.1 million (mainly because of an after-tax gain last year on the sale of stock in another company).

Carmike reported a 3% drop in revenue to $362.1 million during the period, while losses totaled $9.4 million, about the same as a year earlier, primarily because of tax charges.

AMC Holdings is privately held and reports only limited financial results. But the company reported a loss from continuing operations of $3.4 million during the 26-week period ended Sept. 29.

Cinemark, which has been expanding in Latin America, had the strongest results during the nine-month period. Its revenue rose 8% to $1.7 billion, while net income rose 4% to $112.3 million, largely because of international growth.

Industry observers cite various reasons for this year’s decline in admissions, from waning consumer interest in 3-D movies to higher ticket prices at a time when people have been cutting back on discretionary spending. Fueled by 3-D surcharges, average ticket prices in the U.S. reached a record $8.06 in the second quarter of the year, according to the National Assn. of Theatre Owners. (The average ticket price dropped to $7.94 in the third quarter but is still higher than last year’s average.)

Industry executives dispute the notion that higher ticket prices are a factor in lower admissions. Instead, they point to saturation of the family-movie genre. There were 16 animated releases this year alone, up from 12 in 2010. Fourteen are due out next year, according to

“What we may have had here is an overabundance of riches in the family genre,” said Lopez. “There have been a lot of family movies to pick from.”

Others blame more systemic changes.

Theater admissions dropped 5% in 2010 and have been stagnant over much of the last decade, reflecting long-term challenges, such as the growth of the video game industry and the increased popularity of streaming services like Netflix, prompting some consumers to spend more leisure time at home and less at theaters.

“We’re seeing a cultural shift occurring where people are consuming their entertainment from Netflix, the iPad, Hulu,” said Paul Dergarabedian, president of’s box-office division. “There’s more competition for the eyeballs of consumers.”

Theater executives are more optimistic about the film slate in 2012.

“It really looks like it’s going to be a strong year,” said Carmike Chief Executive S. David Passman, citing the arrival of 3-D versions of James Cameron’s “Titanic” and Disney’s “Beauty and the Beast.”

Also in the coming year, exhibitors will roll out more in-theater dining services at multiplexes across the country. In an effort to broaden their audience, circuits will accelerate screening of operas, rock concerts and live sporting events to fill seats during the slow weekday nights, when theaters are largely empty.

If 2011 was any indication, there could be more skirmishes with the major studios. Distributors have been experimenting with offering movies in the home via video on demand not long after the films debut in theaters, as a way to offset declining DVD sales. Exhibitors fear such moves could undermine their business by deterring some people from going to the multiplex at all.

This year the nation’s largest theater chains complained angrily that they were kept in the dark about plans by four studios to release certain movies through VOD for $29.99 just 60 days after the theatrical debut. The traditional “window” between a film’s theatrical release and VOD showing is at least 90 days.

More recently, Cinemark and Calabasas-based Regency Theatres threatened to boycott Universal Pictures’ “Tower Heist” after the studio unveiled plans to distribute the film via VOD only three weeks after its theatrical release. Universal subsequently abandoned the plan.

“We’re all going to have to compromise at some point,” Carmike’s Passman said, adding that theaters and studios, for example, might benefit by selling DVDs in cinemas and sharing some of the revenue.