It’s been a tough time for the movie business.
The 2023 actors and writers strikes brought production to a standstill, leaving studios with fewer films to release in theaters. That’s bad news for cinemas, which are struggling to dig out from the financial hole left by COVID shutdowns and laboring to get audiences to visit the multiplexes at the numbers they were before the pandemic. Add to that a series of commercial disappointments, such as “Furiosa: A Mad Max Saga,” “The Fall Guy” and “If,” and the industry is off to a very rough start to the summer movie season, a time of year when the box office is supposed to be booming.
Michael O’Leary, the president of the National Association of Theater Owners, knows that the cinema operators he represents through his trade group have been through a lot. But he also believes that things are turning around, noting the recent success of “Bad Boys: Ride or Die” and a number of potential hits, such as “Inside Out 2,” “Despicable Me 4” and “Deadpool & Wolverine” that are scheduled to open in the coming days and weeks. If the box office can build momentum, O’Leary thinks the perception will change and the financial sector will give his organization’s members the support they need to improve their venues and grow their businesses.
The box office is down 26% year-over-year. Were you expecting there to be such a dramatic falloff? What went wrong?
Look, the impact of the strikes is real. We are still feeling the effect of them. Not only did it stop production of movies for months, but it meant that for a lot of last year, talent couldn’t promote the movies that were released. We’ve had a lot of disruption to the system and we’ve not really had what I’d call a “typical year” in terms of the volume of releases since the pandemic disrupted everything. This summer, we’re still looking for a catalyst to get people back into theaters similar to what happened with “Barbenheimer.” But beyond that, we’re probably looking at 2025 in terms of turning the corner in the way we might have hoped. We expected it to be a difficult year and, through the first six months, it has been.
Universal Chairman Donna Langley recently said that 20% of the pre-pandemic audience is gone and probably won’t come back. Do you think they will return or has the theatrical business shrunk irreversibly?
I try to avoid predictions. I will just say that after the pandemic, a lot of things aren’t the same as they were before. But I do think we’ll start moving back in the direction that we were in before COVID, whether we hit those numbers in 2025 or 2026, I can’t say, but we’ll be moving in the right direction.
So you think the downturn is mostly attributable to a lack of movies?
There has got to be a lot more product in the marketplace that appeals to a lot of different audiences. There’s not a demand problem — look at what happened with “Barbie” or “Oppenheimer.” There’s a supply problem. There’s been an inability to have a bunch of big movies back-to-back, so we can build excitement about going back to cinemas. Because of the strikes, a lot of things have been delayed. But if you look at 2025, there’s a healthy mix of big tentpoles, returning franchises and medium-sized movies — just a broader array of things to see.
“The Fall Guy” and “Furiosa” both had great reviews, but they flopped. Why didn’t they work?
There have been unfair comparisons with those movies to past movies that opened the summer. I saw analysis that compared them to comic book movies that were released during the same period. Well, neither “The Fall Guy” nor “Furiosa” were meant to be proxies for superhero movies like “Guardians of the Galaxy Vol. 3.” In terms of why they didn’t individually reach or exceed the projections that some people set, I’m not sure. As you noted, these movies were well-received. If I knew why they didn’t resonate more strongly, I’d put the answer in a bottle and sell it.
What do you think the biggest challenge facing the movie business is right now?
That depends on who you talk to. At [the exhibition industry conference] CinemaCon, I frequently heard that there’s not enough capital in the system. Our business is consumer facing and in a post-pandemic world, we need to provide our customers with the amazing experience that they deserve. A lot of our members have done an amazing job of developing their properties and adding things to everything they already were offering, but we want to do even more. We have exciting ideas about how to improve the experience, but the money has not been there. And this is all happening during an economic downturn with inflation, so the costs of running these theaters has not gotten any cheaper. There’s just less discretionary income for these improvements. So our message to bankers and investors has been that the future is bright for this sector, but you need to get behind us.
Is the box office downturn making that impossible? Do all these headlines about falling ticket sales make banks feel more concerned about lending money?
It’s absolutely led to a negative impression of the industry. So it has to have some impact. But our business has been around for well over a century. It’s had challenges, but it has always continued to evolve. So we need to keep making the case that we are worth believing in. Once the box office tide starts to turn, we will show that.
As ticket sales have fallen, some artists, theater owners and executives are suggesting that opening weekend box office numbers are being overhyped and shouldn’t be as breathlessly reported on. What’s your opinion?
I think there’s been an over-reliance of reporting on pure box office numbers. I don’t think it fully encapsulates what a movie makes over the long run, and I don’t think it fully reflects what’s going on with our industry. But we’re a victim of history here. And it’s also true that when things are going well, reporting on opening weekends is terrific for us. When it’s not going as well, frankly, it’s a drag. One challenge we have is to provide people like you with other indicators of the strength of our industry.
Beyond box office receipts, what are those indicators of strength that aren’t being touted?
Well, they’re things like how much investment in going on in our industry. What’s our capacity like, how much are people enjoying Imax and other premium large formats. What are we doing in terms of variable pricing and improving seating options or sound.
What is your relationship like with the streaming companies? Apple and Amazon have released more movies in theaters, do you think Netflix will follow suit?
I don’t really want to comment on their business — they don’t need my advice. But if they are interested in putting their movies in our theaters, the door is always open for those discussions. I”m certainly not interested in jousting or crossing swords with the streamers.
With studios releasing fewer films, will exhibitors do more self-distribution, similar to what AMC did with “Taylor Swift: The Eras Tour”?
You’re going to see a lot more music documentaries and just docs in general. Taylor Swift set the bar high, but there’s a lot more things we can do in terms of concert films. But I’m also excited about things like Crunchyroll putting anime in theaters. There’s an audience for that. I think there’s a demand for more foreign films in certain markets, as well as sports and special events.
Will you do another National Cinema Day, where theaters offer heavily discounted tickets?
Absolutely, but a lot of our members are experimenting with different pricing. Marcus Theatres, for instance, is offering $7 for kids and seniors during the day. A lot of other chains are doing things where they offer steep discounts on different days of the week. We’re always trying out new things in order to grow our audience.
Sony Pictures bought Alamo Drafthouse this week. What’s your reaction?
It’s a byproduct of the ever-changing landscape this industry inhabits. It emphasizes the importance of movie theaters in a global landscape, not just financially, but culturally. This step by Sony affirms all that. This is an industry worth investing in and Sony is uniquely positioned to understand the value of this industry. You combine that with all the innovations that Alamo is responsible for, and you have some exciting opportunities.
Now that the Paramount Consent Decrees, which barred distributors from owning exhibitors, have been allowed to sunset, do you think more studios will buy theater chains?
The jury is still out on the impact of doing away with the Paramount Consent Decrees. Will there be more transactions of this nature? It’s entirely possible. I have no specific insights, but the studios understand the consumer demand for and the financial relevance of theaters.
