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Rethink Technology Research says SVoD killed the Cinema star

Analyst firm answers the question in a world where SVoD flourishes, can the Cinema survive?

BRISTOL, UK(11 Oct 2018)

Rethink TV the video research arm of Rethink Technology Research, a research and analyst firm focusing on IoT, video, and wireless has released a report that has forecasted a $7 billion fall in the global Box office for movies during the next 5 years. The only recent report forecasting the global cinema market, detailing what it will look like in the future and correlating revenues with subscription on demand (SVoD) services.

Cinema is consolidating across the US and Europe. The story everyone has been telling for years is that revenues are well established and they not falling. But that’s not the whole story, and this can only be true for as long as the exploitation of new movies continues to begin in partnership with theatrical release – and this is clearly changing – subtly at first - but changing.

While the entertainment world throws itself and its considerable resources at the creation of Original Content, little thought has been given to what effect this will have on the traditional distribution route to market for movies i.e. the Cinema. 

There is more content coming into the world through the “original” content route, sold first and foremost in SVoD. Also, Cinema is not so much falling in revenues as not gaining its fair share of inflation and population increase that should see global revenues rising by over 4% every year.

Citing a simple relationship between the spend on original content, that for every $15 billion spent on pure SVoD/AVoD content, there will be a corresponding fall of 1 billion Cinema visits, the report maps a future market where failure to jump on the SVoD market will create the conditions for some major established studios to stumble financially. 

This forecast takes a global look at the cinema market correcting some analyst firms beliefs that China will overtake the US in terms of box office receipts very soon, perhaps even by 2019 but Rethink says that based on calculations of real pricing in China it is closer to 2023, reaching box office revenues of $10.1 billion.

This is a bit like global warming – you know that if you release too much Carbon Dioxide into the atmosphere something bad will happen,  but how much can you get away with? Similarly we know that releasing multiple tens of $ billions into Original Content which ONLY comes to market via SVoD, must disrupt the existing Cinema supply chain, but by when? So far studios are forced to chase both forms of revenue – Cinema based and SVoD based – and appear to believe that both revenue streams are unrelated and will not affect one another. At least not yet.  
At Rethink TV we believe that the rules became clear in 2016 when increasing spend on Original Content exacerbated an already nervous Cinema market, and visitors began to plummet. Box office has just about held up, for now, but what happens next. 
"some analyst firms beliefs that China will overtake the US in terms of box office receipts very soon, perhaps even by 2019 but based on calculations of real pricing in China it is closer to 2023, reaching box office revenues of $10.1 billion."

This report is about establishing the laws governing the way in which Original Content is intertwined with Cinema content– and how this will create further financial mayhem at studios in the coming five years. 

So what we have tried to model here is simply how Cinema box office is changing, regionally and globally, and not allowed sympathy to prejudice the outcome. We all love the Cinema, but that does not automatically mean it has a right to survive. Everyone needs to prepare for a future inflexion point where SVoD suddenly rockets, but for the time being Cinema can remain a partial lynchpin of US and non US studios. 

Obviously it makes sense for studios to work towards a balanced portfolio between original work for SVoDs and movies intended for Cinema release. There is much evidence that all the major studios are already doing this. 

What this report will tell you:  
1. How rapidly attendance at the Cinema is falling and how this will accelerate
2. Tie up these visitor falls with SVoD content spend in a working hypothesis
3. Navigates limits to Ticket price rises at Cinemas
4. Shows how box office in China will grind to a halt inside 5 years
5. And show how much revenue Live content at Cinemas needs to provide 
6. Shows that Original content spend will grow by 4X in 5 years and in the process suck some of the oxygen from the movie format

About Rethink  

Rethink is a thought leader in quadruple play and emerging wireless and IoT technologies. It offers consulting, advisory services, research papers, plus three weekly research services; Wireless Watch, a major influence among wireless operators and equipment makers, along with its forecasting arm RAN ResearchFaultline, which tracks disruption in the video ecosystem, and OTT video, along with its forecasting arm Rethink TVRiot which focuses on enterprise disruption from the combination of AI/IoT and cloud, along with its forecasting arm Riot Research.