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Neftlix Killed Blockbuster. Movie Theaters Are Next
By: Inc.
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I have fond memories of going to the movie theater.  The excitement of packing up into the car with mom and dad, ready to head out for something special. "Got to get there early," I'd say. "Don't want to miss the previews!" 

I doubt that my own children will have those same memories. It's a rare event that we go to the movie theater, and the reason why is clear:

Streaming services dominate my children's entertainment--and mine as well.

It all began with Netflix, of course. Now there's Disney Plus, Amazon Prime, Hulu, and what seems like a new service launching every week. (Not to mention YouTube.) And while my kids and I still enjoy heading out to the movies every now and then, there's no doubt that we're usually happier to watch content on our own devices.

Kurt Cagle, CTO of the Semantic Data Group, recently gave it some interesting context on LinkedIn:

"A family of four will typically spend $100 to go to a movie," wrote Cagle. "To put that into perspective, not going to see a dozen movies a year would pay for a home theater system with a 55" TV and surround sound, plus the cost of the streamed movies and popcorn."

Interestingly, Netflix, which began as a DVD-delivery service, is widely credited for putting video rental stores like Blockbuster Video out of business. 

Now, it's the film industry that's ripe for disruption--and Netflix is going in for the kill.

What the data says

You're crazy, some people will tell me. The box office is thriving!

Well, yes and no. 

Yes, box office revenue seems to have steadily climbed in North America over the past decade, peaking in 2018 at an all-time high of $11.9 billion (and dropping to $11.4 billion in 2019).

But this figure is skewed, much because movie theaters must regularly raise their prices to account for inflation and a drop in sales. Because of this, the far more revealing figure is the number of movie tickets sold. And as you can see from the data assembled by the folks over at The Numbers, this number of tickets sold has been on a mostly downward trend.

The question is, as streaming services get more competitive, and consumers have more content options than ever, will they continue to pay more and more to go to brick-and-mortar movie theaters?

Additionally, keeping in mind that the current generation is growing up consuming (most) of its content on personal devices, will they even want to go the movie theater?

Of course, there's one reason--and one reason only--that the majority of us go to the theater: because it's the only place you can go to see a new movie.

Netflix knows this well. And that's why the company's strategy has increasingly focused on paying for original content. Not just any original content, but big-budget feature films, with big-name directors and stars--both the kind that have blockbuster potential in theaters, and the kind that win awards. 

In fact, according to its Quarter 3 report last year, in 2019 Netflix spent about $15 billion dollars on content alone. For point of comparison, last year's Avengers: Endgame, which passed Avatar to become the highest grossing movie of all time, reportedly cost around $350 million to make (plus an additional $150 million to market), and it made close to $2.8 billion at the box office.


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