Canary In The Projection Room: Box Office Slump May Signal Tapped-Out Consumer

Most people today pay little attention to the business of movies, particularly since most new releases are aimed squarely at teenage boys and their appetite for unanchored and gratuitous CGI explosions and mayhem. I’m not saying that movies need to change, not at all, as apparently that is what the current movie market seemingly demands. It was, after all, a record year in 2013 with numerous blockbusters abounding.

Some of the more detailed and nuanced entertainment has shifted to TV, particularly what used to be the strictly “pay” movie channels like HBO and Starz, and such competition may at some point begin to erode the allure of paying for individual theater experiences. But there was more than a little optimism in Hollywood that 2014 would actually be better than 2013, not the least of which was due to the titles scheduled from Memorial Day into summer (Captain American, the second installment, I believe, as well another big X-Men and Transformers, and even a renewed Godzilla that was supposed to be significantly better than the 1997 version that everyone apparently hates).

I’m nothing of a movie critic so I can’t speak to the quality of what is being offered this year as compared to last, and that is something to keep in mind. The movie business is rather odd in that it’s not easy to tease out what may be driving sales and revenue.

Whatever the expectations for this year, clearly something is very much amiss at the theater. It is a theme that is being picked up more and more by those inside without any obvious and easy explanation.

Last year, “White House Down,” “The Lone Ranger,” and “After Earth” all bombed spectacularly. Although there have been no similar-sized bombs this year, no title has yet to spectacularly over-perform, while more than one has under-performed.

“The Amazing Spider-Man 2″ barely broke $200 million and “Godzilla” fell just short with $197 million. Tom Cruise’s “Edge of Tomorrow” might nudge $100 million…

Something bizarre happened to the box office this summer. It might be that too many blockbusters were front-loaded one on top of another or it might be something more.

That is certainly a possibility as, again, analyzing the movie business is difficult and often more than a little quirky (like fashion and restaurants, consumer tastes are challenging to incorporate as a factor for investigation). However, I think that it may be more than just consumer preferences or even the titles being offered since some of these “can’t miss” pictures did.

Thus far, the sci-fi epic is pacing ahead of all its summer completion. The bad news is that it’s only a little ahead of “X-Men: Days of Future Past,” which topped out at $225 million. Moreover, after 6 days, “Extinction” sits at $128 million; its predecessor, “Dark of the Moon,” had already reached $180 million by day 6.

Last week it was unthinkable a new “Transformers” entry would fail to hit $300 million domestic. Now that looks more likely than not. Overseas grosses will ultimately save Paramount , but something truly bizarre is happening to the domestic box office.

It started around Memorial Day when the usual “blockbuster” season began. Films that were supposed to do very well did so only in their first week, suffering a highly conspicuous dropoff thereafter. John Nolte, the critic I linked to above, offered the theory that only hardcore fans were motivated enough to get to the theater when the movie was first released, the “event” aspect of a new picture. By the time the second weekend rolled around there was no broad-based appeal even with positive word-of-mouth (especially through social networks these days) and professional reviews.

You do have to wonder about the lack of broad appeal in some of these movies, and if there are just too many densely clustered around only a few narrow demographics. But I think it would be a mistake to simply brush this off as nothing more than a Hollywood problem alone. It could just as easily be that only hardcore fans for a particular franchise are motivated enough to spend more than a little currency and that the rest of the population is on the other side of the utility spectrum of cost/benefit. Moviegoing has become, after all, a rather expensive proposition.

That becomes all the more important as consumer spending ability gets more and more strained. According to Gallup, while consumer spending hit a 6-year high in May, it fell back in June to a level even with June 2013. And even factoring in that 6-year high, it did not really represent a breakout but rather just typical volatility in month-to-month results inside what has really been zero growth since early last year.

ABOOK July 2014 Retail Sales Gallup

The Gallup results certainly fit within the paradigm of the economic slowdown that hit in the early to middle months of 2012 (with the spending effects lagging that trend by six months or so). It could very well be that expensive theater prices do not fit within the discretionary budgets of 2014’s households.

Again, there is no obvious explanation for the box office slump and deceleration that is shaping up this year (the July 4th weekend was down 40% from 2013), confounding the “experts.” Taking into account alternate influences does not diminish the perilous state of US consumers as a potential cause that may actually be working in concert with these other factors. Whatever may be taking place, in the quest for corroboration of the labor market, and thus the economy’s direction, though nothing here is conclusive this is something to seriously keep in mind for future reference as the Establishment Survey continues its statistical “validation” of a contrary mainstream opinion.

 

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