Is the Movie Theatre Era Over? Chapter 3: Back to the Future
- Vos126
- Apr 30
- 9 min read

When I was a kid, we didn't live that close to a movie theatre. It was about 15-20 minutes from our home in the country. Despite this, many of our family events revolved around going to the movie theatre. I saw many kid classics in the theatre: Cars, Finding Nemo, Lilo & Stitch, Shrek, etc. I have fond memories of going to the theatre with my parents and my brother or maybe some friends at a birthday party. My whole world seemed to change when I found out you could ask for extra butter!
Going to the theatre was an event, but also something you did on a regular basis. Whether it was to celebrate an occasion, a family outing, or just to catch the newest popular release, the social norm was to go to the big cinema palace, buy some popcorn, and enjoy the show. Sadly for me, this is no longer the case for the younger generation.
There are many reasons for this: television, steaming services, the proliferation of high quality screens in homes, etc. I wanted to write about movie theatres, because I still enjoy going to the theatre and don't want them to go away. I wanted to think through how theatres could still survive even if they weren't the profit engines of bygone eras. A possible way forward may lie in going back to the old practices used during Golden Age of Hollywood.

Theatres have clearly seen a huge drop off in revenue since the 2020 global pandemic. During the pandemic, millions of people stayed at home in order to slow the spread of the virus. Needless to say, having large rooms full of strangers sitting next to one another was not ideal for slowing the spread of viruses. At least in most peoples' perception.
For the first time, many big Hollywood films were released in on streaming platforms instead of in movie theatres. This change broke a pattern for many people. Instead of movies being cultural moments that people take in together over a period of a week or so, movies released to people on a streaming service where they would take it in over months. Shows and movies can be cultural moments on a streaming service as well, but the window of relevance for most titles is very small. When the pandemic ended, people were slow to return to theatre and many have just decided not to. This is a dire situation for movie studios as they it don't make nearly as much money doing streaming releases.
Theatre releases have much more potential to make money than a direct to streaming release. A theatre release takes in a set amount per person viewed while a streaming release is more complex. While a theatre just needs a person to buy one ticket for one movie to get a good return on that customer, a streaming service needs to keep that same person streaming for several hours before they get a good return. In other words, theatres focus on getting people in once to see a particular movie while streaming services focus on getting people to stay and several hours of content. Therefore, it is hard to do a cost-benefit analysis of one versus another. However, the resistance of studios to go to the direct to streaming model is convincing evidence that they can make more money doing theatrical releases.
So, we know that theatre releases make more than streaming, at least on a by view basis. We know that less people are willing to spend the money and/or effort required to go into a physical theatre. What are studios to do? Well I would propose two things, vertically integrate by acquiring theatre chains and build more theatres with less screens at each. We will deal with each proposal separately.
Vertical Integration
If you read Chapter 1 of this series, then you would know all about the Paramount v United States case. That case stopped studios from owning movie theatres directly and several other monopolistic practices. The old Hollywood order collapsed after this, but a new one took its place. Big studios found ways to make huge profits while splitting the take with theatre chains such as AMC, Regal Cinemas, and Cinemark. However, as ticket sales have fallen drastically, that same model may prove to be unsustainable. In addition, the Justice Department slackened the Paramount Decree standards to allow studios to own their own streaming service. This development could open the door for studios to return to the theatre business.

What would be the benefits to this model? As it stands now, the theatre chains split box office revenue 50/50(for the most part) with the studios. If studios purchased their own theatres, they could keep 100% of the take and be a lot more efficient and strategic with their releases.
If a film has a bad opening, normally it is yanked by theatre chains quickly, but a studio owned theatre could stick with the film longer and do more to promote it. Studio owned theatres would have more leverage in distribution negotiations as they could only show their movies in their own theatres if they chose. Studios could choose to have complete control over hot new releases like the Marvel franchise, Mission Impossible, or Fast & the Furious.
People would go see the new Marvel movie in a Disney theatre, or they could pay a similar price to see it on Disney+. Either way, Disney makes a comparable amount for each view of the film. Right now. the theatrical release revenue pool is just being split up between too many parties to be successful. Following our example, Disney splits box office revenue 50/50 with theatres. They then split that money up to actors, writers, producers, directors, staff, etc. Advertising the film takes another big chuck.
This is why Hollywood only does big time movies in theatres now. Films just have to bring in a ton of revenue to make any money. A more efficient & combined operation would be lien enough to survive more box office flops, and it may even lead to more low-budget films making it the big screen. Despite the positives, it seems unlikely that the studios try this however. The challenge would be two-fold.

First, it would face significant antitrust scrutiny by the Federal Trade Commission. Like in the 1930s, angered movie theatre chains would petition the government that studio involvement in theatres is a monopoly. The FTC would probably take the matter to court as the actions would threaten the existence of the small chains. It is unclear what the outcome would be, but the media environment has changed so much in the last 80 years. Streaming services have all but killed cable television, and all four of the American studios we have discussed(Paramount/CBS, NBC/Universal, Disney/20th Century Fox, & Warner Bros/Discovery) have extensive cable TV assets. Labor agreements with actor & writers unions in the past few years have jacked up prices for studios while preventing them from investing in new technologies like AI. The court may be sympathetic to studio arguments that all media is direct to consumer now, and there is not much space for middle-men like movie theatre chains. A possible compromise could be that studios spin off their cable TV brands into another entity in order to complete a theatre deal(something they likely want to do anyway). Theatre chains could likely still exist in this potential new era, but they would lose a lot of their leverage.
Secondly, the amount of capital needed to complete deals to buy theatre chains and/or build their own would likely be out of the studios' grasp. All four of the American studios(we aren't counting Sony) are still hemorrhaging debt from media purchases over the last decade.
Paramount has gone into massive debt attempting to build up its streaming platform, Paramount+, while taking several hits at the box office including One & IF last year. They are also in the middle of being acquired by the successful production company Skydance Media.
NBC is in uncharted waters after being spun off by Comcast, and its core business remains traditional cable channels. They also committed heavily to sports by spending $7 billion a season for the NBA's TV rights.
Warner Bros is in possibly the worst shape with a mountain of debt from their merger of Discovery and Warner Media back in 2022. They are also attempting a complete reorganization of their business into two divisions.
Disney is the best of the bunch, but still has a nearly 50% debt to equity ratio. That is not good for those of you who are not astute in finance. This results from the huge acquisitions they made in the 2010s, most notably Marvel, Lucasfilm, and 20th Century Fox. They have struggled with direction of late with CEO Bob Iger having to come out of retirement to save the company and then refusing to name a clear successor.
Of the four studios, Disney has the best shot of making this work. Disney branded theatres would have families coming in droves to see exclusive Disney & Marvel titles. However, they are the most likely to lose an antitrust suit in my opinion given their already large presence in the media landscape. Maybe NBC is desperate enough to give it a try with their Universal brand,
but I doubt it.

More Theatres, Less Screens
As discussed in Chapter 2, theatres started as one screen grand opera houses, but eventually economics led them to build huge movie temples with as many as 30 screens. Starting in the 70s, the number of movie theatres began plummeting, but the number of movie theatre screens grew exponentially. I think the best way forward for theatres is to reverse this trend.
With the decline in foot traffic, movie theatres can mostly be run by two or three people on a weeknight, and maybe ten to fifteen on the weekends. That leads to the argument of why not have twenty screens so that we can capture a wider net of movie goers? I reject that train of thought for two reasons.

Firstly, movie theatres expanded the number of screens to give customers more choice, but now they give the illusion of choice. The films that come out in theatres now are wide appeal, non-offensive productions aimed at attracting the widest range of people. That really limits the amount of topics that studios will greenlight films for. They usually stick to sequels & remakes of old titles or productions of popular IP that has a mass appeal. You add in the formulaic films that revolve around a group experience, i.e. horror movies, religious films, etc, and you have 80% of theatrical releases these days.
That is not much choice. At least not enough choice to compete with the choices on streaming services. People come to the theatre these days for an experience. They want to be a part of a trend or a cultural moment just as in the past. What has declined is the spur of the moment trips to the theatre. The dates, the birthday parties, the family outings that I enjoyed growing up are not as prevalent. Limiting the number of screens shrinks the supply to the amount of demand. While it doesn't cost much more to run twenty screens as opposed to four, it creates supply for almost non-existent demand.
Less movie theatre screens could create less competition for tickets during big events, allowing for higher prices. You would have fuller theatres creating a more lively experience for movie goers. While most consumers would prefer less full theatres and lower ticket prices, they have shown willingness to pay a premium to attend hyped events in person. Proof is in experiential events like Taylor Swift concerts, trips to Disney World, and sporting events. People don't attend random events like they used to, there has to be some online buzz. When there is buzz though, people come in droves.
If I was running theatres, I would shrink my supply of films & screens, focus on a few big ones, and chase trends.

Secondly, studio owned theatres would have less supply of films at any given time due to playing only there own films. Maybe you could negotiate with other studios to show their hot films as well, but they would likely decrease as time went one. A four or six screen Disney themed theatre could be an incredible experience for a family. You could have live characters like Disney World, themed decorations, and have 4-D tech built into chairs.
It makes sense for studios to build small theatres in heavily populated areas. They could put small theatres with the similar square footage as mid-sized retailers in the popular open air malls. Planning a shopping trip? Why not treat your kids to a Disney experience afterwards?
Just like with restaurants, movie goers could have completely different experiences at different branded theatres. A Universal branded theatre could be done up in Jurassic Park style with dinosaurs and jungle terrain. Meanwhile, the Disney theatre could be done up with the Avengers for the latest Marvel film.
The obvious counter to this model is that you would be splitting up the remaining pool of movie goers among three or four smaller theatres rather than just one big one. My answer is that the studios can pick up the lost revenue by being more efficient in production, timing of film releases, and getting 100% of the ticket revenue instead of splitting with a theatre chain.
Final Thoughts
I love going the movie theatre. It is such a unique experience from watching a movie at home, and I want to be able to share that experience with my child. Movie theaters don't have the same hold over the culture that they once did, but I think they can survive if reimagined.
If studios are willing to step back into the theatre business, I think it would be a success for them in the long run. It will not be without challenge from theatre chains, and it will likely be initially unpopular by consumers. Ticket prices will rise, and people will be upset. However, once the transition has been made, consumers would be pleased with the end result.
Whether or not studios and theatres make these changes, I firmly believe that theatres will be around in some form for the foreseeable future. There is still a lot of money to be made even if the revenue growth is in structural decline. So pop a fresh batch of popcorn! I'm on my way!
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