CINEMACON 2013: NATO's John Fithian Delivers State of the Industry Address

April 16, 2013

Official transcript from Fithian's speech:

When the MPAA and NATO encourage parents to "CHECK THE BOX", we are asking them to learn more about their movie choices. And CHOICE constitutes the theme of my remarks today.

The state of the theatrical industry today is strong, primarily due to the diverse choices we offer our patrons in both content and experience. Our distribution partners provide the most important choice to our patrons - the movie options they can see in our theaters. Consider the movies that grossed more than $100 million domestically in 2012. They represented a wide array of choices. Action, comedy, drama, animation, musical, and history to name a few.  

When ranked by box office gross, it's clear that movies rated PG-13 represent the blockbuster sweet spot, as those movies are appropriately entertaining for most age groups. But younger skewing titles also performed well as six PG movies made the list. If exhibitors could make one recommendation to our studio partners, it would be make more family titles and fewer R-rated movies.   

Only two R movies made the top twenty last year, even though more R-rated movies were distributed than any other rating category.

Consider these numbers. The total gross from PG-13 rated movies almost doubled the return from R-rated movies, even though there were almost 50% more R-rated movies released. And the mighty PG movies nearly grossed what the R-movies generated, with less than one-third the number of titles. Americans have stated their clear choice, Hollywood. Give them more choices for all ages and they'll buy more tickets.

To be fair, 2012 had great movie choices, and with those options came record box office returns, with a record-breaking $10.8 billion domestically, representing a six percent increase over 2011. The great movie choices last year also drove 5.5% more people to the cinema in the U.S. and Canada.  

Of course our business is global, and the international marketplace grew as well, also by six percent. When you combine the $23.9 billion international theatrical market with our domestic numbers, we achieved a worldwide record of $34.7 billion.  

Just as broad movie choices can drive box office, limited choices can turn the market negative. Some industry critics quickly ignore our record-breaking year to focus instead on the 12% domestic box office decline in the first quarter of 2013. Indeed, we were down in the first quarter. But why? Simply put - not enough choices.  

2013's first quarter had no "Hunger Games". But more damaging, the product selection in the first part of 2013 was dismal. During early 2012 we had more G, more PG, and more PG-13 rated movies than we had in 2013. Our numbers suffered this year under the weight of too many R-rated movies.  

Fortunately, the diversity of product will improve throughout the remainder of the year. And that brings me to the next important factor - choices for all seasons. Exhibitors operate movie theaters twelve months a year. We do very well during the summer and winter holidays. But any month can produce a $100 million movie. In 2012, distributors spread their movies over the calendar, and we had a record year.  

The award for distributing big movies in non-traditional months goes to my friend Nikki Rocco at Universal, who put Safe House in February, The Lorax in March, and Bourne in August, all to huge returns. Warners put family movie Journey 2 in February, and Academy Award winner Argo in October. Sony put 21 Jump Street in March and Hotel Transylvania in September, a month typically avoided as the first month of school.  Fox put Taken 2 in October. And one more major studio, Lionsgate, scheduled blockbuster Hunger Games in March, instead of the summer.  

In most, if not all of these cases, distribution in off-months produced higher returns than might have been realized during crowded holiday periods.  

We've seen how movie choices for all ages and all seasons generate returns. Our industry could also benefit from more choices for both genders. In 2012 we had some good movies with strong leading females. But as we will discuss further during a ground-breaking lunch panel on Thursday, women are grossly underrepresented behind the camera, in front of the camera, and in the studio and exhibition executive suites. Congratulations certainly are due to Amy Miles and Kathleen Kennedy, winners of two very significant awards here at CinemaCon.  I just wish we could clone each of them a dozen times.  

The final criteria for product diversity is movies for all ethnicities. Given the global theatrical marketplace, our studio partners strive for a wide range of ethnic appeal. And the range produces results right here in the United States. As this chart demonstrates, Hispanics constitute our best customers, averaging 6.4 per capita attendance.  

Our distribution friends give us good movie choices, while our NATO members focus on diversity in the theatrical experience.  

Concession choices are important to our patrons. The traditional popcorn and a Coke constitute our biggest sellers. But many modern cinemas offer additional items, such as salads and burgers, finer dining menus, and adult beverages. In many locations, it's no longer "dinner and a movie".  It's "dinner at the movies." I encourage attendees to check out the trade floor this week, where many food and beverage choices will be offered by our partners at the National Association of Concessionaires, led by President John Evans, Jr.  

Cinema patrons deserve the freedom to choose the food and beverages they want. That important consumer choice extends to serving sizes as well. I congratulate our associates at NATO of New York for their successful law suit against Mayor Bloomberg's attempt to regulate consumer choice. If a patron wants to splurge and have a big Coke, they can. Or if they want a healthier option, they can make that choice too, without the government choosing for them.  

Also at the trade show, delegates can see the latest technologies, brought to us by our partners at the International Cinema Technology Association, and their president, Joe Demeo. We have captioning for our deaf patrons; digital projection to show more varied content; 3D; wonderful sound systems and immersive audio; large screen formats; and mobile apps, to name a few. Consumers are responding to these technologies.  

Even though our members have spent billions to offer the best theatrical experience, they still maintain affordable ticket prices. If the average ticket price forty years ago were adjusted for inflation, it would exceed the average price for 2012.  And yet the cinema experience today is so much better than it was in 1972.  

Back then, our patrons could go indoors or drive-in, and the choices ended there.  Today, we still have indoor cinemas and drive-ins. But we also offer traditional concessions or fancy table service; various styles of seating; large or intimate auditoriums; family environments or adult beverage services; and a host of other options.  

Cinema patrons have never before experienced this wide range of alternatives at their local movie theater. With broad choices in the content of movies, and the environments in which to view them, our industry's future is brighter than ever.  

I want to conclude by thanking a few people who made this convention possible. NATO's Chairman David Passman, who is with us this morning, along with the entire NATO Executive Board. And our volunteer members on the conventions task force, with special thanks to chairmen Phil Harris and Bill Stembler. Bill steps down next week after five years of dedicated leadership. CinemaCon wouldn't have happened without Bill and Phil.  

Thank you all for coming to CinemaCon 2013.  Enjoy the show.


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