SHOWEST 2006 - STATE
OF THE INDUSTRY
Las Vegas, NV -- March 14, 2006
Motion Picture Association of America
(MPAA) Chairman and CEO
Dan Glickman addresses the Convention.
One of my favorite movie lines is from an unforgettable character,
Ferris Bueller, who says, quite philosophically, "Life moves
pretty fast; if you don't stop and look around every once
in awhile, you could miss it."
I love that line, because it is about keeping things in perspective.
Sometimes it is difficult for all of us to see the forest for
the trees. It can be especially difficult in the entertainment
industry, which right now seems to be evolving at lightning speed.
There is so much change -- both internal and external. And I think
one thing that's nice about this gathering each year is it
gives everyone a chance to stop, come together and look around.
I think that's particularly important after a year like 2005.
In 2005, total domestic box office was down, but remained near
$9 billion, a barrier broken for the first time only three years
Global box office is down, but remains 46 percent higher than
it was in 2000. The cost of making movies has flattened, and declined
from the $100-million-PLUS-perpicture price tag from a few years
Eight movies grossed more than $200 million last year - a new
all time high for mega-blockbusters in a single year.
People still love going to the movies.
And despite an ever-widening array of consumer choice - both in
terms of how they watch movies and what they do instead of watching
movies -- Americans bought more than 1.4 billion movie tickets
last year. And over 80 percent of moviegoers say the overall movie-going
experience is time and money well spent.
But our numbers could and should be better. Average theater attendance
per person is down -- for the third year in a row. To state the
obvious: this is a trend that needs to be reversed.
We have some significant challenges ahead. Change is afoot. There
is no question the evolution of the on-demand world and the new
and enhanced power of consumer choice is impacting the habits
and preferences of the audiences we serve -- not to mention the
internal dynamics of new production techniques, marketing methods,
financing of film and distribution strategies, including the current
discussion of window lengths.
Yes, we live in interesting times.
It has been the tradition for the Chairman of the MPAA to present
last year's box office totals during this appearance and review
the year that was. But in the spirit of the winds of change in
our industry and beyond, I wanted to try something different.
Because I think everyone knows how to sum up box office in 2005.
It was down. Attendance was down. This is not breaking news. What
is important in 2006 is how we respond to the changing marketplace.
When I consider the state of the industry, it is clear: we're
in a state of change. At the same time I will also tell you: I
am bullish about the future of the moviegoing experience.
Granted, I'm someone who waxes nostalgic about my hometown
theater every chance I get. I'm someone who believes that
the only way to really see a movie is in a big theater, on a big
screen, with a big bag of popcorn.
I believe that no technology exists, or will ever exist, that
replaces the experience of watching towering images in the dark
with a crowd of people who laugh, cry and feel terrified at the
same moment you do.
The question is, are people like me a dying breed?
Research released last week by the MPAA suggests, certainly not
yet. Almost 70 percent of consumers say going to the theater is
the ultimate way to see a movie. But it's just a matter of
time until the competitive marketplace makes high-tech home entertainment
more affordable and accessible to everyone.
Not to mention the expanding competition for our customers'
time and entertainment dollar - from video games to pay-per-view
sporting events, to the Internet.
All the modern technology in the world notwithstanding, Americans
will come to the movies if they think they have value. But if
they don't, they will stay home.
So the question we must answer is what are we going to do to make
sure our customers are getting a valuable experience and that
they appreciate the value of the experience?
If there is a silver bullet answer it is, very simply, that everyone
must perform their respective roles and perform them well.
I'd suggest first - and quite obviously - that movie-makers
must continue to turn out quality movies with compelling and entertaining
stories that audiences want to see. That's fundamental. It
doesn't matter how smart or market-savvy you are as a theater
owner. Moviemakers have to do their jobs. The power of the story
always has been and will continue to be the key to our success.
But the critical role you play as exhibitors in giving the audience
a place to come and connect with that story should not be underestimated.
It is your job to ask, why should they come to my theater rather
than staying at home? Why should they sit in my seats and eat
my popcorn rather than on their sofa with the microwave variety?
If you can't give them good answers to these questions, they
I was home in Wichita recently and was visiting with a theater
owner who said to me something very obvious that I think is important.
He said, "We've all got to be thinking creatively about
providing a good value. People have to think, it's worth my
time to go there."
This type of thinking is working in Wichita. I've been to
his theaters. They are friendly, customer-oriented places, and
people are willing to drive halfway across town to go there for
the same movie that's playing at a different theater much
closer to their house. And I know he is not alone.
There are some basic things that people want when they go to the
movies - things that are important to maintaining and building
audiences. Safety, comfort, convenience, cleanliness, friendly
employees and ample parking - those are the basics.
There are other things that exhibitors are experimenting with
to provide their customers added value.
For example, offering concierge services that actually make dinner
and babysitting arrangements for their patrons.
I've seen a theater with a really clever way to buy tickets
on your cell phone. You dial in your ticket order and the system
sends a bar code back to your phone that you can scan in when
you get to the theater. No paper tickets, no lines, no hassles.
We should be looking at other industries who have aggressively
courted loyalty. I think of the airline industry and its frequent
flier program that rewards repeat business. In short -- are we
giving customers the most bang for their buck? And I'm not
talking about the number of explosions onscreen.
Now, I'm not here to deliver a lecture or tell you what to
do. I am not in your shoes and I don't pretend to be. I am
here as a committed partner who believes that we are all in this
together. We fail or succeed together.
We at the MPAA have a role to play ourselves and we are doing
some strategizing to bolster our own effectiveness. For starters,
I believe it is important to better understand consumer attitudes
about our industry.
We need to know exactly what movie consumers want from the theatrical
experience. We need to know what motivates people to go to the
movies -- and, equally important, what causes them to stay at
home. We must understand their perceptions about the value of
a movie and whether they recognize the ramifications of piracy.
In a competitive environment as unforgiving as today's marketplace,
we simply can't afford to rely on guesswork -- no matter how
smart we think we are.
I've directed the staff of the MPAA to conduct research into
these and other important questions -- the first time we as an
association have undertaken such a project. That research is ongoing
as I speak. I have no doubt that some of the answers we're
going to get will be obvious.
But I'm equally certain that we will learn things we don't
know that generate ideas. Maybe we'll find out that customers
value the ability to buy other things like posters, DVDs and other
ancillary items at theaters. I've seen that happening in some
theaters, by the way. Maybe they want more choices at the concession
counter. Maybe they think movies are too long or too short. Maybe
moviegoers feel even more strongly about pre-trailer advertisements
than we can even surmise from anecdotal evidence. Maybe they think
there are too many movies to choose from - or maybe they think
there are not enough options. Maybe we'll find people would
consider seeing a short film or old cartoon before the feature
as adding value to the experience.
We will be working closely with our friends at NATO on this project
and will share results with you so your members can also benefit.
The goal of this research is not to suggest to theater owners
how you should do business. We want to be armed with data that
will inform our efforts to accomplish two things:
We as an industry collectively spend hundreds of millions of dollars promoting individual movies, but very little promoting the value of the movie-going experience or the movies in general. Why not?
- to foster an environment in which our companies and all producers and distributors of movies can continue to thrive.
- to better communicate the value and rewards of the movie-going experience.
When I was at the Department of Agriculture, industries like pork, beef and milk spent a lot of money promoting generically the value of these products. Not any specific brand name, but the foods themselves. Not to suggest that the movies are like pork chops. But those campaigns were done because market sales and volumes of individual consumer brands were falling, and this reversed the trend. And I simply suggest that we as an industry should consider whether such an effort might be useful.
I'm pleased that some industry leaders are moving forward on an idea somewhat along those lines and I am pleased to tell you the MPAA will be a part of it.
With the support of both film studios and theater owners, my good friend Jean Firstenberg of the American Film Institute has launched an effort to establish a "National Movie Week" next year. The idea behind National Movie Week is to generate enthusiasm, excitement and better understanding of movies. As part of this effort, the MPAA will be working to get Congress to pass a resolution recognizing a week in March as "National Movie Week". I look forward to working with Jean and others in the coming year on that project.
Speaking of national image and branding, I'd wager that if you ask someone on the street what the MPAA does, he or she will likely say: "They're the ones who rate the movies." Yes we are. And we're proud of the job we do.
After 40 years of operation, the Classification and Ratings Administration works to preserve the creative freedom that filmmakers need and deserve. It works as a system that gives consumers -- most importantly parents -- a reliable source of information about film content.
Administering CARA has been an historic and successful partnership between NATO and the MPAA and continues to be one of our most important endeavors. We all have a stake in making sure the system is as effective and transparent as it can be, and we will continue our close partnership with you to make sure we are asking consumer oriented questions about CARA's service as well.
Finally, after talking so much about change, let me assure you there are some things that won't change at the MPAA. For example, it wouldn't be an MPAA speech if I didn't talk about piracy.
There is a reason I am a broken record on this subject. Copyrighted
works like movies are unique cultural and economic assets that deserve
protection. And making sure consumers actually pay for the movie
experience continues to be at the core of our mission. On this front
we have launched a multi-pronged approach -- one that includes enforcement,
litigation, legislation, education and innovation. And we are making
progress on a global scale.
We are advocating legislation at the federal and state levels to fight movie piracy. From enacting anti-camcording laws that punish people who go into your theaters with the sole purpose of stealing movies, to promoting digital anti-piracy laws designed to stop people from stealing movies from the comfort of their homes, we are aggressively moving forward to protect the value of the movies we all love.
We have a plan to go to Universities and High schools and spread
the word that illegally downloading our movies is both morally and
legally wrong, and such activity does have consequences.
This is important, because if we don't teach the children to respect copyrights, we will lose the next generation of customers.
And this last year we had a pivotal achievement by winning the Supreme
Court Grokster case. A fight you stood with us in and we thank you
for that support because I think re-affirming the value of creative
property will benefit everyone in this room. We have many capable
partners in these endeavors, and are building on these relationships
and establishing new ones.
In that spirit of partnership, I am pleased to tell you we are launching a new effort with NATO this year -- a web-based training program that provides both information and incentives for theater employees, individuals who are on the front lines in the daily battle against camcording pirates.
Starting this week, theater owners can point employees to this site
to ensure they have both the knowledge and the motivation to stop
camcording in theaters -- which is responsible for 90 percent of
the pirated new releases that wind up on the street and on the web.
The site is www.fightfilmtheft.org
I encourage you to look at the site, use it, encourage your employees to use it. And I also encourage you to visit our booth and our presentation this week at ShoWest University to learn more about how you can continue to help.
Even on the piracy front, we are doing our best to think in new ways. We must be leaders, not victims, learning from the past but not dwelling in it.
And that is really my challenge to you today: take charge of your own future. Ask yourself if you are thinking creatively about providing a good value.
As Charles Darwin once observed, "It is not the strongest or the most intelligent of species that survive, but the ones most responsive to change."
There is another old adage that - the more things change, the more they stay the same. I think the truth for the movie industry is somewhere in between.
Yes home entertainment is growing and will continue to do so. Yes consumers' eyes and wallets are being pulled in many different directions. Yes we must be pro-active in maintaining and building audiences.
But I believe ultimately we will be successful because there are some fundamental truths about the movies.
One of those immutables is that Hollywood has the ability to tell superb stories unlike any other medium can -- stories that appeal to all kinds of audiences. Blockbusters like Star Wars or War of the Worlds and blockbuster family films like Harry Potter, The Incredibles or the Chronicles of Narnia bring worlds to life that must otherwise only exist in our minds and imaginations.
Comedies aimed at adult audiences like Wedding Crashers or the 40-Year-Old Virgin drew big laughs and big box office.
And smaller productions like Crash and Brokeback Mountain, Capote and Good Night and Good Luck attracted enthusiastic audiences.
Why? Because they offered us brilliantly told stories of love, life, fantasy, humor and history -- the kinds of stories that people want to see today and will want to see tomorrow.
The other established, permanent fact is that movies matter to people and, as a result, there will always be a demand for them. For nearly a century, we have made sense of our lives, populated our fantasies, and defined our dreams with words and images we got from going to the movies.
From Rhett Butler's refusal to give a damn to Dirty Harry's invitation to make his day -- from Dorothy's uneasy realization she was not in Kansas anymore -- a feeling I know only too well - to the Godfather's suggestion that you make your enemy an offer he can't refuse -- the movies have provided people around the world with a common reference point and a common language.
These two constants -- the unique story-telling art of film and the public's love affair with the movies - give us the oundation that will enable us to meet any and every challenge to our industry.
As Bill Murray's character Carl Spackler would say in Caddyshack, "We've got that going for us, which is nice."
I look forward to working with you during what I am confident will
be a very successful 2006.
National Association of Theatre Owners
(NATO) President and CEO
Thank you, Dan Glickman, for being with us today.
In words and deeds you continue to demonstrate your commitment to the cinema industry,
and your respect for the partnership our two associations share. I am also grateful
for so many other partners with us here today, particularly the leaders of two
important sister organizations: Larry Etter of the National Association of Concessionaires;
and Dwight Lindsey of the International Theatre Equipment Association. I also
want to thank the sponsors of last night's Independent Showcase by acknowledging
Robert Mayson of Kodak Digital Cinema and Jack Brady of the Newspaper Association
John Fithian addresses the Convention.
I also need to express my deep appreciation
for the NATO members and our two
top volunteer leaders--Chairman Phil Harris of
Signature Theatres and Vice Chairman
Lee Roy Mitchell of Cinemark.
ShoWest 2006 comes at an important
juncture in our industry's history. Over the
past year since we last gathered here in Las
Vegas, significant and energetic discussions
have taken place across a spectrum of
fundamental issues. I view the debates as
and necessary, and I emerge from the year
excited about our business and confident in
After a final year of hard work on
specifications, equipment development, and
business modeling, we stand now at the
dawn of the biggest technological revolution
since the advent of sound. Digital cinema
starts right now, in the year 2006, and it
couldn't come at a more important time.
Digital cinema will enhance the movie-going
experience by providing our patrons
with consistent, high-quality images that won't
degrade over time. Digital cinema will
also give exhibitors greater programming
flexibility to meet diverse consumer demand.
Equally important, digital cinema will ensure
that the theatrical experience cannot be
replicated in the home.
In November 2004, NATO's board of directors
adopted a unanimous resolution
describing our fundamental objectives. Now
that nearly all of those objectives have been
achieved, or are on the road to fruition, the
revolution is beginning.
In the resolution, NATO members called for
uniform technical standards to
promote interoperability and compatibility, and
to foster competition. NATO worked
with our partners at the studios to support the
efforts of their Digital Cinema Initiatives,
and we are pleased with the final
specifications that DCI released in 2005. Two
ago, NATO's Technology Committee released
some supplementary requirements that
complement DCI's work. Those requirements
are available on our web site. NATO will
also continue to participate in the essential
work of the Society of Motion Picture and
Television Engineers as that body adopts
The resolution also declared exhibitors'
interest in high-quality equipment to
enhance the theatrical experience. With the
projector and server technology currently on
the market, we believe that digital cinema
quality exceeds that of film and anything
available in home entertainment systems. I
encourage all our members to spend some
time this week on the trade floor, in the
demonstration suites, and at the screenings
examining the latest technologies.
Regarding the business models, the NATO
resolution called for a financing plan
where the studios pay for the costs of the
transition. Today, various third party
integrators have proposed financing and
installation plans to North American exhibitors
that are backed by agreements with the
studios. Under these plans, the third parties
the capital to buy and install equipment in
cinemas. Over time, the studios will then pay
"virtual print fees" to the third parties for the
use of the equipment. Several exhibitors
have already announced that they have
reached agreements with the various third
under these models.
The resolution also urged that financing plans
be open to participation by all
exhibitors regardless of size or geographic
location. All of the third parties currently
offering plans have stated their commitment to
this principle. I am concerned,
nonetheless, that smaller exhibition
companies should seek mechanisms to
their power to obtain economies of scale for
use in negotiating digital cinema equipment
and service deals. One such mechanism is
the Cinema Buying Group LLC , currently
operating under the leadership of managing
director J. Wayne Anderson.
Regarding a roll-out sequence, the NATO
resolution embraced the need for
testing of complete digital cinema systems,
based on specifications and standards, in a
beta market for a reasonable time. Today, at
least two of the third-party financing and
installation organizations have announced
plans for beta markets with exhibitor partners.
We strongly support this essential beta testing
to ensure that equipment systems do not
fail and that the specifications and standards
can be met.
NATO will continue to advocate the goals of
the resolution as the transition goes
forward. To a significant degree, though, the
work of the U.S. exhibition industry
through its association is coming to a
successful end. It is now incumbent on our
individual members to negotiate their
particular plans for digital cinema, as they
The past year has also produced a spirited
debate on the issue of release windows.
Aware of the potential irony of this statement, I
am grateful for Mark Cuban, Steven
Soderbergh, and the few other individuals who
promoted simultaneous release of movies
in cinemas, on DVDs, and directly to the home
all at the same time. These radical,
though misguided, experiments have served a
very salutary purpose.
By teeing up the debate, and generating
tremendous media attention to the issue,
proponents of simultaneous release have
encouraged important discussions between
exhibitors and studios. Though the dialogue
continues, I am very pleased to report that
the overwhelming majority of studio and
cinema leaders agree that the tiered release
movies, first to cinemas and later to ancillary
markets, maximizes returns for everyone.
Thoughtful industry leaders like Howard
Stringer of Sony, Sumner Redstone of Viacom,
Ron Meyer of Universal, and Jim Gianopulos
of Fox have all articulated publicly their
support for the theatrical release window
because they know the tiered release model
serves their companies and their consumers.
The creative community has also begun to
voice their understanding of the role
the cinema release window plays in the
experience of their art form. Leading talent like
M. Night Shyamalan, Jonathan Demme and
Tim Burton have described why theatrical
release windows are important to them and
The NATO staff has collected the many
comments supporting the theatrical
window, and those statements will be
available in the press room throughout the
The comments suggest four reasons why the
theatrical window is here to stay.
First, the window enables the viability of the
cinema industry. As Sumner
Redstone emphatically stated, "any exhibitor
playing pictures under [simultaneous
release] circumstances would be committing
Second, the theatrical window drives the
economics of the movie industry as a
whole. As Ron Meyer explains, "The window of
time between theatrical-release dates
and DVD-release dates has a purpose in
delivering financial results to us and different
experiences to the audience. There's a place
for each of those windows."
Third, the theatrical window preserves the
artistic medium. That's why Tim
Burton calls the idea of simultaneous release
"absurd." Burton believes that "everything
should be done to treat the [cinema business]
as an art form--it's a visceral medium."
Finally, and perhaps most importantly, the
theatrical window gives consumers
choices. Our patrons know that some movies
are made for the cinema first, while other
pictures are made for television or the
straight-to-DVD market. Consumers have
different expectations for each category. In a
world of simultaneous release,
entertainment product would be homogenized
and consumer choice reduced. Howard
Stringer put it best when he stated that "if you
collapse a window or go day and date...you're
doing movie of the week. And the sizzle...of the
movie industry will be gone. You have to guard
the value of the content."
We are pleased with the response, and
confident that the theatrical release
window is here to stay. Thankfully, our studio
partners appear similarly confident. In
fact, the average video release window
dropped by only four days from 2004 to 2005--
from four months and 20 days to four months
and 16 days. We'd naturally prefer to see
it go the other direction--but in a year with
often raucous debate about simultaneous
release, it's comforting to see the window
remain relatively stable.
The past year has also produced inordinate
media attention and industry
consternation on the issue of box office
results and the decline of 2005. Box office
receipts did decline by 5.8% in 2005 over
2004. But in what other industry would a
decline of that size garner so much attention
and doomsday predictions? In the short term,
our business is cyclical. In the long term,
however, we are growing. Movie
theatres have sold more tickets on an average
annual basis this decade than they did in the
1970s, 80s or 90s. Indeed, every decade has
seen growth. In the 1970's we sold 985
million tickets a year. In the 1980's, that
number grew to 1.1 billion. In the 1990's, we
averaged 1.3 billion. And in the first six years
of this decade, we have sold an average of
1.5 billion tickets. Steady growth over the
years, despite the short term cycles.
Exhibitors know that good movies drive good
box office receipts. No other factor
looms as large. Variations in movie supply
drive short term cycles. But our members
also know that we must strive to improve the
movie-going experience on a continual
basis. That's what digital cinema is all about.
That's why we are attacking rude patron
behavior with public service messages and
increased patron monitoring by theatre
That's why we're working with screen
advertising companies to make the pre-show
entertaining as possible. These and many
other innovations in the movie-going
experience will be discussed further in panel
discussion on Wednesday morning, when
four top cinema company CEOs will join a
renowned cinema studies professor in an
important dialogue about enhancing the
magic of the movie-going experience.
As a final comment, I want to salute the
Academy of Motion Pictures Arts and
Sciences. The 78th Annual Academy Awards
last week proved to be, again, an
entertaining and inspiring portrayal of the
magic of movies. In fact, I can claim some
special solidarity with the Academy this
year--as I have watched some in the pundit
class declare the imminent death of the
Oscars, the obsolescence of this great
and the surrender of its grandeur to largely
unspecified, but nevertheless somehow
"inevitable," revolutions in public consumption
habits. Yes, sounds familiar, doesn't it?
We in the movie theatre business read our
obituaries in 2005 with equal amusement. As
with Mark Twain's famous cable from London,
as with movie theatres, and so with the
Academy, the reports of our death have been
I want to issue a special thanks to Academy
president, Sid Ganis, for devoting a
few moments of his very scarce and precious
time at the Oscars podium to a celebration
of movie theatres, and the vital--and
unique--role that movie theatres play in
and perpetuating the value of movies. He
could have spent that time delivering any
number of messages. His decision to tell an
international audience that movie theatres
are indispensable to our collective industry
certainly earns President Ganis our deep
My father, who was a history professor and a politician, once told
me this. When someone else makes your point for you, and states
it better than you ever could, quote them, sit down, and shut up.
I conclude my remarks today with those words from Academy President
Sid Ganis, who said, "I bet you that none of the artists nominated
tonight have ever finished a shot in a movie, stood back and said
'that's going to look great on DVD.' Because there is nothing like
the experience of watching a movie in a darkened theatre, looking
at images on an eye enveloping screen, sound coming at you from
all directions, and sharing the experience with total strangers
who have been brought together by the story they are seeing." Thank