Hollywood is heading for its worst summer in 25 years

The 40-year-old film Close Encounters of the Third Kind will be the biggest movie Hollywood will promote at the box ofice over the US Labour Day weekend. Photo / AP

By Brian Fung, Hamza Shaban

A Steven Spielberg film will again be the biggest movie that Hollywood will promote at the box office this holiday weekend. Except this film is one he made 40 years ago - Close Encounters of the Third Kind.

Major movie studios are barely offering any wide releases for Labour Day weekend, a very unhappy ending to a summer filled with blockbuster flops. The number of movie tickets sold this summer is likely to hit a 25-year low and this weekend's take, while typically small, may hit the kind of record that makes studio executives sink in their chairs.

For Hollywood, the seasonal doldrums are coming at a particularly bad time. Tech giants such as Netflix, Apple, Amazon, and Google are committing billions of dollars to muscle into the business of making movies and shows - and all of these companies want audiences to watch from the comfort of their living room sofas.

"It's been a bad summer-movie session," said Ross Gerber, president of Gerber Kawasaki, an investment management firm based in Santa Monica, California. "But there is a bigger thing going on here." Gerber and others point to a wider malaise affecting the entire legacy entertainment ecosystem. Thanks to a confluence of circumstances - blockbuster events on television, the encroachment of online streaming services, the inexorable pull of social media and sequel fatigue - audiences now have more reasons than ever to stay home. And without a must-see tent-pole feature luring huge audiences into auditoriums, going to the movies just wasn't what it used to be.

But analysts offer a number of reasons why movies performed so poorly this summer. It could have been the content itself; films such as The Emoji Movie, Ingrid Goes West, and Birth of the Dragon were all panned by critics.

Aubrey Plaza in Ingrid Goes West. Photo / Neon via AP

By comparison, television content this summer was particularly compelling. HBO saw record numbers watch its hit show Game of Thrones in July and August. Last weekend, a fight between Floyd Mayweather and Conor McGregor appeared to suck up all the attention from the popcorn-eating crowd at the theater. Those successes may only embolden Silicon Valley to move more aggressively into the business of making entertainment. It's clear that hit/popular shows on small screens can be as powerful a draw as a tent-pole superhero flick on the big ones.

"People have a glut of things they can watch," said Patrick Corcoran, a spokesman for the National Association of Theatre Owners. "So what they go out of their way to watch in a movie theater has to be that much more compelling for them."

Studio executives are hoping that audiences will return to the movies in the fall and winter, as flashier franchises such as Star Wars and Blade Runner return to the big screen. To some in the industry, the crushing results of the past several months are little more than a blip, one attributable more to bad luck and poor timing than a full-on industrial crisis.

Ryan Gosling in Blade Runner 2049. Photo / AP

Recent industry data appear to support this finding. Just a few months ago, executives were crowing about a record-setting quarter for the box office, off films like Disney's Beauty and the Beast, which made a whopping $500 million domestically.

Last year, theaters took in more money than ever, according to industry statistics.

"Stocks are [currently] getting destroyed because investors have concluded that if nobody is going to the movies now, then they are never going back -- which is just wrong," said Michael Pachter, a research analyst at Wedbush Securities, a Los Angeles-based investment bank.

Still, few deny the movie business faces a challenge from tech giants who aim to revolutionize the way films are distributed.

For example, Netflix has pushed for releasing more films on its platform sooner, which could eat into box office returns by shortening the window in which movie theaters may exclusively show new content. Companies such as Apple and Amazon, meanwhile, are elbowing their way into the entertainment space by making their own original films and TV shows.

To anticipate that pressure, film studios and theater owners are turning moviegoing into a more specialized experience, trying to recreate the sense of magic that consumers today still can't get at home - at least not without great expense.

Theater chains nationwide are ripping out those old, fold-down seats and replacing them with deluxe, upholstered recliners. In a way, it's like replicating the comforts of the living room experience, but with far more amenities. Some are beginning to offer alcohol, or installing premium audio systems with speakers that not only blast your eardrums from the side, but in some cases from the ceiling above - or even underneath your seat. By the end of the year, as many as 40 percent of big screens at some theater chains may feature high-end seating options, according to James Goss, an industry analyst at Barrington Research.

"The longer term trend has been a modest erosion in actual attendance," he said, "and the theatrical sector has tried to respond by creating a better experience."

Film studios are also growing more strategic about when to release their biggest hits. As entertainment alternatives have multiplied, companies are no longer treating summer as the most important ballgame. Instead, they are spreading their films out across the calendar. But studios tend not to coordinate their schedules - resulting this year in a weeks-long hole in summer coverage, according to Corcoran.

"The summer, while an important time period, is becoming less so over time," he said. Five years ago, he added, roughly half of box office receipts were concentrated in the summer. Last year, that figure was down to 39 percent, and could drop to 34 percent this year.

For Spielberg's warmed-over sci-fi classic, that could end up being an advantage.

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