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TheStreet Open House

Hollywood Sticks to What Sells and It's Not Comedies

Stocks in this article: VIAB TWX NFLX CMCSA FOX DIS

NEW YORK (TheStreet) - Laughter may be the best medicine and once upon a time, comedies were the cure for everything.

With an innate ability to provide happiness and tears in seconds, the comedic film was an affordable and effective remedy that could cure even the surliest of moods. But unfortunately, that is no longer the case. Major Hollywood studios, i.e. Paramount (VIAB) and Warner Bro. Entertainment (TWX - Get Report) have been turning their backs on comedies in pursuit of the genre's more lucrative siblings.

According to data compiled by Nomura, the rate at which Hollywood's biggest studios have been churning out comedies has been on a steady decline since 2010.

This decline could very be attributed to evolving tastes: U.S. residents aren't going to the movies quite like they once did. With video streaming services such as Netflix (NFLX) and Hulu making popular titles available to stream from the comfort of one's home, why spend money at the movies? 

Technology is another factor. With lagging DVD sales, studios have resorted to experimenting with shortening the theatrical release window for films before they are released on DVD. Consumers initially had to wait 6 months before films were released on DVD. These days, popular titles can be accessed almost instantly due to VOD (Video-On-Demand) services, the premium-priced programs broadband companies offer consumers.

Rio 2, the animated sequel to the family-friendly film starring Jesse Eisenberg and Jamie Foxx, is currently available to consumers via Comcast's (CMCSA) XfinityTV VOD services despite its July 15 scheduled home-media release.

However, Wunderlich Securities analyst Matthew Harrigan suggests that we aren't seeing fewer people in U.S. movie theaters just fiscally responsible consumers who are only willing to spend money on quality content. Moreover, this could change with the 2015 film line-up complete with the December release of Star Wars Episode VII, the highly anticipated Avengers sequel Avengers: Age of Ultron, and two films from Pixar Animation Studios.  

Although there is still some discrepancy as to whether or not Americans are abandoning the movie theater, studios have been focusing on the demands of their international consumers where box office revenues have been soaring. And U.S. comedies, unlike sci-fi thrillers, generally don't resonate abroad.

With expectations that studios will continue to reap the rewards of buying power abroad, Nomura estimates that global box office receipts will reach $57.6 billion dollars in sales by 2022, Disney's (DIS) Walt Disney Home Entertainment, 21st Century Fox's (FOX) Twentieth Century Fox and others are investing in generating content that will meet the demands of the largest emerging market economies, i.e. Brazil, Russia, India and China.

And it appears international audiences are clamoring for animation and action, not comedies.

Nomura declares "animated films have been the most profitable genre since 2004, making a global average of $235 million per film". The action film genre comes in a close second, generating about $138 million per film followed by dramas and comedies.

Soon after the latest Transformers film was released in China, it had broken almost every box office record, making over $90 million U.S. dollars (600 million renminbi) in ticket sales, setting the record for the largest three-day film debut for a film in China.

To combat flopping sales both stateside and abroad, Hollywood is steering clear of the laughs. "Given that the box office has been down, studios are rather risk-adverse and instead, want to go with a sure thing," suggests ERC box office analyst Karie Bible.

With comedies being more of a gamble and harder to get right, studios are opting for films with universal appeal. According to Nomura's analysis, Walt Disney Home Entertainment  (DIS) isn't releasing any comedies this year and Paramount has scaled back to a startling degree, with only 17% of the company's total releases being comedies as opposed to last year's 40%. 

Those are the facts. No joke.

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