Why the Movie Industry Is Squeezing You This Summer

PORTLAND, Ore. (TheStreet) -- Even if you're mad at Steven Spielberg for editing E.T. to swap out guns for walkie-talkies and loathe George Lucas for continually revising the Star Wars films, can we simply agree that these men know how to make and sell blockbuster films -- even if they can't stop futzing with them?

Good, because it's not them who are inevitably going to suck every bit of pleasure out of movies as we know them. It's the industry around them. In their view, it doesn't matter how The Lone Ranger did this past weekend, because Disney ( DIS) and all the other studios have wrecked the movie business beyond repair.

At a panel discussion at the University of Southern California's School of Cinematic Arts in June, Spielberg noted theatrical movie releases are now competing against new, more personal and more riveting forms of entertainment. Meanwhile, Hollywood just keeps throwing money in the hopes that Mars Needs Moms, John Carter and Rise of the Guardians won't just blow up in their faces.

"There's eventually going to be a big meltdown," Spielberg said. "There's going to be an implosion where three or four or maybe even a half-dozen of these mega-budgeted movies go crashing into the ground, and that's going to change the paradigm again."

Lucas chimed in and declared that as studios narrow their focus and gamble more cash on lowest-common-denominator films carried largely by effects, moviegoers will continue to turn away in droves. It's the consequence of that exodus that should have moviegoers nervous, Lucas explains.

"You're going to end up with fewer theaters, bigger theaters with a lot of nice things," he said. "Going to the movies will cost 50 bucks or 100 or 150 bucks, like what Broadway costs today, or a football game. It'll be an expensive thing. The movies will sit in the theaters for a year, like a Broadway show does."

The only thing surprising about that declaration is the dollar amount, and even that's not too far off the mark. In the past 20 years, according to BoxOfficeMojo, the average price of a movie ticket has nearly doubled from $4.14 in 1993 to $7.98 just last year. That's more than $2 ahead of the rate of inflation and only thinly veils the ticket prices of around $20 fans have shelled out for 3-D and IMAX ( IMAX) showings in certain markets.

The $50 ticket has already arrived, with Viacom ( VIA)-owned Paramount charging that much for showings of Brad Pitt zombie film World War Z in Houston, San Diego, Atlanta, Philadelphia and Irvine, Calif. For that price, fans got an early screening of the film, 3-D glasses to keep, a small popcorn and soda, a poster and a reserved copy of the DVD once it is released.

Why do they have to sell you this whole package right this minute? Because where movies used to have to charm you or impress you into buying a ticket, they now have to trap you. Now that high-definition televisions have improved the home viewing experience, streaming and on-demand services have nullified the need to leave your home and television and video game producers are creating far more compelling zombie narratives in AMC's ( AMCX) The Walking Dead and The Last Of Us on Sony's ( SNE) Playstation 3, it's gotten tougher to get you to come out to a zombie movie that bears little to no resemblance to the popular book it's named after.

It's not just World War Z, either. You're watching less of Hollywood's movies in theaters in general. In 2002, the movie industry sold 1.6 billion tickets. By last year, even The Avengers and Batman couldn't make Americans buy more than 1.36 billion tickets. That's up from the 1.28 billion sold in 2011, but still part of a steady decline.

You're also not buying movies as much anymore, either. Best Buy ( BBY) started clearing out low-margin DVD and Blu-ray racks in favor of high-rolling Samsung and Apple ( AAPL) mini stores. DVD and Blu-ray discs have been rendered impulse-item afterthoughts at big-box stores and supermarkets and tack-on items for free shipping at online retailers. Amazon ( AMZN), Apple's iTunes and Wal-Mart's ( WMT) Vudu all sell digital copies, sure, but they also have rentals at a quarter of the price of a new copy that users can watch at any time without cluttering up the joint.

That's throwing the whole industry into chaos, since studios used to be able to estimate just how much home video would factor into their total sales. With that number now resembling a giant question mark, especially for products that aren't as safe a bet as big-budget superhero blockbusters or computer-animated kids movies usually are, Hollywood may be less inclined to take chances.

That doesn't just mean they'll pass on smaller projects or let more esoteric films head straight to streaming or on-demand. It also means they won't risk having you see their premium products for a dime less than the industry average ticket price. Later this year, all films will be released in digital formats only. Film is out, which means drive-ins and small independent and second-run theaters will have to shell out six figures for upgrades or shut down entirely.

The number of theaters in America has already decreased from 7,744 in 1995 to 5,697 in 2011, according to the National Association of Theater Owners. At the same time, the number of movie screens across the country has increased to 39,580 from 27,843 as big theater companies including Regal Entertainment ( REG), Cinemark ( CNK) and Carmike ( CKEC) build larger multiplexes and consolidate power.

Think you can wait them out until their films appear on Netflix ( NFLX), Amazon Prime or Verizon's ( VZ) Redbox streaming services? Just remember who holds the keys to the content. Disney and DreamWorks Animation ( DWA) are playing ball, but Time Warner ( TWX) pulled a bunch of movies off of Netflix a few months ago to feed its own Warner Archive Instant streaming service. Just as moviegoers used to sit through previews of Weekend At Bernie's and Legal Eagles and declare them "rentals," today's moviegoers weigh whether to stream it or skip it.

The studios want all of those back doors closed, and it's the moviegoing public that inevitably pays for the industry's inability to keep up. Even as the total U.S. box office gross rose from $4.9 billion in 1992 to $10.8 billion last year and the number of films released in theaters climbed to 660 from 480, studios and their parent companies seem just fine with raising the bar for admission and forcing even more customers out of the theaters.

Spielberg and Lucas may have birthed the monstrous blockbusters that are devouring the movie industry with each successive flop, but even they see how this is all going to end badly. When imagination and higher concepts are replaced by cynicism and low expectation, it's no longer entertainment -- it's car sales. How can studios get you into big-budget remakes and sequels you don't want to see? Maybe they can't, and that should worry them more than $3 showings of Iron Man 3 and Mission: Impossible marathons on Netflix.

-- Written by Jason Notte in Portland, Ore.

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Jason Notte is a reporter for TheStreet. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, the Boston Phoenix, the Metro newspaper and the Colorado Springs Independent. He previously served as the political and global affairs editor for Metro U.S., layout editor for Boston Now, assistant news editor for the Herald News of West Paterson, N.J., editor of Go Out! Magazine in Hoboken, N.J., and copy editor and lifestyle editor at the Jersey Journal in Jersey City, N.J.

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