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Entertainment industry is evolving at a faster pace than ever before, panelists say

by Jason Rzucidlo

americajr@americajr.com

WATCH: Interview with John Fithian, CEO of the National Association of Theatre Owners

LOS ANGELES -- The entertainment business is changing right before our eyes. Movie theaters are switching from 35-mm film projectors to digital projectors. The effects of Netflix and RedBox are definitely having an impact on box office sales. Contracts, production incentives and liabilities were some of the other issues discussed at the 2014 USC Gould School of Law’s Institute on Entertainment Law and Business last Saturday in Los Angeles.

John Fithian, president and CEO of the National Association of Theatre Owners (NATO), was the first speaker in The Now and Future of Movie Theatres panel discussion. He said that box office sales are down only 4.2 percent for the year with sales up for the last six weeks in a row. Fithian made the argument that ticket prices are increasing at a slower rate than inflation. The president and CEO said that movie tickets cost $9.27 each in 1973, when adjusted for inflation. He said the average price of a movie ticket in the U.S. was $8.13 last year.

“We’re putting in big seats, bar services, restaurant services,” Fithian explained. “The atmosphere of going to the movies has improved. We’re looking at immersive audio, high dynamic range, 4D--The first one at Regal LA Live. We’ll continue to try it here. We did have a very bad summer. We suffered as a result of not enough movies. The number of big movies coming is declining. We’re still having a lot of big movies made. We think we’re the most affordable in town. The global market for is exploding in eastern Europe and China. It should be a really strong resurgence. Young adults are the most important We’re concerned about the drop off in 12-17 year. Hispanics make up the most movie goers in this country.”

The next panelist was Veronika Kwan Vandenberg, president of international distribution at Warner Bros. Pictures International. She said WB supports the investments made by movie theaters to make their buildings more luxurious. Warner Bros. International has brought in at least $2.5 billion for each of the last five years, with $3.14 billion in revenue last year. She said her movie studio has a terrific slate of films to come.

“The business has changed dramatically,” Kwan said. “China overtook Japan to be the top box office. They’re leaving everyone in the dust. Mexico is a big growth story for us. The United States and Australia are strong movie going cultures. Korea very strong this year with local films. We’ve seen huge growth in Russia. India is still a tough market with Bollywood films taking in 90 to 95 percent of the market. Multiplexes are being built in Brazil. Harry Potter has always been a strong franchise for us. The Transformers films have done well in Japan and Australia. The top 20 movies are all epic event movies. Big action does very well outside the U.S. Comedies are very tough internationally. They don’t translate to other countries. In the case of Ted, everybody thought that teddy bear was so cute with a foul mouth.”

Nicolas Gonda is the co-founder and CEO of Austin, Texas-based Tugg Inc. It is a web-platform that lets fans choose the movies that play at their local theaters. First, a consumer fills out a request form online. Then, the movie theater either approves or denies that request. If it is approved and enough tickets are sold before the deadline, the movie is shown and the fan who created the event gets 5 percent of the ticket sales. Tugg is a new way to simply boost attendance in movie theaters.

“We’re setting up an environment for collaborating with public in a safe way,” Gonda explained. “Word of mouth has the impact of 200 television ads. The general trend is to study who’s engaging and grow that success. Our average attendance is 150 people. That is 100 percent more turnout then before. We’re able to target underused space. This is all based not the trust factor. It can’t be bought.”

Entertainment industry legend Sir Howard Stringer was the keynote speaker. He told the crowd of attorneys and guests that his first job was answering phones at The Ed Sullivan Show. During his first week on the job, The Beatles showed up. Stringer worked as the executive producer of the CBS Evening News with Dan Rather from 1981 to 1984, when it was rated No. 1. He later went on to serve as President of CBS News from 1986 to 1988 and developed their news program, 48 Hours. Finally, Stringer wrapped up his 30-year career as president of the CBS network from 1988 to 1995. He recently joined the boards of directors for the BBC in London and Time Inc. in New York.

“We’re at a point in history where everything is speeding up,” Stringer said. “Change is constant. Nothing stands still. It took 35 years for Americans to have a TV and a radio. It took us six years to have a PC and just six months to get a phone. I’ve always embraced change. To move forward, you need to remember where you came from. You have to learn to look over your shoulder. I’ve never got a job because I deserved it. I was lucky to work at CBS. We had audiences in the 10’s of millions. It was probably the last time the White House watched TV. Sony was slow to respond to the digital world. Steve Jobs loved Sony’s hardware, but saw what we did wrong. Japan is powerless in the face of the changing world. Getting an idea out there is more important than perfection.”

I also attended the panel discussion, Music Festivals: From Woodstock to Coachella. Marc Geiger, co-founder of Lollapalooza and worldwide head of music at WME Entertainment, was the first speaker.

“Festival slots are high value and hard to get,” Geiger explained. “Major festivals pay $500,000 to $4 million per artist. Coachella is on the high end. A big headliner should be able to sell out an arena, a couple of Hollywood bowls. We do 3,500 festivals per year. You’re managing a city for a number of days. There are a lot of media rights issues. A lot of festivals are webcasts. Copyrights are not controllable. If time shifted, it falls on the record labels.”

The second panelist was Kevin Lyman, creator of the Vans Warped Tour and CEO of 4Fini. A few years ago, the event promoter decided to let parents into the Vans Warped Tour shows for free. Attendance jumped shortly after. Lyman said he is adding more bluegrass, hip hop and electronic dance music (EDM) artists to the Warped Tour.

“I’m booking bands on a two-year schedule,” said Kevin Lyman, creator of the Vans Warped Tour. “We do 42 shows in 50 days. It’s like a moving city. Warped is a lifestyle festival rather than a music festival. T-shirts and tickets are still a value. It’s about 50 cents per band. I have to get 7-figure sponsors to offset the expenditures. Journey stores carry our artists’ products in their stores. In terms of liability, everything that happens fall on us. Really the risk is on the fans. There’s got to be an assumption of risk if you go. We are connected with our fans everyday.”

John Boyle, chief growth officer at Insomniac, added: “SiriusXM broadcasts a lot of our festivals live. The Electric Daisy Carnival (EDC) has a $330 million economic impact in Vegas. When dealing with weather…what do we do? The radius clause is the ugliest issue we deal with.”

The entertainment business has gone through dozens of changes in the past year. Consumers have dropped cable and satellite services in favor of Netflix and RedBox. I’m excited to see what’s ahead when this conference returns in a year from now.

For more information about the USC Gould School of Law’s Institute on Entertainment Law and Business, visit http://weblaw.usc.edu.