Movies occupy mindshare in the US well beyond the level usually associated with a $9 billion industry. Even when home video sales are added to these box office earnings for 2005, the entire industry sees revenues of less than $35 billion.
In an age of increasingly personalized and fragmented media exposure, movies promise shared cultural experiences; even though Americans no longer all head downtown on Saturday nights to see the same film, movies still form a core part of US cultural literacy, and the most-hyped North American awards show remains the Oscars.
Consumers also bring many movies into their homes after their theatrical runs, and the studios' movie marketing plays into these choices too. Spending on all forms of filmed entertainment in the US, including box office, home video, online rentals and digital streaming, reached $34.4 billion in 2005, and will reach $44.2 billion in 2010, according to the "Global Entertainment and Media Outlook: 2006-2010" report, published by PricewaterhouseCoopers in June.
Despite all this influence and spending, the movie industry's fortunes still ride on theatrical box office success. Although much more revenue comes from home video sales than box office receipts, it is success in theaters that delivers sales into the home with minimal new marketing outlay.
However, US box office revenues are at a plateau of sorts, having averaged $9.19 billion over the past five years, according to the Motion Picture Association of America (MPAA), and having actually dipped in 2005 by $550 million. Growth is likely, with PricewaterhouseCoopers and the MPAA projecting that US box office revenues will reach $11.1 billion in 2010.
This growth depends critically on attracting the frequent moviegoers who spend a rapidly growing portion of their free time on the Internet, and studios will have little choice but to step up their efforts to get the attention of this audience. As a result, the proportion of advertising spending that is devoted to online efforts by Hollywood studios will rise from 3% in 2006 to 8% in 2010.