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Oscars Highlight Shifting Industry Landscape

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by Devin McGinley Analyst
Feb 27 2018

Although the Movie and Video Production industry is undergoing a period of tumultuous change, the Academy Awards has remained Hollywood’s biggest night for a reason. Amid fierce box-office competition, a prestige nomination can renew interest in a film’s remaining theatrical run; according to online ticket vendor Fandango, best picture contenders this year received as much as a 241.0% post-nomination bump at theaters. Even after the ceremony, producers leverage their Oscar wins in distribution deals years down the line. Yet, this year’s awards show may be more notable for the financial successes it overlooks, and for the growing distance between the winners represented on stage at Dolby Theatre and the champions at the box office.

Critics vs. consumers

For the 82nd Academy Awards (which aired in March 2010), the Academy expanded its best picture category beyond its traditional five-nominee lineup, in a bid to include more films seen by the average consumer. It worked initially; that year’s best picture slate accounted for 16.1% of 2009’s total domestic box office. However, the gulf between critics and consumers has since continued to widen, and this year’s best picture nominees have the lowest average inflation-adjusted gross as well as the slimmest box office share of any year since the category was expanded. It’s also the second consecutive year that no top-ten film at the previous year’s box office is represented. The Movie and Video Production industryhas fared relatively well in recent years, achieving annualized revenue growth of 2.2% from 2012 to 2017. But the industry’s premier awards night features few of the productions that actually drive its business.

Hollywood is currently in the thralls of the blockbuster. According to IBISWorld, the Movie and Video Production industry generates 69.2% of its revenue from action, adventure and thriller movies that tend to attract more big-screen viewers, with dwindling shares for dramas and comedies. Studios have become more risk-averse, preferring to produce more surefire films based on established properties. Under the traditional Hollywood model, the blockbuster subsidized the distribution of arthouse flicks whose critical and commercial reception was far less predictable. However, blockbusters have increasingly become the industry’s core business. Revenue has become more concentrated among the top films at the box office; over the past three years, they have accounted for 34.4% of gross ticket sales, compared with 27.5% over the past five years. Although Academy voters and critics continue to elevate smaller, often independent productions, the survival of Hollywood’s major players increasingly hinges on sequels and big-budget action films.

oscars graph

Doubling down

The Movie and Video Production industry grew healthily from 2012 to 2017 despite a 1.1% annualized decline in inflation-adjusted box office revenue, illustrating the increasing importance of distribution deals and streaming arrangements following a film’s theatrical window. Moreover, declining box office receipts have reinforced Hollywood’s focus on the blockbuster, since it has made competition among major studios something of a zero-sum game to attract limited consumer dollars. These two trends are encapsulated by Disney’s proposed acquisition of 21st Century Fox, which would create a truly dominant industry player with a market share that may reach as high as 36.2%. The combined conglomerate will be better able to absorb the risk of a box office flop, and also better positioned to monetize its greatest successes through merchandising and other ancillary revenue streams. Much like its earlier purchase of Marvel Studios, Disney’s merger with Fox will set the company up with a steady pipeline of blockbuster entertainment due to its broad portfolio of intellectual property. It could also bolster the company’s planned in-house streaming platform with an extensive original content library that will rival any existing streaming service. The major move into streaming by an incumbent Hollywood player is a harbinger for where the industry is headed.

Vying for prestige

However, if the Academy Awards overlook the most salient film industry trends, they nevertheless highlight the power of entrenched, traditional Hollywood players against the upheavals of the digital age. Both Netflix and Amazon have poured billions into acquiring original content and inking deals with top on- and off-screen talent, but only Amazon has so far garnered statues for a narrative feature film, with 2017’s best actor and original screenplay awards going to its Manchester by the Sea. While Netflix has earned four nominations for its feature Mudbound this year, it has had a tougher climb due to the company’s insistence on day-and-date release, by which it makes its films available to stream simultaneous with its awards-qualifying run in theaters. The Academy of Motion Picture Arts and Sciences, which sponsors the Oscars, is essentially a trade group for the film industry invested in protecting its traditional distribution model; accordingly, films released digitally first are ineligible for the Academy Awards. This has produced contradictory trends: As traditional studios move into streaming, streaming services such as Netflix have pushed their films through the traditional distribution model.

oscars canva

Since traditional studios have realized the competitive potential of Netflix and Amazon, they have slowly begun clawing back their content. Disney, for instance, plans to cease distribution deals on new titles with Netflix beginning in 2019, concurrent with the launch of its own streaming platform. With the lines between production and distribution thoroughly blurred, streaming platforms will no longer be able to rely on third-party content, and are aggressively pursuing awards and the associated prestige in a bid to attract top talent. As theatrical distribution steadily shifts to focus on blockbusters, a niche may emerge for standalone streaming services to produce the artier films that typically win awards. In this sense, although the Oscars may not say much about how the film industry’s recent past or present, they will potentially speak volumes about its future.



Edited by Sean Egan. Designed by Emily Lidstone.