PESTEL Analysis of the Movie Theatre Industry

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The first record of movie theater activities began in the late 1700s, although the “viewings” were called magic lanterns and depicted hand-drawn images. Now you can grab a friend or two and pop into the local theatre, watch the latest films with a beer,  experience it in 3D or 4D, if you so choose. In some locations, you can watch in 3D or 4D — moving chairs included.

Unfortunately, the movie theatre attendance is down. Ticket and concession prices are up. The reasons are detailed within this PESTEL Analysis of the Movie Theatre Industry. Here, you’ll learn how six factors — political, economic, sociocultural, technological, environmental, and legal — are impacting this industry.

Political factors: A rocky relationship between the biggest foreign market and the USA

An entertainment standstill

Hollywood has its eye set on Chinese’s broadening film selection, but the trade war between China and the United States may impact that acquisition. If this remains the case, Hollywood won’t gain access to the increased revenue-sharing of these foreign films.

China remains tentative about any sort of partnership as they expand their investigation into the alleged tax evasion of entertainment companies. The relationship between both countries is rocky, which can impact the exporting and importing of foreign films.

Economic factors: Lack of profits attributed to cheaper competitive options

Skyrocketing ticket prices

Movie tickets are expensive, but there’s a good reason for that. Owners of the theatre only get 30% of ticket profits — the rest goes to the studio that created the film. For that reason, ticket prices keep rising. Yet, theatres can’t last long on such a small percentage of profits. That’s why theatres offer a variety of concessions — everything from generic popcorn to fancy beers.

A brand new movie experience

Some theatres are going a step further. Rather than just varying concession options, they’re building restaurants into the location. AMC Theaters has already done this, and now offers dessert options like ice cream and yogurt. They’ve adopted comfier chairs like recliners too. Hopefully, these changes will give patrons an added reason to come. If it’s successful, we’ll likely see other smaller theatre companies add more food choices and nicer chairs.

Cheaper to stay home and stream the latest movies

Movie theatre profits are fighting with convenience. We have many entertainment options now: Flat screen TVs, video game consoles, surround sound speakers, and streaming services. The monthly fee of any general streaming services is the same price as a single movie ticket. Clearly, we can easily be entertained at home. It’s cheaper. More comfortable even.

Sociocultural factors: Why attendance is down

Lowest attendance records

Less people are going to the theatre — in fact, in 2015, box office attendance hit a record low. The reason can be tied to streaming services — like Netflix and Hulu — and the type of movies coming out lately: A combination of reboots, live-action remakes, and franchise films. Still, that hasn’t stopped everyone from going to the movie theatre; it still gives you an experience like no other.

A unique experience you can’t get at home

For instance, no matter how big our flat screens are, they can’t compete with the sheer enormity of theatre screens. When you’re sitting in the darkened theatre, the size sweeps you in. You’re engulfed in the images and sounds. It’s a completely different atmosphere than watching a movie at home, where you can pause at any time or play on your phone at will.

Watching a movie in the theatre with a dozen strangers changes how you perceive the movie. When they laugh, you’ll laugh too. If they gasp, you’ll feel the tension. If the theatre is completely silent, the intensity is felt by every viewer. It’s an odd bonding experience, but one we enjoy every now and then.

Technological factors: New equipment for alternative content

Experience movies as if you’re there! Kind of…

You can do more than passively watch movies in theatres. Many theatres offer 4D viewings, in which you watch the movie but your chair moves too. You’ll feel gushes of wind against your face, spritzes of water from above, and changes in scent — all depending on what’s happening on screen. It’s best for action movies with lots of movement, loudness, and intense stunts.

Rent the room for game tournaments

You could participate in a video game tournament or rent out the movie room for birthday parties. The parties are expensive for just a few short hours. But what child wouldn’t love having an entire theatre to themselves? As for the tournaments, hosts rent out the room and set up gaming consoles to connect to the large movie screen.

Bringing VR to the big screen

Although not quite ready for massive public use, virtual reality (VR) will take the movie viewing experience another step into the future. VR has run into many bumps to reach mainstream audiences — the lack of quality content and expensive headsets being the biggest obstacles — Hollywood is still adapting films to VR anyway. Some movie theatres have already adopted chairs with Oculus Rift technology attached. Tests are being carried out but nothing permanent quite yet.

Environmental factors: Lights, solar panels, and natural popcorn bags

The easy ways for theatres to be eco-friendly.

Movie theatres can easily become more eco-friendly by adopting LED lighting. Compared to regular bulbs, LED lighting can save between 50-60% of energy. Some theatres are also installing solar panels on the roof of the building, using popcorn bags of natural fibers, and proper waste management. All of these things are better for the environment and don’t affect the quality of the theatre.

Legal factors: A fight with the ADA

Lawsuits: Closed captions and disabled discrimination

Several theatres across the United States had discrimination lawsuits against them. The lawsuits document the lack of closed captioning movies options and accommodations for disabled patrons.

According to the Americans with Disabilities Act (ADA), the theatres must offer adequate equipment for patrons with disabilities. Now, theatres must have the necessary equipment, notify patrons of this equipment, and have available staff to assist with this equipment before, during, and after a movie viewing.

PESTEL Analysis of the Movie Theatre Industry: Bottom Line

The movie theatre industry has come a long way over the last couple of years, but progress is at a standstill. Some locations allow for 4D viewings, allow renting the theatre for birthday parties or gaming tournaments, and swapped out the old chairs for comfier recliners. But many people are put off by the high ticket prices, especially when the cost of one ticket is the same as a monthly subscription to an online streaming service with many popular movies offered in the plan.

The industry must keep up with the newest technology, like VR, and see how these additions can improve the movie viewing experience. It’d also be beneficial for the theatres to find new methods of creating revenue rather than relying on expensive concessions.

Photo by Krists Luhaers