There is some debate as to the reasons why, but the bottom line is that 2005 was a bad year at the box office, in North America and around the world.

The slump hit hard in the summer blockbuster season, as box office revenues fell short of 2004 numbers for 19 straight weeks in North America, and some declared the beginning of the end of moviegoing as we know it. It was only by the saving graces of a strong holiday season led by The Chronicles of Narnia: The Lion, the Witch and the Wardrobe that by year-end the overall drop in North America ended up at only 6%.

It was worse in Canada specifically. Telefilm Canada reports that the 2005 B.O. fell to $831.3 million, down nearly 9% from 2004’s total, marking the third consecutive year of decline. For his part, industry consultant Howard Lichtman, president of strategic marketing consultancy firm Lightning Group, contests that figure. ‘I’m seeing a 7% decline – deeper than the States but not as deep as that,’ Lichtman says.

But there is nonetheless agreement that Canada’s slump outstripped that of the U.S., begging the questions why and what are local exhibitors doing to halt the slide?

Prognosticators warned this was in the cards, pointing to the DVD market and uber home-theater systems as the culprits, spawning a generation of cocooners. According to Lichtman, Canada has the highest DVD penetration rate of the measured worldwide market – just a hair higher than the U.S., with 77% of households packing the gear. DVD sales in Canada last year were US$2.6 billion, proportionately higher than in the U.S., with US$19.8 billion. So it all makes sense, right? Not necessarily.

‘It’s actually the people with the best equipment that also go to the most movies,’ says Lichtman. A recent Nielsen Entertainment/NRG study bears this out, indicating that those with the most high-tech gadgetry go out to the movies the most, at 8.2 per year on average.

The next theory, and the one that everyone does seem to agree on, is that we can blame Hollywood.

‘We attribute [the slump] directly to film product,’ says Pat Marshall, VP communications and investor relations at Cineplex Entertainment, which saw its B.O. slip 8.6% from 2004 to 2005. ‘When the product’s not there, the customers vote by not buying a ticket at the box office.’

At Cineplex, Canada’s largest theater chain with 64% of the market (1,269 screens at 129 theaters), it was the tentpoles that failed to deliver. To illustrate her point, Marshall cites that 2005’s third biggest earner, Wedding Crashers, generated $24 million in receipts, compared to $32 million for 2004’s number three, The Lord of the Rings: The Return of the King.

‘Some of the tentpole films were really disappointing last year, like The Island,’ says Marshall. ‘We had great expectations, and unfortunately it was a disappointment for us all.’

Some see 2004 as an anomaly. Just as a single dog can throw the B.O. off its game, surprise hits can also alter the landscape, as was the case in 2004 with The Passion of the Christ and Fahrenheit 9/11.

‘2004 was a massive year,’ says Dean Leland, VP marketing and media for Nova Scotia-based Empire Theatres, the country’s second biggest exhibitor with 403 screens in 54 theaters. ‘[2004 saw] some great blockbusters as well as performing midrange films. Was it that 2005 was bad, or was 2004 so good that it’s hard to compare those numbers?’

Leland concedes that, during the slump, Empire got a bit worried in the short term and tightened its belt.

‘You watch your expenses a little more closely and try to drive your revenue a little better’ by paying extra attention to details like the targeting of trailers and the placement of movie posters, he notes.

Still, when the fare’s not there, there’s only so much exhibitors can do.

‘Ellis [Jacob, Cineplex’s president and CEO] is often quoted as saying, ‘We set the table, we don’t serve the steak,” says Marshall. ‘But we do the best we can to maximize the opportunities.’

To that end, exhibitors have been working for some years to turn cinemas into ‘entertainment destinations.’ The average movie house is certainly a lot plusher, louder and more comfortable than it was a decade ago. Exhibitors have also hedged their bets by seeking out alternative sources of revenue, beaming in concerts and special events like wrestling, NHL hockey and concerts via satellite, and renting their cinemas out for corporate events – a small but growing part of the business.

Feeling bullish, Cineplex will open more locations this year (see sidebar) – one year after purchasing main rival Famous Players ­- and is embarking on new marketing initiatives.

‘Advertising now associated with our business is film-dominated, [focusing on] the content of the film itself,’ says Marshall. ‘We’re going to be putting advertising in place as to the entertainment experience of watching a film on the giant screen.’

Later this year, Cineplex will also roll out a customer loyalty program, she adds.

Overall, [exhibitors] agree that last year’s downturn is a tempest in a teapot.

‘Our business is very cyclical,’ says Leland. ‘We’re in it for the long haul.’

The cycle runs its course about every decade, says Lichtman, with smaller summer B.O. dips every three to four years, but the general trend remains positive. All have high hopes for this year’s release slate.

‘I think we have what will be the best May in history, with one phenomenal film after another,’ says Marshall. Mission: Impossible III, Poseidon, Over the Hedge and The Da Vinci Code all hit the screens in quick succession, followed later by X-Men: The Last Stand, Cars, Pirates of the Caribbean 2: Dead Man’s Chest and Superman Returns.

And with Ice Age: The Meltdown’s boffo North American opening weekend B.O. of US$68 million, exhibitors are already breathing easier.

‘It’s the biggest opening so far this year,’ says Leland. ‘That on the surface is great, but it also demonstrates that when the movie’s there and it strikes a chord, the moviegoers are there.’

www.cineplex.com

www.empiretheatres.com