The Oscars Diversity Problem – Who’s to Blame?

It’s Oscar week and that means Vanity Fair parties, Russell Simmons’ All Def Movie Awards and numerous corporate and agency sponsored luncheons and receptions – culminating with the 88th Academy Awards this Sunday.  movie realFor the last couple of weeks much of the talk surrounding the Oscars hasn’t been around which movie will win best movie, but instead about the lack of minority representation in the top four category nominations. The media has made sure we knew who was boycotting the telecast and giving us their thoughts on what Chris Rock, the host of this year’s Academy Awards, should say on the topic.

Throughout these discussions the Academy of Motion Picture Arts and Sciences has received a lot of flak. The Academy responded by changing their membership and voting policies. And many industry insiders have moved the discussion and blame from the Academy to the movie studios. Question. Are the movie studios to blame? If their goal is to make as much money as they can from each movie release by mitigating risk and taking what they consider safe bets – franchise films, sequels and remakes – are they to blame for a lack of diversity in Hollywood? Well, I am a commercial real estate appraiser so I can’t say with a fact that they are to blame. But, I do believe that real change in what the major studios produce likely won’t happen until the movie industry experiences a major downturn. As we saw with network television, low ratings led to the networks being more adventurous with their programming. And the result, was more diverse shows that better reflected the viewing audience.

At the Feasibility Research Group (FRG) we have appraised many specialty properties from grand performance theaters to small town community theaters, and in doing, so we have learned a great deal about the movie theater industry. According to the National Association of Theater Owners (NATO) there are 5,375 indoor movie theaters and 39,579 indoor screens. The movie theater business is not an easy business and it’s even harder for the small, often four screens or less, neighborhood movie theater.

NATO projects that 750-1,000 of these small theaters will go dark. The blame for the closing of these small movie theaters can be attributed to the rise in video on demand, rising ticket prices, struggling small towns and once again movie studios. In the past couple of years’ movie studios have mandated a change from the 35mm film platter system which has dominated the industry for over 100 years to new a digital system. The change to the digital format allows for improved picture quality, the ability to view 3-D movies and a host of other upgrades that enhance the movie viewing experience. As well, the change results in significant savings for the movie studios, as it costs approximately $1,500 to print and ship a 35mm print and only $150 to send a digital film. However, for the movie theater owner this change is a significant increase in cost, as each screen conversion cost between $60,000-$75,000 for a minimum cost of ~$240,000 for a small four screen theater. A cost many small theaters simply cannot afford.

Are these simply a sign of the times, and the days of the neighborhood movie theater are gone? I say no. The neighborhood theater is a key part of the community, often serving as a community gathering place. To continue to exist many movie theater owners have turned to crowd funding sources like Kickstarter to help them raise funds for the conversion. Others are seeking to maximize revenue by fully utilizing their theaters, by showing second run movies and renting out the space for events during non-peak hours.

And others are being even more creative. Movie Heroes is a subscription service for movie theaters. They started by getting 3,000 people in a small Northern California town to contribute $20 per month for unlimited access to viewing of movies at their neighborhood movie theater. The subscription service saved a neighborhood movie theater, doubled the theater’s annual revenue and increased movie viewing attendance.

So who is to blame, is not the right question. The question is, what will we do about it? And like most industries, innovation is the key to survival. And that innovation has to come from all participants in the movie industry – the studios, investors, artists, distributors and the theater owners.