U.S.

Theatrical Market: 2005 Statistics

MPA Worldwide Market Research & Analysis

2005 Motion Picture Industry

The following document provides context and empirical data with respect to box office in 2005, a topic which provoked much dialogue throughout the year. In 2005, total domestic box office remained near $9 billion, a barrier broken in 2002 for the first time. Global box office remained steady at over $23 billion, just shy of the all time high in 2004 of $25 billion and 46% higher than the 2000 mark of $16 billion. U.S. theater admissions decreased 8.7% in 2005 to 1.4 billion. The number of movies released remains on a growth trajectory, with total releases topping another all time high of 563 versus 528 in 2004, growth of 7%. New releases by the major motion picture studios (MPAA members) grossed an average of $37 million in 2005, an increase of 7% over the past five years. A major component of the annual box office was the performance of blockbusters, which remained comparable to prior years in total box office. A new all time high was set in 2005, with eight movies grossing over $200 million, three more than in 2004, and five more than 2000, a great milestone for the industry.

MPA Worldwide Market Research & Analysis

2005 Motion Picture Industry

Research conducted by Nielsen Entertainment/NRG in August of 2005 found that an overwhelming 81% of moviegoers who saw at least one movie in 2005 believed the experience was one of time and money well spent, versus the 15% who preferred watching on DVD and the 4% who preferred they had not seen a movie. Four in ten of these moviegoers plan to buy the last movie they saw, with more than half of them making this decision immediately after seeing the movie. Consistent with past years, PG-13 films comprised the majority of top grossers for the industry, with PG and PG-13 films accounting for 85% of 2005s top 20 films. Average theatrical costs remained in line with 2004, and below the $100 million peak of 2003, this in spite of increasing marketing costs of 5.2%. For MPAA member company subsidiaries/affiliates, theatrical costs declined while marketing costs increased by 33%, including increases in overall advertising expenditures, less the cost of prints. Technology continues to provide new opportunities for the industry. The analysis conducted by Nielsen Entertainment/NRG indicated that those moviegoers who owned or subscribed to four or more home technologies (e.g. DVR service, large television, DVD player, VOD) were actually more avid moviegoers, seeing an average of two movies more per year than the moviegoer who owned or subscribed to fewer than four.

MPA Worldwide Market Research & Analysis

U.S. Box Office Has Held Steady

For the fourth straight year, domestic cumulative box office from all studios continues to hold near $9 billion.
U.S. Box Office (Billions)

$9.52 $7.66 $8.41

$9.49

$9.54

$8.99

2000
Source: MPAA

2001

2002

2003

2004

2005
4

MPA Worldwide Market Research & Analysis

Worldwide Box Office Has Held Steady

Worldwide box office, although down 7.9% from 2004, shows a 46% growth over 2000.
Worldwide Box Office (Billions)

$25.23 $19.76 $15.92 $16.96 $20.34

$23.24

2000
Source: MPAA

2001

2002

2003

2004

2005
5
5

MPA Worldwide Market Research & Analysis

U.S. Admissions
Theater admissions decreased 8.7% in the U.S. in 2005.
U.S. Admissions (Billions)

1.64 1.42 1.49

1.57

1.54 1.40

2000
Source: MPAA

2001

2002

2003

2004

2005
6

MPA Worldwide Market Research & Analysis

Industry Comparisons - Entertainment Options

Movies drew more people than theme parks and sports in 2005.

2005: Admissions/Attendance Comparison (Millions)

1,402.5

NHL* 20.3
NFL 17.5

334.0 134.5

NBA 20.5

MLB 76.0

Movies

Theme Parks

Sports

Sports

Source: MPAA, PriceWaterhouseCoopers

* 2004 data used for NHL due to cancellation of 04-05 season.

MPA Worldwide Market Research & Analysis

U.S. Box Office: Blockbusters Thrived

For the full calendar year 2005, 8 films grossed over $200 million compared to only 5 films in 2004. However, movies below the $200 million mark under-performed relative to 2004.

Number of films breaking 50 million to 200 million Benchmarks

Year of Release Box Office Range

200 Million & Over 100 to 199 Million 50 to 99 Million

2005
8 12 36

2004
5 18 41

Source: MPAA

MPA Worldwide Market Research & Analysis

U.S. Box Office: $200 Million Films

In the Summer of 2005, box office top grossers were comparable with prior years; however, movies below the top tier underperformed relative to 2003 and 2004.

Top Top 30 Grossing Grossing Summer Summer Movies Movies

AVERAGE CUMULATIVE BOX OFFICE (millions)

TOP 10

MIDDLE 10 BOTTOM 10

Source: Nielsen Entertainment/NRG

MPA Worldwide Market Research & Analysis

Films Released in the U.S.

The total new films released in 2005 increased by 5.6% from 2004 after a surge in new releases of 13.3% from 2003 to 2004.

Total

New Releases

Reissued

528 483 462 411 370 466 449 473 459

563 520

549

41

21

17

14

14

1995
Source: MPAA

2001

2002

2003

2004

2005

MPA Worldwide Market Research & Analysis

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Films Released in the U.S.

The total number of all films released in 2005 increased 7%. MPAA new releases grossed an average of $37 million an increase of 7% over the past five years.
Average Box Office of New Releases Year 2005 2004 2003 2002 2001 All New Releases $15.4 20.0 20.7 21.2 18.2 MPAA New Releases $37.3 34.6 41.6 32.8 34.8

Feature Films Released in the U.S.

New Films All Other Total New MPAA Distributors Releases 194 355 549 198 322 520 194 265 459 220 229 449 188 274 462 212 158 370 Reissued Films All Other Total MPAA Distributors Reissues 4 10 14 1 7 8 4 10 14 5 12 17 8 13 21 22 19 41
11 11

Source: MPAA

Year 2005 2004 2003 2002 2001 1995

MPA Worldwide Market Research & Analysis

Ratings
In 2005, 12 of the top 20 films were rated PG-13. PG and PG-13 films account for 85% of 2005s top 20 films. 2005 Top 20 Grossing Films
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Title Star Wars: Ep. III Revenge of the Sith Harry Potter and the Goblet of Fire The Chronicles of Narnia War of the Worlds King Kong Wedding Crashers Charlie and the Chocolate Factory Batman Begins Madagascar Mr. and Mrs. Smith Hitch The Longest Yard Fantastic Four Chicken Little Robots Walk the Line The Pacifier Fun With Dick and Jane The 40 Year-Old Virgin Flightplan Distributor Fox Warner Bros. Buena Vista Paramount Universal New Line Warner Bros. Warner Bros. Dreamworks Fox Sony Paramount Fox Buena Vista Fox Fox Buena Vista Sony Universal Buena Vista Box Office (USD MM) $380.3 289.2 288.8 234.3 216.9 209.2 206.5 205.3 193.2 186.3 177.8 158.1 154.7 134.8 128.2 118.2 113.1 110.3 109.4 89.7 Rating PG-13 PG-13 PG PG-13 PG-13 R PG PG-13 PG PG-13 PG-13 PG-13 PG-13 G PG PG-13 PG PG-13 R PG-13

2005 Top 20 Films by Rating

R 10% G 5% PG 25%

2 12

1 5

PG-13 60%

Year 2005 2004 2003 2002 2001

Top 20 Grossing G PG PG-13 5% 25% 60% 5% 25% 55% 5% 15% 60% 5% 30% 65% 10% 20% 55%

R 10% 15% 20% 0% 15%

Source: MPAA

MPA Worldwide Market Research & Analysis

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Ratings
Since 1968, 5 of the 10 top grossing films have been PG-13, 4 PG and 1 R. Top Grossing Films by Rating 1968 to 2005 Percent of films by Rating 1968 to 2005
R 58%
Rank 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Title Finding Nemo The Lion King Monsters, Inc. Toy Story 2 Aladdin Star Wars Shrek 2 E.T. Star Wars: Phantom Menace Harry Potter: Sorcerer's Stone Distributor Buena Vista Buena Vista Buena Vista Buena Vista Buena Vista Fox DreamWorks Universal Fox Warner Bros. Box Office (USD MMl) 339.7 328.5 255.9 245.9 217.4 461.0 436.7 435.0 431.1 317.6 600.8 403.7 380.2 377.0 373.4 370.3 281.5 234.8 232.7 216.2 Rating G G G G G PG PG PG PG PG PG-13 PG-13 PG-13 PG-13 PG-13 R R R R R Release Date May-03 Jun-94 Nov-01 Nov-99 Nov-92 May-77 May-04 Jun-82 May-99 Nov-01 Dec-97 May-02 May-05 Dec-03 Jun-04 Feb-04 May-03 Dec-84 Dec-73 Jul-98

PG-13 12%

PG 21%

G NC-17 7% 2%

Titanic Paramount Spider-Man Sony Star Wars: Episode III Revenge of the Sith Fox Lord of the Rings: Return of the King New Line Spider-Man 2 Sony The Passion of the Christ The Matrix Reloaded Beverly Hills Cop The Exorcist Saving Private Ryan NewMarket Warner Bros. Paramount Warner Bros. DreamWorks

Source: Variety, MPAA

MPA Worldwide Market Research & Analysis

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MPAA Member Companies Average Theatrical Costs

Since 2003, average theatrical costs of MPAA member companies were down 6.5% overall. From 2004 to 2005, negative costs were down 3.8% and marketing costs increased by 5.2%. In absolute numbers, average negative and marketing costs hit their peak in 2003.
102.9 89.4
Marketing Costs Negative Costs
-0.6%

96.8

96.2 Despite a 4% decrease in negative costs, Member Company theatrical costs remained flat at a 1% decrease.

78.7
30.6

39.0

34.4

36.2

54.1
17.7

31.0

23.3
6.5 16.8 47.7 36.4

58.8

63.8

62.4

60.0

1985

1995

2001

2002

2003

2004

2005
Source: MPAA

MPA Worldwide Market Research & Analysis

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MPAA Member Subsidiary*/Affiliate Average Theatrical Costs

Average theatrical costs of member subsidiaries declined by 6.4%. Negative costs were down 19% while marketing costs increased by 33%.
61.6

Marketing Costs Negative Costs

45.2 41.0
11.2 9.5

14.7

40.4
11.4

-6.4.%

37.8

15.2 46.9 31.5 34.0 29.0 23.5

2001
Source: MPAA

2002

2003

2004

2005

* Subsidiaries include studio classics and specialty divisions such as Fox Searchlight, Miramax, New Line, Sony Pictures Classics, etc.

MPA Worldwide Market Research & Analysis

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MPAA Member Company Distribution of Advertising Costs by Media

The share of advertising expenditures among member companies on Television from 2004 to 2005 remained stable at roughly 36%, down from as high as 42.3% in 2001.
PERCENT OF TOTAL

Year Total $ Newspaper 2005 $32.36 12.7% 12.8 2004 30.61 13.9 2003 34.84 13.5 2002 27.31 13.1 2001 27.28

Network 23.2% 22.9 23.2 23.0 25.4

Spot TV 12.9% 13.3 15.7 17.6 16.9

Internet/ Online 2.6% 2.4 1.3 0.9 1.3

Trailers 4.4% 7.4 4.4 4.5 5.1

Other Media 22.3% 22.2 21.9 21.4 20.2

Other Non-Media 21.9% 19.0 19.5 19.1 17.9

Other Media includes:

Cable TV/Network TV Network Radio Spot Radio Magazines Billboards

Other NonMedia 22%

Newspaper 13% Network 23% Spot TV 13%

Other Non-Media includes:

Production/Creative Services Exhibitor Services Promotion & Publicity Market Research

Other Media 22%

Source: MPAA

MPA Worldwide Market Research & Analysis

Trailers Internet/ 4% Online 1%

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MPAA Member Company Subsidiary*/Affiliate Distribution of Advertising Costs by Media

Among member subsidiaries, the share of advertising expenditures on television increased from 33% in 2004 to 34.3% in 2005. Share of expenditures in newspaper declined 4.2%.
PERCENT OF TOTAL

Year 2005 2004 2003 2002 2001

Total $ Newspaper Network Spot TV $13.31 15.5% 21.7% 12.6% 10.13 19.7 19.9 13.1 12.80 18.6 20.9 7.3 9.76 22.0 25.7 5.6 8.29 18.6 42.8 3.2
Other Media includes:
Cable TV/Network TV Network Radio Spot Radio Magazines Billboards

Internet/ Online 2.5% 2.2 1.6 0.9 0.4

Trailers 5.6% 7.5 4.7 6.1 5.2

Other Media 23.3% 21.0 28.0 21.1 9.9

Other Non-Media 18.8% 16.7 19.0 18.6 19.9

Other NonMedia 19% Other Media 22% Trailers 6% Internet/ Online 1%

Newspaper 16% Network 21% Spot TV 13%

Other Non-Media includes:

Production/Creative Services Exhibitor Services Promotion & Publicity Source: MPAA Market Research
* Subsidiaries include studio classics and specialty divisions such as Fox Searchlight, Miramax, New Line, Sony Pictures Classics, etc.

MPA Worldwide Market Research & Analysis

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Technology complements Moviegoing in the U.S.

One in five moviegoers who report seeing at least one movie in 2005 own/subscribe to four or more entertainment technologies and those who do see two more movies on average per year than the low tech households, as of August 2005.
MOVIEGOERS WHO OWN OR SUBSCRIBE TO 4+ TECHNOLOGIES (20%) MOVIEGOERS WHO OWN OR SUBSCRIBE TO <4 TECHNOLOGIES (80%)

Avg. Movies/Yr = 8.2

Avg. Movies/Yr = 6.2

DVD Player Big Screen TV (35+) Home Theater Digital Cable Game System VOD Premium Channels PPV Satellite TV Recordable DVD Player DVR (TiVo, etc.) HDTV Plasma/LCD TV NetFlix

91% 82% 80% 74% 66% 66% 65% 65% 58% 51% 45% 44% 42% 39%

DVD Player Big Screen TV (35+) Home Theater Digital Cable Game System VOD Premium Channels PPV Satellite TV Recordable DVD Player DVR (TiVo, etc.) HDTV Plasma/LCD TV NetFlix

76% 21% 22% 30% 37% 14% 26% 18% 20% 26% 10% 10% 5% 12%
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MPA Worldwide Market Research & Analysis

Source: Nielsen Entertainment/NRG

U.S. Moviegoers Satisfied with Experience

The vast majority of moviegoers say that when they go out to see a movie, their overall theater experience is time and money well spent.

Satisfaction with theater experience at last movie

Source: Nielsen Entertainment/NRG

MPA Worldwide Market Research & Analysis

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Consumer Preferences
The majority of moviegoers feel that the theater offers the ultimate moviewatching experience.

What is the ultimate movie-watching experience?

Home 31%
Home 19% Home 29% Home 31% Home 36%

Home 24%

Home 35%

Theater 69%

Theater 81%

Theater 71%

Theater 69%

Theater 64%

Theater 76%

Theater 65%

TOTAL

M<25

M 25+

F<25

F 25+

Source: Nielsen Entertainment/NRG

Consumers F<25 who are going to MORE movies than last year

Consumers F 25+ who are going to LESS movies than last year

MPA Worldwide Market Research & Analysis

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Moviegoers are DVD consumers

For many moviegoers, its not either or. Four in ten moviegoers plan to buy the last movie they saw, with more than half of them making this decision immediately after seeing the movie. In other words, one-quarter of all moviegoers leave the theater already knowing they want to buy the title on DVD.
HOW SOON AFTER SEEING THE MOVIE DID YOU DECIDE TO BUY IT? PLAN TO BUY LAST MOVIE SEEN IN THEATER ON DVD

After the DVD was released Not immediately after the movie, but before the DVD was released

Immediately after seeing the movie

Source: Nielsen Entertainment/NRG

Rising to 61% among avid DVD buyers vs. 50% among less-frequent purchasers

MPA Worldwide Market Research & Analysis

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Appendix

MPA Worldwide Market Research & Analysis

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Box Office
Year 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
Source: MPAA

Box Office Gross (USD MM) $8,991.2 9,539.2 9,488.5 9,519.6 8,412.5 7,660.7 7,448.0 6,949.0 6,365.9 5,911.5 5,493.5 5,396.2 5,154.2 4,871.0 4,803.2 5,021.8 5,033.4 4,458.4 4,252.9 3,778.0 3,749.4

% Change Prev. Period 2005 vs. -5.7% 0.5 -5.7% (0.3) (5.2) 13.2 (5.6) 9.8 6.9 2.9 17.4 7.2 20.7 9.2 29.4 7.7 41.2 7.6 52.1 1.8 63.7 4.7 66.6 5.8 74.4 1.4 84.6 (4.4) 87.2 (0.2) 79.0 12.9 78.6 4.8 101.7 12.6 111.4 0.8 138.0 (0.4) 139.8

MPA Worldwide Market Research & Analysis

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Admissions
Year 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
Source: MPAA

Admissions 1,402.7 1,536.1 1,574.0 1,639.3 1,487.3 1,420.8 1,465.2 1,480.7 1,387.7 1,338.6 1,262.6 1,291.7 1,244.0 1,173.2 1,140.6 1,188.6 1,262.8 1,084.8 1,088.5 1,017.2 1,056.1

% Change Prev. Period 2005 vs. -8.7% -2.4 -8.7 -4.0 -10.9 10.2 -14.4 4.7 -5.7 -3.0 -1.3 -1.0 -4.3 6.7 -5.3 3.7 1.1 6.0 4.8 -2.3 11.1 3.8 8.6 6.0 12.8 2.9 19.6 -4.0 23.0 -5.9 18.0 16.4 11.1 -0.3 29.3 7.0 28.9 -3.7 37.9 -11.9 32.8
24 24

Note: 1989 to present based on NATO average ticket price

MPA Worldwide Market Research & Analysis

Average Annual Admissions Price

Year 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

% Change Avg. Annual Admission vs. Previous Period Price (USD) $6.41 3.2% 6.21 3.0 6.03 3.8 5.81 2.7 5.66 4.9 5.39 6.1 5.08 8.3 4.69 2.2 4.59 3.8 4.42 1.6 4.35 --

% Change CPI 3.4 3.3 1.9 2.4 1.6 3.4 2.7 1.6 1.7 3.3 2.5

Note: NATO average ticket price based on NSNB survey and reflects average price paid for all admissions to movie theaters, inclusive of first run, subsequent runs, senior citizens, children, and all special pricing.
Source: MPAA; Bureau of Labor Statistics

MPA Worldwide Market Research & Analysis

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Industry Comparisons - Entertainment Options

Going to the movies remains an affordable outing for most families -- with admission prices significantly lower than alternative entertainment options.

2005: Average National Ticket Price Comparison

2005 Admission Price (1 Ticket) 57.50 47.50 45.00 33.54 21.00 $6.41 2004

Event Football Game Basketball Game Hockey Game Theme Park Baseball Game Movie Ticket

Cost for Admission Cost for % Change Family of Price Family of 2005 vs. Four Four (1 Ticket) 2004 230.00 54.75 219.00 5.0% 190.00 46.00 184.00 3.3% 180.00 45.00 180.00 0.0% 134.16 32.85 131.40 2.1% 84.00 19.82 79.28 6.0% $25.64 $6.21 $24.84 3.2%

Source: PriceWaterhouseCoopers, MPAA

MPA Worldwide Market Research & Analysis

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