Box Office in Free Fall: How Low Can It Go?

By late evening on Dec. 9, the sense of defeat spreading through Hollywood was palpable. After solid Friday matinee attendance, the nighttime audience for New Year’s Eve had evaporated and the domestic box office was in trouble. Instead of opening to an expected $20 million, Garry Marshall‘s star-studded comedy topped out at $13 million, while Jonah Hill‘s The Sitter opened to less than $10 million, ringing in the worst overall frame in more than three years. What’s more, attendance for the first two weekends of December dipped to its lowest level since 9/11. After several record years, domestic box office trails 2010 by 4 percent.

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Studios insist they are not in panic mode, but budgets are being scrutinized with renewed ferocity. And if holiday entries in the Alvin and the Chipmunks, Sherlock Holmes and Mission: Impossible franchises underperform, there are sure to be repercussions. “If the box office doesn’t expand and we don’t do as much business as last Christmas, then we can talk,” says a studio exec. “It would be a mistake to start painting a doomsday scenario until then.”

Some execs believe the culprit is the product. “There just haven’t been that many compelling movies,” says one veteran exhibitor. But distribution execs also gripe that increased ticket prices are chasing away movie­goers, particularly students, who have vacated the multiplex this year. The average cost of a movie jumped in 2010 — coinciding with the 3D onslaught — to an all-time high of $7.89, up 5?percent from $7.50 in 2009. Now the average is $7.96. “We have messed up the price/value ratio. We need to make better movies and lower prices,” says another studio veteran.

A silver lining: 2012 is packed with mega-franchise entries including The Dark Knight Rises, The Amazing Spider-Man and The Hobbit: An Unexpected Journey as well as the 3D reissue of Titanic. A healthy number of event pics, including John Carter and The Hunger Games, also might help. Says one exec, “There hasn’t been a movie that has exceeded expectations in a long, long time.”