Home-Video Film Revenue Seen Topping Ticket Sales

Despite a highly publicized dip in movie-going in 1985, media analyst Paul Kagan predicted Tuesday that studios will enjoy a 25% jump in 1986 revenue to $6.7 billion, spurred largely by the booming home-video business.

Kagan, a Carmel-based consultant and a well-known newsletter publisher in the cable-television, broadcasting and home-video fields, said the studios have averaged a 15% gain in revenue over the past five years if all forms of film distribution are tallied.

He said the largest revenue gains in the past five years have been in foreign home video (up 753% to $640 million); domestic home video (up 689% to $1.5 billion) and pay television (up 180% to $700 million).

Only the business of selling motion pictures to network television has declined since 1980, down 43% to $200 million in 1985, the analyst said.

Revenue from the most traditional form of distribution, in motion picture theaters, increased 38% during the five-year period in the United States and Canada to $1.52 million in 1985, Kagan said, even though domestic box-office ticket sales declined an estimated 5% in 1985.

By Kagan’s estimates, 1985 domestic theatrical revenue of $1.52 billion still topped video revenue of $1.5 billion in the United States and Canada, but he predicted that domestic video revenue will surge ahead to $2.3 billion this year, versus $1.68 billion in 1986 theatrical rentals.

As had been widely predicted in the industry, home-video revenue of $2.1 billion surpassed theatrical rentals in 1985 for the first time on a worldwide basis, Kagan said.

Kagan cautioned that overall growth rates will slow after 1986, because of “a saturation of population by the VCR machines and stabilization of consumers’ tape usage.” The studios, Kagan said, “are going to have to learn to get people to consume more tapes.”

Kagan, said this is the first time he has attempted to tally the total revenue picture for film distributors from all exhibition sources.

“It does not behoove the studios to tell . . . people they do business with . . . how big their business is,” Kagan said in a telephone interview. He stopped short, however, of estimating which form of distribution has proved most profitable for the studios. “That’s a different study,” he said.

Kagan attributed the movie-going decline in 1985 to an absence of “middle of the road” box-office successes, which he defined as movies in the $50-million to $100-million range.