Summer recently ended and with it finished the biggest season for the U.S. Box Office. This time period is generally considered to run between the first weekend of May and the end of Labor Day weekend. While this spans only a third of the year this summer season contributes close to half of the total annual U.S. box office. Unfortunately the amount of tickets sold this summer was the least since 1997. Based on total gross revenues however, this summer was above 2009 by a scant 0.2%. Comparing the entire year of 2010 so far to 2009 (up through the end of week 36) revenues are up a more decent 4%. The better cumulative performance is thanks mostly to Avatar, Alice in Wonderland and other movies that drew strong crowds during the first 17 weeks of the year.

The fact is that the time between January and May hold the greatest potential for growth given its lower historical performance. Double-digit year-over-year growth occured during the first 9 weeks of 2009 and again during the adjoining 7 week “Spring” period of 2010. Hollywood has been slowly and steadily releasing more bigger budget titles during this period, and over the next five years there may be a smaller difference between the business generated here and during the summer season.

Still, the summer is where the action is and this summer also had some high expectations to live up. Just two years ago The Dark Knight was released (see the large spike during week 29 of 2008) and made the biggest opening weekend of all time. There were also strong titles during the summer 2009 like of X-Men Origins: Wolverine and Star Trek which provided a strong start to the season (note the large spikes around $200 million between weeks 18 and 21 of 2009). In comparison the 2010 summer had a very poor start, puncuated by the worst Memorial Day weekend in 15 years (note week 23 of 2010 on the graph for the complete aftermath of that debacle).

I believe that this pitiful performance over was due to the low-quality of films released that weekend: Sex and the City 2 and Prince of Persia: The Sands of Time have already faded from memory if not from their studios’ balance sheets. I still think that if Fox missed a big opportunity by not releasing The A-Team, a underrated action movie with a recognized brand on Memorial Day weekend- “four soldiers of fortune” is about as appropriate as it gets. I guess research indicated that B.A. Barracus wouldn’t stand up to Carry’s fanclub and videogamers. The real challenge for the studios is to drive a low-quality movie in front of bad reviews which are gaining more steam every day from internet chatter (site reviews, Facebook comments, bad Tweets, etc.). It’s so easy to get word-of-mouth circulating these days that I wonder how a studio can market against it.

For now the safer bet may be just to push releases towards the outer edges of summer and harboring only the strongest titles during Memorial Day and Labor Day weekends. The tougher solution would be to fixing bad titles during production instead of during marketing.

For the past few years the home video industry has been undergoing some traumatic changes. Although there was an almost seamless transition from the VHS to the DVD format, the shift to a high definition disc format has been stifled as a result of the format battle between HD and Blue-Ray. It’s also possible that consumers haven’t been convinced by a high-definition format will bring significant new benefits. In any case, it seems that the overall market has several challenges ahead.

Also while DVD sales grew strongly between 1999 and 2006, they have been dropped since then. During the same period DVD rentals grew at a slower rate but have plateaued around $7.5 billion during the past three years. Consumers are simply buying less discs, resulting in a greater importance for the rental segment.

This shift towards rentals may be led by the greater convenience of innovative subscription services like Netflix, and by lower priced rental options, as in the case of kiosks like Redbox that charge only $1 per rental. Since a kiosk requires a lower overhead cost, Redbox can offer rentals at $3 less than a video store. With its low price point and well placed distribution network of 18,000 kiosks, many at Wallmarts, Redbox has raised its share of the DVD rental market from 2.3% to 9% during the past year. This would be approximately half of the kiosk DVD business, based on figures from an NPD study. NPD also estimates that kiosks will grow to a 30% market share during 2010.

Unsurprisingly Redbox is seen as a threat both by Blockbuster, whose second quarter same store sales fell 18% this year, and by many production studios (although not Dreamworks) who see their DVD revenues flattening. In response Blockbuster is planning to open 10,000 kiosks over the next year and several movie studios have blocked Redbox from offering new releases for 28 days. This story is far from over since it remains to be seen how other factors like online video and VOD services will come into play but it does demonstrate that the DVD rental market while seemingly mature is far from settled.

CrunchBase Information on Redbox

According to a Variety article that I commented on yesterday, during the past four years new sources of funding like private equity money have created a ‘surplus of movies’ that are forcing Hollywood to release ‘heavyweight’ movies across a wider spectrum of dates, other than on just around Easter, summer and the year-end holidays. During the past five years the biggest budget releases have normally been focused on these dates, but higher budget ceilings are slowly creeping up around other months.

The months of May, June and December stand out as being the points of highest investment. The three highest spikes in the graph are in May 2007, November 2008 and December 2009, respectively for Spider-Man 3 ($258 million), Quantum of Solace ($230 million) and Avatar ($250 million). August  was slow before 2007, before it was considered part of the summer blockbuster season.

Looking at the first quarter, with the exception of Astérix aux jeux Olimpiques in 2008, January held budgets below $70 million. In fact the last time Hollywood launched a January release with greater than a $75 million budget was in 2000 with Fantasia 2000. This February no studio released a major picture. March has seen the most steady rise, reaching $130 million this year with Watchmen. Inversely, April has been falling, perhaps since studios prefer to delay big releases until May.

Based on the extraordinary box office performance during the first quarter of 2009, perhaps studios will overcome their fear and place more blockbusters there in the future.