Despite a highly publicized drop in movie-going in 1985, media analyst Paul Kagan predicts that studios will enjoy a 25 percent jump in 1986 revenue to $6.7 billion, spurred largely by the booming home-video business.
Kagan, a Carmel, Calif.-based consultant and a well-known newsletter publisher in the cable-television, broadcasting and home-video fields, said the studios have averaged a 15 percent 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 percent to $640 million); domestic home video (up 689 percent to $1.5 billion) and pay television (up 180 percent to $700 million).
Only the business of selling motion pictures to network television has declined since 1980, down 43 percent to $200 million in 1985, the analyst said.
Revenue from the most traditional form of distribution -- motion picture theaters -- increased 38 percent during the five-year period in the United States and Canada to $1.52 billion in 1985, even though domestic box-office ticket sales declined an estimated 5 percent in 1985, Kagan said.
He estimated that 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." He asserted that the studios "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.