Although revenues have mostly continued growing since 1980, movie theatre attendance in the U.S. hit its peak in 2002 at 1.6 billion tickets. Netflix, which launched in 1997, didn’t take off until 2004-2005, when it was still a mail-order DVD business. Prime Video launched a year after that, in late 2006, but took—and many will still argue is currently still taking time—to put up meaningful numbers. Then the iPhone launched in 2007. Far from any single factor, all of these developments combined has led to a diminishing reliance on the movie theatre, now unseated by the TV and increasingly the smartphone. Going to a movie theatre today is reserved for blockbuster movies from Disney and a handful of other creative powerhouses, or for the small indie movies among coastal viewers. Movie theatres, once the default, are now the outlier. 

The same transformation has occurred within the retail industry if you substitute theatres for stores. People used to shop exclusively in stores, but the introduction of ecommerce, and more specifically Amazon, shifted behavior significantly so that the majority of new growth comes from ecommerce, not physical storefronts. Brick-and-mortar retail is still the vast majority of all retail sales, hovering around 85-90% depending on the estimate, but the growth rates of ecommerce will eat into this at increasing speeds, so much so that ecommerce will increasingly become the default in specific categories and move closer to parity with offline sales over time.   

The main reason that Amazon has been able to drive and profit from this shift is that it has run its retail business at either breakeven or a loss for most of its history, leveling the playing field for itself thanks to a diversified business structure—an advantage most of its competitors lack, considering that retail remains their main and only business. This trend is also happening in the entertainment space, as Amazon—and, on a much smaller scale, Apple—put forth their entertainment endeavors at no cost to the user, tacked on as a piece of a larger offering (Amazon Prime or Apple TV+). By centralizing multiple products and services under one ecosystem, as Amazon does, it can operate its entertainment business at a loss, bolstered by sales in other departments. 

These moves will challenge Netflix and other media-based companies that are competing for consumers’ attention—competing against a company that does not need to make money is a hard game to play. On the flipside, people value the things they pay for and it will be important to watch which companies can make a bigger impact and longer-lasting businesses by giving things away for free. 

While the dynamics of the entertainment and retail industries are somewhat unique, they overlap in a singular challenge—to compete for consumer attention and dollars. While defaults are shifting in both industries as the world’s largest companies dip their toes into both retail and entertainment, pillars of these industries that were previously taken for granted—that people see movies in theatres and buy products in stores, and that companies need to make money selling their products for a profit—will drive the shift away from these established norm at an even faster pace.