Will This Holiday Tradition Be Around for Next Year, or Fade Away?

Thursday, November 26, 2020

I don’t know about you, but I can’t believe that we’re already at the end of November. It’s been an interesting year … with even more interesting markets. And consumer behaviors over the next few weeks are going to give a lot of insight into what we can expect heading into 2021.

I’ll admit, I like the convenience of getting my groceries delivered to my door. So, I haven’t even been out to see if stores are filled with people grabbing the turkey and all the fixings.

Regardless, it’s definitely going to be a different sort of week for most people.

There’s no need to wake up at the crack of dawn to stand in line for the Black Friday sales. Many stores have been offering them online already … and will probably continue to offer them all the way up until Christmas.

And as far as I can tell, only two movies are set to be released this week, compared to the 11 released Thanksgiving last year.

Needless to say, it’s been a tough year for movie theaters.

The Walt Disney Co. (NYSE: DIS) made the decision to push all of this year’s major releases not named “Mulan” to 2021. Universal also decided to delay its next “Fast and Furious” movie and “No Time to Die” will skip its planned fall release. All the while, Netflix, Inc. (Nasdaq: NFLX) and Hulu aren’t taking a break.

That said, the coronavirus can’t be completely held accountable for this bleak outlook on movie theaters. Attendance has been declining steadily since 2002 and even back in 2018, analysts were warning of the Netflix Revolution. It’s been clear for years that theaters would need to evolve or will disappear into the past. 

But just how bad has it gotten? Let’s check the Weiss Ratings.

Cinemark Holdings, Inc. (NYSE: CNK) operates 548 theatres in 41 states and 15 Latin American countries. Right now, it currently holds a “D” rating and has been in the “D” range since April.

Just last week, the company announced that they have worked out an agreement with Universal Studios. This agreement means that Cinemark theaters will have exclusive rights to show a film for the first three weekends following its premiere. If it does well, it will get another two weekends of exclusivity before Universal can monetize the movie as a streaming pay-per-view.

This could be an interesting model going forward. I’m not sure that people are going to want to wait three weeks to stream it at home, but at the same time that’s a lot shorter than we had to wait for something to be released to DVD.

Shares of Cinemark are currently down 53% since the beginning of the year. But this will be one to watch as we see this new agreement in action.

AMC Entertainment Holdings, Inc. (NYSE: AMC) operated approximately 1,000 theatres in the U.S. and internationally. It currently has a “D-” rating. This company has spent most of the past three years in the “D” range and shares are down 47% since the beginning of the year.

But, just like Cinemark, they are trying to adapt to the future.

Earlier this month, AMC announced the launch of private theatre rentals. This was following a four-week beta test that resulted in 110,000 contacts inquiring about a private rental. The rentals start at $99 and can range up to $349 for more popular newer releases.

That number of inquiries is impressive, but I’ll be watching to see if those turn into actual bookings … and more money for AMC.

Whatever ends up happening, it’s clear to both companies that they need to change their ways to compete. The latest home televisions are technically superior to theater screens. Most have a higher frame rate ... and when paired with the right surround sound and popcorn … the experience is quite similar.

Investors also have to remember that the eight days between Christmas and New Years can account to up to 10% of a theater’s total box office for the entire year. And, as of right now, four movies will be released Christmas Day, including the much-anticipated “Wonder Woman 1984”.

Unfortunately, for theaters, “Wonder Woman 1984” will be released simultaneously on HBO Max. But we really never know how people will react until then. I’m not the biggest action movie fan, but there is something special about seeing a superhero movie surrounded by fans in the theater.

Obviously, we’ll have to wait for the full year results from these companies. But, I’m anxious to see what kind of turnout the holidays will bring.  

Best,

Kelly Green

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