No, Movie Theaters Are Not the Next Blockbuster
Even if you haven’t been paying close attention to the movie theater industry, it should come as no surprise that cinemas have had an extremely challenging time since the start of the coronavirus pandemic. Similarly, to cruise lines and restaurants, operations were brought to a near standstill in March of 2020. Even with restrictions in many states reduced or fully lifted, some consumers, at least for now, have remained wary. Even amid the initial releases of anticipated blockbusters like Marvel’s “Black Widow” and Warner Bros’ “Space Jam”, weekend box office sales in the United States are only slightly surpassing some of the worst weekends for the box office from 2019.
However, movie theater companies have remained vigilant in their efforts to outlast the pandemic, and many of the largest players have fared rather well, all things considered, up to this point. Cinemark Holdings (NYSE: CNK), for example, has managed to secure enough cash from moderate debt issuances to ensure they would remain liquid even with no sales in 2021 (Cinemark already had $114 million in sales in Q1, 2021). Similarly. AMC Entertainment Holdings (NYSE: AMC) raised close to $2.5 billion over the past 6 months amid the company’s leading role as one of the WallStreetBets “meme stock.” From an industry outlook, each box office release seems to outperform the last as more people return to theaters. Furthermore, increased adoption of COVID-19 vaccines has reduced the spread of the virus and its variants, reducing the probability of another lockdown.
Yet, despite these positive developments suggesting the movie theater industry is, as Cinemark CEO Mark Zoradi puts it, on the “road to recovery,” analyst sentiment remains very bearish on the movie theater industry. The primary factor behind this downtrodden sentiment is not fear of long-term lockdown or consumer fear of public entertainment complexes. Rather, it is one that has plagued theater outlooks for close to a decade: streaming. As millions were forced inside last year, Disney, At&T’s Warner Media, and other major movie studios pivoted their focuses to streaming services, allowing consumers to watch their content from the safety and comfort of their homes. Deals have been reached with cinemas to shorten theatrical windows, but the most concerning development has been studios’ choice to release movies either exclusively on their streaming services or alongside the theatrical release. Disney’s “Mulan,” for example, was released exclusively on Disney+ for an additional fee in September 2020, and the most recent Marvel movie, “Black Widow,” was released on streaming at the same time as theaters, earning $80 million at the domestic box office and $60 million via streaming. Meanwhile, Warner Bros. announced in December 2020 that they would release all of their 2021 films on HBO Max alongside the theatrical release, and the studio also announced just this week that they will release at least 10 of their 2022 films exclusively on HBO Max. These announcements have indicated that the increased competition of streaming services with traditional theater releases is likely to last for at least the next few years, if not permanently.
Such developments have led many analysts to write off theaters as a business of the past, destined to fade into history, similar to the movie relic that is Blockbuster Video Stores. While the coronavirus pandemic has put theaters in a less than ideal situation, causing both immediate chaos and catalyzing a long-term clash with streaming services, the suggestion that theaters are destined to fail still seems like quite a stretch. Not only have box office numbers steadily improved since theaters began to reopen, theaters, unlike Blockbuster or other failed retailers, offer an immersive experience coveted by moviegoers, as opposed to a merely outdated way of getting a product to consumers.
Improving Box Office Numbers
Despite the heightened competition with streaming services, Box office numbers have continued to improve as restrictions are lifted and more people received the COVID-19 vaccination. Major releases, including “A Quiet Place, Part II,” “F9,” “Black Widow,” and most recently “Space Jam: A New Legacy, ” all have had a better opening weekend than the last, with July’ weekend box office results now beginning to cross into pre-pandemic territory. Box office sales are still well below the opening weekends of “The Lion King” or “Frozen 2” from 2019, but the trends so far suggest demand for the theater remains. According to data intelligence company Morning Consult, 52% of US adults currently feel comfortable returning to the movies, including 63% of Gen Z adults—some of the youngest consumers—ready to return. Meanwhile, the average weekend box office sale for the first three weekends of July 2021 was just over $93 million, which equates to just over two-thirds of median box office sales in 2019.Taking into account only about half of all potential consumers are considered willing to attend the movies at this time—a statistic on the rise, up from 20% of consumers at the start of the year—consumer demand for theaters appears to be holding strong and maintains substantial future upside.
Source: Morning Consult
The reactions of those who have already visited a theater have been overwhelmingly positive. According to a Fandango survey, roughly 93% of respondents, all of which had made a recent ticket purchase, were satisfied with the experience. Meanwhile, 87% actually offered praise to the theater they visited for “making them feel safe in the wake of the COVID-19 pandemic” (USA Today). These initial positive experiences in the theater will likely motivate repeat visits and encourage others still hesitant to make their own return to the movies as the pandemic eventually wanes.
The Theater Is an “Experience”
A more qualitative analysis of the movie theater industry also helps to separate it from Blockbuster and similar business failures of the past. Blockbuster, a retailer of physical movie copies, was overtaken by Netflix and other streaming companies essentially because they provided the same end-service to consumers—watching a movie at home—in a far more convenient fashion. Either way, people were watching whatever movie they selected on their own TVs, but Netflix allowed people to have the same experience both cheaper and without the inconvenience of driving somewhere to pick up a copy of the movie.
In contrast, the theater, be it for movies, concerts, plays, or any other sort of entertainment, is a distinct and immersive experience all its own, diversifying it from what is provided by steaming services. The theatrical experience is also, as Melissa Kirsch of the New York Time eloquently puts it, one of “communal emotion.” Being able to laugh, cry, and hang on the edge of your seat alongside a group of total strangers is a wonderful thing about the movies, and has allowed them to endure far longer than the term “streaming” has even been in our societal lexicon. These distinctions help explain why theater, in some shape or form, has been a part of human civilization since at least the 6th century BCE. It also explains why so many people still wish to attend plays and live concerts despite high quality recordings of either available for a fraction of the price—it just isn’t the same as watching Hamilton on Disney+.
Steaming services allow for a home movie-watching experience far superior to what was offered by Blockbuster and its movie renting peers of the past, but movie theaters have proven they can, and will, endure, most likely coexisting alongside steaming platforms. Already, the return to theaters has demonstrated the resiliency of demand, and the community and immersion of a theatrical viewing will likely keep movie-goers coming back to the theaters for many years to come.
Works Cited
Brumley, James. “Disney's ‘Black Widow’ Marks an Important Win (AND Loss) for Theaters.” The Motley Fool, The Motley Fool, 13 July 2021, www.fool.com/investing/2021/07/13/disney-black-widow-important-win-loss-theaters/.
“Domestic Yearly Box Office.” Box Office Mojo, www.boxofficemojo.com/year/?ref_=bo_nb_we_secondarytab.
The New York Times, The New York Times, www.nytimes.com/by/melissa-kirsch.
Rubio-Licht, Nat. “Studios Reach Deal with Cinemark on Theatrical Windows.” Studios Reach Deal With Cinemark on Theatrical Windows | Los Angeles Business Journal, 7 May 2021, labusinessjournal.com/news/2021/may/07/cinemark-hollywood-studios-make-deal-cut-release-w/.
Sims, David. “Disney's 'Black Widow' Gamble Didn't Pay Off.” The Atlantic, Atlantic Media Company, 22 July 2021, www.theatlantic.com/culture/archive/2021/07/disney-black-widow-box-office/619502/.
“Tracking the Return to Normal: Entertainment.” Morning Consult, morningconsult.com/return-to-entertainment/#section-5.
Vlessing, Etan. “Warner Bros. to Produce 10 Movies Exclusively for HBO Max in 2022.” The Hollywood Reporter, The Hollywood Reporter, 22 July 2021, www.hollywoodreporter.com/business/business-news/warner-bros-to-produce-10-movies-exclusively-for-hbo-max-in-2022-1234986624/.
“Will Movie Theaters Become the next Blockbuster Video Stores?” The Federalist, 14 July 2021, thefederalist.com/2021/07/14/will-movie-theaters-become-the-next-blockbuster-video-stores/.
