The COVID-19 pandemic has altered a number of industries, damaging some while accelerating others. Among the former have been entertainment exhibitors. A reliable $10-12 billion business from 2008 to 2019 fell to record lows in 2020. In fact, the theatrical business had its highest gross in 2018 at $11.9 billion and lowest in 2020 at $2.2 billion.
#SaveYourCinema, #SavingAMC, and other hashtags have been tweeted and retweeted over the last year. Key partners of the theatrical experience, NATO (National Association of Theater Owners), DGA (Director’s Guild Association, MPA (Motion Picture Association) have all joined in the movement to save the American theatrical experience. Major Hollywood talent joined the chorus, as well, declaring that “Movie theaters are a vital part of American social life.”
In true Hollywood fashion, a savior appeared. Seen over the skyline of Wall Street on the fourth of May was not a large ape climbing up a skyscraper, but a small plane with the banner “AMC to the Moon.” The redeemer, it seems, was a much less intimidating protagonist: a kitty.
“Theaters are Dead!”
COVID-19 infections hit record heights in the U.S. at the end of 2020. Exhausted by safer-at-home restrictions, many Americans ventured out of the home during the Thanksgiving break, with dire results: In December, U.S. COVID-19 deaths reached an all-time high. That same month, the theatrical industry’s Grinch, Jason Kilar, announced that WarnerMedia would release its entire 2021 theatrical slate day-and-date on its struggling streaming service HBO Max. Experienced Hollywood observers had seen this film (stock price decline) before with MoviePass, and viewed WarnerMedia’s move and the effect on AMC as an ugly sequel.
These factors were a double-sized lump of coal in AMC’s Christmas stocking, and shares fell to a low of $1.98 on January 5. It seemed the end was nigh for moviegoing in the U.S.
The Kitty that Roared
Oddly, AMC shares rose to a high of $13.26 at the end of the month. What happened? The kitty roared. The Reddit community that caused such a stir with GameStop had picked AMC as one of its targets. Even AMC CEO Adam Aron was caught off guard. “I was completely oblivious to GameStop (and the resulting Reddit movement). I had never heard of them.”
Although this statement seems as unlikely as skyscraper-sized monsters, the stock rally was a shock to all. The Reddit forum and the mania drove AMC stock to rise 467% in 72 hours, helping AMC slash its debt load by $600 million. This cash injection helped AMC remain solvent as the U.S. began large-scale vaccinations.
Much of the credit for the rallies that saved both AMC and GameStop is given to the retail investor. It is the same little guy (i.e., the same demo, 20-30-something males) that is attracted to action movies. Godzilla v. Kong opened on March 31 and earned $49 million during its opening 5-day weekend. Godzilla v. Kong is also a rare sequel success to a big-budget flop. Its predecessor, Godzilla: King of Monsters bombed in the summer of 2019 with a $110 million domestic take, whereas Godzilla v. Kong has a cumulative gross of $93M domestically as of May 9. In case anyone in Hollywood didn’t know, it was also available via streaming for 31 days on HBO Max. In this case, G v. K was all upside when compared to King of Monsters, with similar box office take plus (not Disney+ type numbers, however), new subscriber adds.
Lurking in the Shadows, in a Good Way
In early May, streaming giant (and therefore by definition the mortal enemy of theaters) Netflix announced plans to expand its theater-first business by releasing Army of the Dead with a 7-day window at Cinemark. On May 14, Army of the Dead will open nationwide in 250 major theaters, with streaming availability to launch a week later on May 21. Smaller circuits such as Harkins, Landmark, and Alamo will also carry the film, bringing the total count to 600 theaters, Netflix’s largest theatrical release yet.
Netflix believes “fans will love seeing [this film] in an immersive, cinematic environment with larger than life sight and sound technology.” In other words, even Netflix understands that films of this type are best enjoyed not via streaming on living-room TV but on the big screen with hundreds of other viewers sharing the experience. For those that prefer to wait a week to watch the movie via streaming, that’s fine as well, but this type of film is best experienced in a movie theater uniquely equipped to deliver a truly immersive experience.
Further positive news for the theatrical exhibitors came from AMC's rival Cinemark. On May 7, Cinemark announced agreements with Warner, Disney, Paramount, and Sony to establish windows between theatrical and home entertainment releases. (A separate deal had been reached in November 2020 with Universal.)
“Theaters are Back!”
Since the success of Godzilla v. Kong, other action films such as Mortal Kombat and Demon Slayer: Mugen Train have claimed post-pandemic victories, spurring many Hollywood prognosticators to claim that “Theaters are back.” Wall Street for the moment seems to agree, as both AMC and Cinemark stock prices rose despite worse-than-expected Q1’21 results.
That being said, during the same week, another company from the streamer-verse, Roku, announced a record quarter and its stock rose over 11% on the first day, considerably more than either AMC or Cinemark. Since these two parallel universes will continue to collide, I’m opting for paper hands instead of diamond hands.