- Share this article on Facebook
- Share this article on Twitter
- Share this article on Email
- Show additional share options
- Share this article on Print
- Share this article on Comment
- Share this article on Whatsapp
- Share this article on Linkedin
- Share this article on Reddit
- Share this article on Pinit
- Share this article on Tumblr
It has been a rough week for movie theater stocks amid investors’ worries about the potential pain the Delta variant of the coronavirus could cause cinemas, among other factors.
Despite sector stocks trading up on Friday, Cinemark shares had lost 20.5 percent for the week to close at $15.86 on Friday, as had AMC Theaters’ stock, which this week fell by 21.4 percent to close at $34.96. Imax’s stock was down 15 percent for the week to close at $16.79 on Friday, while the cinema and hotel operator Marcus Corp. saw its shares fall by 11.5 percent over the last five days to close the week at $16.45.
Meanwhile, the London-listed stock of Regal owner Cineworld was off 19 percent this week to close at 63.14 Sterling on Friday (US $86.70).
“I think the pullback is related to Disney’s success with the Disney+ viewers” of Black Widow, Macquarie analyst Chad Beynon tells The Hollywood Reporter, referring to Disney’s weekend disclosure of $60 million in Premier Access revenue for the movie. “There’s also been a major sell-off in the (COVID pandemic) ‘reopening’ names as well.”
Indeed, investors have of late been bidding up stocks of companies seen benefiting from an end of lockdowns and the reopening of the economy, but the more infectious virus mutant has raised questions about next steps.
MKM Partners analyst Eric Handler also sees both factors weighing on cinema investors’ sentiment. “I think early in the week the weakness had to do with the $60 million of premium VOD revenue for Black Widow, which increased the industry’s secular concerns,” Handler says. “From there though I think the selloff is more macro-driven and related to rising Delta variant concerns. What we are seeing right now with the cinema stocks isn’t all that different from what some of my other colleagues are seeing in restaurants and airlines.”
With regard to Black Widow, “I think there are a few factors which cinema bears are overlooking,” Handler says. “It’s not true that Disney doesn’t have to share premium video on-demand revenue like it does with box office revenue. The platform which consumers use (Apple, Amazon, Google etc.) all get about 15 percent. Then there are unquantified payments which are being made to talent who have seen their points/bonus get cannibalized by PVOD.”
Secondly, piracy could be a growing concern. “From what I have heard, the level of piracy amped up quite a bit with Black Widow, which also ate into box office numbers,” explains Handler.
B. Riley analyst Eric Wold similarly noted the issue of piracy in a report this week, writing: “We have already seen the significant impact on (and potential loss of) the China theatrical market given the ease of piracy with a day-and-date PVOD release.”
Wold echoed the view that worries about Disney+ PVOD releases were overstated, arguing that the performance of Black Widow “demonstrates underlying theatrical demand.”
Wold noted: “our view is that the majority of those approximately 2 million Disney+ households that opted for the $30 premium VOD are more than likely to once again become theater-goers in 2022 (and beyond) when the exclusive windows come back into play.”
Based on his calculations for Black Widow, “there is a breakeven point around 57-58 percent of Disney+ households choosing to see the film in theaters instead,” Wold highlighted. “And an exclusive theatrical window would force that decision. In addition, we believe moviegoers are more likely to also watch the film at home again later as opposed to initial PVOD viewers.”
Sign up for THR news straight to your inbox every day