The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
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You're confusing the way things were with the way things are. We are at a crossover point where the expensive blockbusters need to make more money to break even than is currently possible.
Hollywood have demonstrably shown they don't need cinemas by releasing WW84, Soul, Mulan on their own streaming services, and by selling Borat, Coming2America, Ebola Holmes etc. to streamers.
@Bladey
The decisions about streaming aren't being taken at the studio level, and it's not about making money off of one film. The streaming model is completely different to the existing film release model, so can't be compared easily.
The current model is really expensive for the studios. They have to pay cinemas 50% of ticket price, plus have a marketing budget of 50%+ of production budget.
WW84 is a great way to acquire customers for HBOMax - and the decades of content will keep people paying. Having a massive, front-loaded and risky payoff isn't great for business - having a recurring income is.
You have to be realistic where cinemas are in the pecking order. They will always have a place, but I doubt any cinema chain was included in the discussion about how WW84 was released - only the details of the ticket split. And I don't think Cineworld were in the room for that.
The pandemic has proven beyond doubt that Hollywood doesn't need the cinemas, but the cinemas sure as hell need Hollywood.
I'm not trolling here, but the next line is pretty important:
“We will share further updates on this in the coming months."
So I assume the plan, and not a bad plan, is to wait until there's a lot more blockbusters on the horizon.
Mooky in October:
"It cannot be one movie only. It needs to be a situation that the studios are saying, 'It is safe enough to go back and this is our release schedule.' The COVID situation needs to stabilize and we need to have a clear schedule of movies ahead."
I was surprised by the WW84 announcement too. It seems like this came from above Warner Bros. and I think was driven by the fear of missing out on the streaming business.
I'm not the most positive about Cineworld, but I tend to agree that this was a story plucked from very limited insight.
I personally think the WW84 news was a much more interesting story for discussion, but hey-ho.
The FT article was very UK focussed which misses the point that they could close everything outside the US and still have 75% of their business.
Honestly - I know enough to know I don't know enough!
I'm not sure how a CVA will work as most of their properties are in the US. In the UK you need 75% of creditors by value to agree to a CVA - and I would guess that that may mean landlords could block it? I'm not sure how CINE are structured - is the US and UK separate entities?
Also it's going to destroy those relationships and could mean all sorts of problems in the longer term.
I don't know about your other points. I think they all depend on things outside of Cineworld's control, so may or may not be feasible.
I read that this deal may only be with AMC at the moment. Cineworld have always refused to show films that break the theatrical window, but maybe this will be the exception?
It's interesting that WB have agreed a reduced fee with AMC in return for streaming this on HBOMax.
Of course you could argue that WB don't need a deal with anyone else as there's probably enough capacity with just AMC on board.
WW84 release is a very specific deal, and clearly tailored for the moment and not necessarily a huge shift to streaming by WB.
For those that haven't read the details, WW84 has 30 days on HBO Max + cinema and then it's pulled from streaming and has 30 days of theatrical exclusivity.
From a Cineworld point of view the big question is will they show it? This breaks the theatrical window, and therefore historically wouldn't be shown by Cineworld. And because of their past stance, were they even involved in the negotiations?
johnygaddar - thanks for the links. It certainly does look like they changed their mind about sharing more data.
I was going by their announcement on October 12th where they mentioned going into more detail on the investor day.
I agree with you Ian - it just seems too big a step away from Tenet where they were trying to support the Cinemas.
But then again this is apparently coming from the very top who want to push HBO Max and don't really care for cinema. But as you say - HBO Max isn't global.
I think the only way the streaming route would work would be for a Christmas cinematic release where possible and then shortened window with compensation to cinemas. Then straight to HBO Max in the US, and and massive payoff from Apple/Disney for streaming rights for the RoW.
Can all that come off? Probably easier to just delay the decision until the Summer.
I thought they were always going to detail this on investor day on December 10th.
That's not to say you're not right about it being poor news though.
Investroid - all totally fair points - especially number 5. Disney are really hurting, and have shown that they are more than happy to throw product out.
To clarify - I wasn't suggesting that studios would move to 100% streaming - my point was that it's a decision that's out of Cineworld's hands. They need to diversify their offering as it will not only guard against supplier problems, but also strengthen their hand against Hollywood.
Also when I said production had stopped, what I meant was that no big films have been green lit recently and so after the productions currently filming have completed, there's currently nothing lined up.
And thanks for the reasoned debate. It's easy to get wound up in your own position, but I like reading another balancing viewpoint. At the end of the day we are on here to get a perspective on this company, not to win an argument.
As I've said before, they won't release all the films in 2021. There's a big gap in production and they will need these films in 2022/23. This is a lost year - there isn't going to be a bumper year to make up for it.
As I've also said before, in the case you describe the Unlimited card is terrible for Cineworld. Cineworld have to pay the studios for each visit, so they would lose a fortune at the current price. Can they increase the price? Maybe - but in a possible recession charging £25+ a month doesn't look great compared to streaming alternatives.
All the major exhibitors have got lazy over the last decade and now rely on one supplier for everything they need to survive. Forget Covid - it's just bad business. What if Disney decide to go 100% streaming? What if Marvel loses its appeal? What if MGM gets bought by Apple?
I do believe CINE can survive - but the idea that it will be some boom time in February isn't realistic. They are going to need new content beyond Hollywood, less sites and screens and a way to break away from the feast or famine of weekday versus weekend attendance. These are all things they could have done over the last decade, but didn't bother to.
My final 'as I've said before' - I think either AMC or Cineworld will go bust, and it will be the one who is the most imaginative and tenacious over the next couple of months who will be the survivor.
It's not unusual in other countries to have income based rents. I think there might be some ancient law in the UK that makes it difficult.
It's also a bit harsh on the landlords to, in the case of Clarks, take all of the financial hit.
Won't this burn all their bridges with the landlords? I think a revenue based rent is a good idea though, but it has to be by mutual consent.
Pboughton - I'm not sure there's much truth in your post.
@funinvester And what do you think the accuracy would be for a self-administered test done by a football fan who's paid £60 to see a game?
I've read the article and apart from a picture of a football pitch and one line about how this could be used for people going to events there's no substance that this will be used for a 'freedom pass'.
When they actually quote someone, they say that it will be used for mass testing in cities and care home visits.
Now, my Nan is a Wonder Woman, but visiting her isn't quite the same as going to the cinema.