RE: Investors have high hopes for Cineworld - FT on 14th August 202015 Aug 2020 16:03
Continued..... Cinemas need big movies. According to data from Box Office Mojo, each year’s top 20 releases provide more than half the box office takings, with numbers 21 to 50 accounting for a further 20 per cent. Newness also matters: the first three weeks of a release provide about 80 per cent of a movie’s total box office revenue, whether it is a hit or a flop. The solution put forward by AMC Entertainment, the biggest US cinema operator by screen count, is to assume not much changes economically. Last month AMC agreed a deal with Universal Pictures to shrink its window of exclusivity on new releases to 17 days from around 75 days previously. Universal can sell its films on premium pay-per-view after just three weekends in theatres, while AMC is eligible for an undisclosed cut of the extra income generated. The gamble for AMC depends on how attached the public is to the ritual of watching films in the dark with strangers. Waiting three weekends, at most, to see a specific movie at home is a very different proposition to waiting nearly three months. It might turn out that the big-screen experience has enough intrinsic appeal to keep box office takings steady. But perhaps cinemagoers will prove more fickle, their goodwill having been eroded by overlong adverts and overpriced popcorn.Even before the pandemic cinema was a shrinking industry that was struggling to adapt to technological threats Cineworld — which has not yet signed an exclusivity deal such as AMC’s — takes between a quarter and a third of US revenue from things other than box-office receipts. For the past decade its attendance numbers had been in decline, offset by rises in ticket prices, while US concession spending had risen from around $3 per customer to nearly $5.50. Is the model sustainable post-pandemic? Not according to the market. With no big refinancing obligations looming, Cineworld has liquidity available to survive up to 18 months of lockdowns, estimates Bank of America. Yet the stock is down by more than 75 per cent in the year to date. Shareholders had some respite this week. Cineworld’s stock rallied nearly 50 per cent on news last weekend that the US had scrapped rules dating from the 1940s that blocked movie studios from owning cinema chains. The change followed reports earlier in the year that Amazon and Netflix (which were not bound by the restriction) might buy theatres to help with marketing) Even before the pandemic, however, cinema was a shrinking industry that was struggling to adapt to technological threats. While the change in the antitrust regime makes vertical consolidation possible it also hands studios more leverage, such as by allowing the sale of new releases in bundles. Deeper industry co-operation makes sense. Blockbuster releases still need theatres, at least for the moment, but in future negotiations the studios will hold all the power. The cinema industry’s script has been torn up, leaving investors with no guarantee of a happy ending.
Sign In
Follow the stocks
