Will Streaming Kill DVD And Movie Theaters?

Movie theaters are struggling to reinvent themselves after COVID-19 got many people more comfortable streaming content at home. It takes a big film like Top Gun: Maverick ($1.5 billion worldwide box office) to bring people out to the big screen.

People have gotten so comfortable with the small screen that services like Disney+, HBO Max, Hulu, NetflixNFLX
, Paramount+ and Peacock have flourished, and one could argue that they are doing so at the expense of the box office. Many movies appear much more quickly online than they used to, with movie studio owners rushing them to their owned streaming services much more rapidly than in the past.

Every time I read another story about box office and DVD revenues being cannibalized by streaming, I think of the 1979 hit by The Buggies “Video Killed The Radio Star.” The lyrics go, in part, “In my mind and in my car, we can’t rewind, we’ve gone too far. Pictures came and broke your heart. Put the blame on VCR.”

Movie theaters have struggled with bringing a permanent reset to the movie business and getting customers to come back in droves. These include loyalty programs and, most recently, movie-theater chain AMC EntertainmentAMC
announcing on 12/14 it will issue a co-branded visa with an entry offer that spending $50 within the first three months after issuance will get you $50 worth of credit at the theater.

Although they won’t start issuing cards until next year, management at AMC is likely hoping that it will shore up its core business and it won’t have to rely on its “meme stock” status and can rather investors can focus on fundamentals.

Shares in AMCX soared from $2/share at the beginning of 2021 when it was teetering on the brink of bankruptcy to a high of $72.62 in June of 2021 as individual investors flooded message boards with rah-rah messages despite the fact that fundamentals at the company were poor (it has since slid back to close on 12/15/2022 at just $5.60 per share).

Clearly the company’s prospects are improving, but the move from $2 to $73 was not justified by the company’s financial performance. It reported YTD revenue for the first three quarters of 2022 of $2.9 billion with an operating loss of $298 million. This compares to $2.5 billion in 2021 and an operating loss of $930 million, a massive improvement over the COVID-19 impacted 2020 where revenue came in at just $1.2 billion and the company had a massive operating loss of $4.2 billion.

Short sellers were completely blindsided by the retail investor frenzy who deemed themselves “the ape army.” Management seized on the opportunity, launching a portal on its website for individual investors in June. Shareholders who sign up for AMC’s loyalty program get perks like free popcorn and screenings, as well as regular company updates.

Individual investors owned about 80% of AMC stock at one point, a huge number given the large number of major media investors. AMC said it would donate $50K to the Dian Fossey Gorilla Fund in a tribute to the new shareholders, who have dubbed the CEO Adam Aron “Silverback.”

The AMC credit card is just one more perk in the theater chain’s toolbox which also includes “AMC Stubs,” a loyalty program whereby members can watch movies for just $5 per ticket every Tuesday through the end of January, excluding special events.

However, it may end up being just a short-term stop gap as macro trends see consumers increasingly turning to streaming services to watch movies and TV shows. This trend will likely hurt smaller independent films reaching a niche audience. Consumers are likely to continue to crave big budget action films like “Mission Impossible: Dead Reckoning,” which comes out next year.