June 3, 2020
NEWS ANALYSIS — Wedbush Securities media analyst Michael Pachter remains bearish on the movie theater business, arguing exhibitors’ aggressive plans to re-open screens during a lull in the coronavirus pandemic is wishful thinking.
A return to moviegoing would in turn help studios market retail sales of DVD/Blu-ray Disc and digital titles — despite the fact home entertainment has fared well during the pandemic due to a larger segment of population being housebound.
Specifically, Pachter is talking about Cinemark, which plans to re-open select screens on June 19, with a national re-opening slated for July 10. Plano, Texas-based Cinemark Holdings, which closed all of its theaters on March 18 due to the virus, operates 554 theaters and 6,132 screens in the U.S. and Latin America.
“People may be eager to visit the theaters once they feel safe doing so, but we think it is unlikely crowds will return to any semblance of normal before a vaccine is widely distributed, particularly in urban and suburban markets,” Pachter wrote in a June 3 note.
Cinemark June 3 reported first-quarter (ended March 31) domestic admissions revenue per screen was down 25.7% from the previous-year period — and up slightly (0.7%) from the domestic industry box office decline of 25.4%. For the full quarter, Cinemark attendance fell 29% to 27.9 million, while the average ticket price increased by 4% year-over-year.
In Cinemark’s Latin American circuit, admissions revenue per screen declined 32.1% in Q1, which included a 16% negative impact from currency translation and a 26% year-over-year decline in attendance per screen.
Pachter contends that with 30% of moviegoers older than 50 (according to the MPAA in 2018), a significant portion of middle-age consumers are not going to be bold enough to return to theaters. In addition, about 40% of moviegoers are under 30 years of age and losing a portion of this demo could result in studios and exhibitors delaying more releases until a vaccine is found.
“As we face a potential spike in cases nationwide after some seemingly premature re-opening schedules in addition to nationwide protests, we are less sanguine than Cinemark management that enough of the population will risk their health to support the current release slate schedule starting in July,” Pachter wrote.
He estimates the domestic industry box office will end 2020 down 97.8% from 2019, with most domestic screens likely remaining closed beyond the end of the quarter.
“Theatrical exhibition is in the middle of a perfect storm,” Pachter wrote. “Theater closures not only deplete cash reserves and sources of liquidity, but may alter consumer behavior indefinitely.”