🍿Hollywood Fails, Theater Operators Quiver (Short Movie Magic)🍿

Will Theater Pain Hurt National CineMedia Inc.?

If reality followed fiction, President Trump’s assertion that COVID-19 would magically disappear would come true at the waving of a wand. Unfortunately, magic doesn’t exist outside of the cinema and, lately, it doesn’t exist inside the cinema either.

The good news? Approximately 70% of US movie theaters are back open.

The bad news? They’re open in zombie form, key markets like NYC and LA remain shuttered, and theaters don’t exactly have a ton of inventory to exhibit. Those theaters that are open couldn’t max out revenue if they wanted to as safety restrictions include, among other things, staggered seating. And so you’ve got the same formula for theater operators as that afflicting gym operators: little-to-no revenue and increasing operating expense. AMC Entertainment Holdings, Inc. ($AMC), Cinemark Holdings, Inc. ($CNK), and Regal owner Cineworld Group plc ($CINE) are feeling it; they find themselves stuck between the government shutdowns, the COVID-19 induced movie delays and, to add insult to injury, the forced acceleration of "alternative delivery methods" that will compete on the supply side. Studios are leveraging studio weakness to better position themselves for the future too: Universal Pictures secured a smaller theatrical window so it could stream titles via its on-demand platforms earlier than they’ve historically been able to. All of this creates the perfect storm for theaters.  

Looking for a reprieve from the deluge of bad news, operators eagerly awaited the long-postponed US release of Christopher Nolan’s “Tenet.” Nolan is among, if not the, most popular directors in Hollywood today. Operators hoped that people looking to return to some form of normalcy would be jacked up to see his latest mind f*ck. Like Tom Cruise was. And Casey Neistat. And this guy who bought out an entire theater. Unfortunately, for the studio and for theaters, the film’s results were lukewarm at best. 

Hollywood execs are acting accordingly…

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Entertainment 3.0 (Short Hollywood, Long Subsidized Data Plays & Will Smith?)

More Data = More Crap Like "Bright" 

We've addressed algorithmic-based books and music, we might as well triple-down with movies. It's well known by now that Netflix ($NFLX) and Amazon ($AMZN) are using their respective data sets to develop new original projects. This circumvents the otherwise costly endeavor of licensing deals for outside content which, naturally, is fragmented in such a way that is costly to Netlfix/Amazon and frictionful in certain respects for the end user. Why is some content available internationally while other content is not? Why is certain content downloadable but other isn't? All of that has to do with "rights" for licensable content. 

This is precisely why we get "Bright," the new Will Smith vehicle that "feels like it was produced by an algorithm to fit in as many genres as possible (crime, fantasy, cops, etc.)." Netflix has said that 11mm people watched the movie in the first three days of release. At an average movie price of $8.90/ticket, that's the equivalent of nearly $98mm in revenue in three days. A sequel has been green-lit. This movie was an experiment dripping with data-based motivation and it seems to have worked. What does this portend for Hollywood?

Oh, Hollywood. This week we also learned that moviegoing has fallen to its lowest rate in a generation: theater admissions fell nearly 6% in 2017.  Choice quote, “'The industry should be concerned if the metric falls again in 2018,' said Geetha Ranganathan, a Bloomberg Intelligence analyst. 'Especially with a stronger film slate for this year, fewer moviegoers would be a warning sign that the industry may be in secular decline.'” Ruh Roh. 

And so should we really be surprised that there's a company out there now attempting to exploit data relating to Hollywood-produced theatrically-released movies? Enter Moviepass, a subscription-based business that lets movie-goers go to an unlimited amount of movies per month for only $9.95/month (subject to a one movie in 24 hours restriction). The movie theaters are like, "What the hell?" but consumers are like, "Sign me up!" 1 million of them. The movie theaters are like, "That's our data!" and Moviepass is like, "We don't care, go fly a kite home-slice." 

This Tren Griffin piece does a deep dive into the Moviepass business and leaves much to unpack. The piece is long but it provides some real insights into the movie theater business and the numbers are bleak. For theaters. For Moviepass. For basically everyone other than the moviegoers who ought to enjoy the Moviepass-subsidized movie-going while it lasts. And that probably includes malls - many of which are betting their futures on moviegoers seeking the moviegoing "experience." 

All of which would explain the recent waive of consolidation. In the past month alone, Cineworld Group Plc agreed to buy #2 U.S. movie chain Regal Entertainment Group for $3.6 billion. And Walt Disney Co. ($DIS) awaits approval of its proposed $52.4b acquisition of 21st Century Fox Inc., including the company’s movie studio. Content is king right now. It helps drive more data for more content. Yes, this is becoming very circular. 

And so back to Will Smith. Rumor has it that the actor famously performed a data-based analysis to determine how he could best catapult himself to stardom. Then came Independence Day. And Men in Black. Those movies weren't luck: they were strategy. Which is to say that if streamers are all about data, and Hollywood is (now) all about data, and actors are all about data, consumers probably ought to get used to movies like Bright.