2 stocks that could win in a “new normal” for movie releases


Audiences are starting to return to theaters and businesses like AMC Entertainment (NYSE: AMC) – the largest theater chain in the world – are generating income again. But a new hybrid model of simultaneous theatrical releases with streaming debuts is also being tested. Motley Fool contributors Jason Hall, Jon Quast and Nicholas Rossolillo discuss two actions that could win in this Motley Fool Live segment of “The 5” recorded on October 1st.

Jason Hall: It’s just frankly guys, this is just a good opportunity to talk about streaming stocks. Disney (NYSE: DIS) and Scarlett Johansson have reached an agreement on Black Widow for those who don’t remember. Like many box office stores, the deal she made with Marvel Studios, bonus included, is based on the box office of the movies she’s in. Here’s the thing Disney chose to release Black Widow on Disney + simultaneously with the opening of the box office. Then, of course, he announced that he had made $ 60 million on Disney + shortly thereafter. I think it’s a win-win for your hands and it’s probably a win for most artists in the industry. But I wanted to talk about the repercussions here for the model. Is the direct-to-consumer sales model the future? Is it a hybrid? What stock do you think will gain from this? Jon, let us know what you think about it and what actions you think you can win here.

Jon Quest: Yeah. Thanks Jason. For your question, I think the movie industry has changed, but I think it has been changing for quite some time, and I remember an interview about 10 years ago with Steven Spielberg and George Lucas, who complained that the box office is not what it used to be. To illustrate their point, this is something that I noted here. HEY was in theaters for over a year [laughs]. Star wars, Back to the future, Beverly Hills cop was in theaters for six months, 30 weeks.

Room: I would say that is a good thing.

Quarter: [laughs] Well the point is, movies had a longevity. You could put in almost any movie, and they were more story-centric, not so much about special effects, not so much about the explosions underneath, the big blockbuster events. They were smaller films and yet they stayed in theaters for a long time. That’s where the incentive was as a production studio, and that incentive slowly eroded. I really think streaming is here to stay. I think a lot of your non-blockbuster special effects, a lot of action, I don’t think these are really for theaters as much as they were in the past. I think it will be more of your streaming-centric things. I think the future of theater is in the premium experience. For your typical movie, people just want to show it at home. They want to watch him on the couch. For your premium cinema, I think they have everything to gain if there is a beneficiary among the cinemas, and I just wanted to share that from IMAX (NYSE: IMAX). This is recent news here, the new Marvel franchise Shang-Chi and the legend of the ten rings book. I can’t read everything because Zoom (NASDAQ: ZM) block it here, sorry.

Room: I feel it is happening.

Quarter: [laughs] Delivered 8.5 million on 399 screens. The global IMAX network won 16.8 million, the best global box office weekend on record in September for IMAX. No, we’re not talking about 2020 when no one went to the movies.

Room: It never is.

Quarter: Never. IMAX is at an all time high right now. Compare that to something like an AMC, where it’s still in the doldrums. I wanted to share one more thing here. Sorry. If I’m right and it’s the premium experience going forward, I love IMAX for that reason. Here is something I wanted to show. Look at the total liabilities over the past five years. IMAX actually got through the pandemic relatively unscathed. If you look at what AMC had to take on here with the liabilities, that’s astronomical. It’s a big deal for IMAX too, but relatively better and already going downhill. But look at this. Your average outstanding shares. Over the past five years, IMAX’s stock numbers have been declining, as AMC is content to issue stocks like crazy to stay afloat. If you go for the stock of a movie theater, I go with IMAX.

Room: I love this take. Nick, that’s awfully boring except it’s not.

Nicolas Rossolillo: No, IMAX is a cool company. I like this. If you have to pick a movie theater stock, that’s great. However, I just think to reiterate that Jon just in the movie business has not been the same for a long time. Netflix has just sparked the evidence it is in secular decline. I don’t think that’s going to change. That’s not to say it won’t be here in 30 years, but in the home entertainment business I think it’s here to say because of streaming, TV technology, sound technology is improving. . We can get a much better viewing experience without ever leaving home. It’s pretty cool. But I love Disney in this space. Netflix (NASDAQ: NFLX) is too obvious, but Netflix got the ball rolling with this direct-to-consumer film release. Most of their films never go to theaters. You can just stream it. When it is published, you will be able to distribute it. I love Disney though because of the strength of the movies they have. I also have a cool little site here. Box Office Mojo, IMDb, it’s actually a Amazon (NASDAQ: AMZN) business.

Room: I was going to tell Amazon about this.

Rossolillo: Again, movie theaters, the secular decline. In streaming, it’s like a growth trend. But in 2019, check out these top grossing movies. Seven of them are Disney. Included between Star wars and Marvel then the animated films. It could be eight if you consider the Spider-Man: Far From Home.

Room: They own more than they did that year.

Rossolillo: Exactly. Sony (NYSE: SONY) has the right to Spider Man. Marvel always benefits from it, because it is a story of the Marvel Universe. This will not change for the next decade. They have this amazing list of movies that they can really test this hybrid model on. They can send it to theaters, get what they can get from theaters, but then do that bounty, maybe they keep doing the premium Disney + model where you pay $ 30 and then the movie is yours. . Maybe they don’t, I don’t know. But I think the model has changed forever where the theater industry will struggle to make money, and movies will just go much faster to a streaming service to acquire and retain subscribers on that platform. Like a lot more profitable, in the long run for companies to have this constant income, and movies are cheaper than ever before, so Disney also has a competitive edge on this front, a different subject. But Disney thoroughly, I think he will win in this department.

Room: Well, that’s the king of content, and that’s the key. i said it on Twitter (NYSE: TWTR), and I think it’s the most amazing thing, that people pay whatever counts as money for the next 100 years to see Disney intellectual property no matter how people get it. see. It’s one of those few that for me, that I think it’s really like a business forever. I really think it’s amazing what they’ve built. I’m going to give Jon a little more credit here for IMAX because there is an age-old growth opportunity that they are involved in and that’s in Asia where there are cinemas under construction and there is a lot of growth and there is has an expanding class of consumers who go to see movies and that’s something that a lot of places people haven’t even been able to do. An IMAX is set up for these age-old trends, they’re really well positioned for that. I’m not going to pick an action here. I’m going to say you both did well, and I said what I think about Disney.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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