Last week we looked at how Netflix has loaded on debt while developing a new slate of original content. Although the streaming giant is taking a big risk with this strategy, many entertainment industry insiders still think Netflix is in a much stronger position than traditional movie theaters. With attendance down 3 percent from 2016, AMC Entertainment recently downgraded its outlook for the rest of the film industry’s year. The announcement sent theater stocks tumbling and caused the top four cinema operators to lose $1.3 billion in value.
While flops like King Arthur and Valerian are partially to blame for this decline, experts fear the industry’s problems run deeper than a few box office duds. American audiences also failed to turn out for formerly reliable franchises like Pirates of the Caribbean and Transformers. Even the upcoming release of the new Star Wars movie is unlikely to offset 2017’s losses. In the past theater owners simply raised ticket prices to make up for declining audiences. With admission fees about as high as they can go, though, most cinemas can’t rely on this strategy anymore. It’s likely the industry will suffer over the long term if it can’t find a solution to this problem.
Of course, it’s also possible that American cinemas are just having a bad year. In 2018 studios will release a new Avengers movie along with sequels to Deadpool and Jurassic World, all of which are expected to be big hits. “This is very typical of the movie business,” said Bloomberg analyst Paul Sweeney. “You could make the argument that the slate for next year looks really good, which should grow the market next year in North America. That part’s a cyclical thing, and it’s likely to come back.” Still, there’s no telling how 2019 will fare for the movie industry. As streaming services like Netflix continue to keep Americans planted on their couches, Hollywood may start depending more and more on lucrative overseas markets like China.
Questions:
- Why do you think movie attendance is down in 2017?
- Do you prefer to watch movies in a theater or in your home? Why?
Source: Anousha Sakoui and Emma Orr, “Hollywood Might Not Bounce Back From Theaters’ $1.3 Billion Stock Collapse,” Bloomberg, August 3, 2017.