Fun
Frisky
Nostalgic
Intense
Adventurous
Choked Up
Curious
Romantic
Weird
Theater chain AMC Entertainment lost 25 percent of its market value Wednesday following a surprise announcement that it will take a $200 million charge against earnings for the second quarter of 2017 related to a bad investment in an on-screen advertising company.
So did Wall Street overreact to a measly $200 million charge by a company that sold $3.2 billion last year in movie tickets, buttered popcorn and super-sized soft drinks? Maybe, but AMC Entertainment, the world’s largest theater chain (and no relation to the AMC Networks cable group), has had some issues this year that go beyond a soft summer box office.
The company posted record first-quarter earnings in May but has hemorrhaged 50 percent of its share price in the months since on concerns about its debt load from acquisitions of several smaller theater chains and Chinese regulators squeezing parent company Dalian Wanda’s access to financing.
The two other big U.S. theater chains, Cinemark Holdings (down 14 percent over the last three months) and Regal Entertainment (down 16 percent), are struggling with investors who aren’t yet sure whether the thin box office returns this summer are more reflective of a bad batch of movies or a meaningful change in consumer behavior toward watching more movies and TV shows at home on streaming services like Netflix, Amazon and Hulu.
The U.S. box office grossed a record $11.4 billion in 2016, has seen year-to-year growth in four of the last five years, and has benefitted enormously from the Star Wars and Marvel franchises continuing to grow their audiences. That growth continued into 2017 with a record first quarter — up 11.7 percent from a year ago — on the strength of Logan, Get Out, The LEGO Batman Movie and global hit Beauty and the Beast.
And then the music more or less stopped.
Guardians of the Galaxy Vol. 2, Wonder Woman and Spider-Man: Homecoming have been the few solid grossers in an otherwise disastrous summer movie season. A long string of would-be blockbusters — The Fate of the Furious, Alien: Covenant, Pirates of the Caribbean: Dead Men Tell No Tales, Cars 3, Transformers: The Last Night, Despicable Me 3 and War for the Planet of the Apes — underperformed their franchise predecessors by nearly a billion dollars.
Another long string of would-be franchise starters or franchise reboots — Tom Cruise’s The Mummy, Guy Ritchie’s King Arthur: Legend of the Sword, The Rock’s Baywatch and Luc Besson’s Valerian and the City of a Thousand Planets — have been not just flops but box office embarrassments with not a single one breaking $100 million. Ultra-violent action flicks Baby Driver, John Wick: Chapter Two and Atomic Blonde have all earned solid reviews and done respectable box-office business, but none have been breakout hits. Dunkirk is visually stunning and a likely Oscar contender, but it’s not a breakout hit either.
The most charitable explanation for the sad-trombone summer box office is that the studios poisoned the well with too many sequels of sequels of sequels — did we really need another Transformers movie? — but that doesn’t explain why Baywatch bombed or why Cars 3 underperformed Cars 2 by $50 million or why summer comedies like Snatched ($46 million) and The House ($25 million) have done so poorly.
Also, the theater experience ain’t what it used to be. After the AMC Entertainment news broke on Wednesday, I did a little field research at a suburban AMC theater. I had been meaning to see Baby Driver, and writing about summer movies was the perfect excuse. The 45-minute round trip to the theater and 15-minute delay before it started chewed up an hour I’ll never get back, the print was not as saturated as I would have liked, and the seats are not as comfortable as my sofa.
And that doesn’t include the conscience-shocking notion of paying $14.59 plus tax for popcorn and a Coke.
Those deterrents have been there all along, but there are new threats:
- Streaming services — you can get a month of Netflix for the same $10 I paid to see Baby Driver at a matinee — are almost certainly cutting into the theatrical business, and Netflix has more than 50 theatrical films in development.
- By next summer, according to a research report in June by MoffettNathanson media analyst Robert Fishman, a likely shortening of the theatrical window from 90 days to 30-45 days will put even more downward pressure on box office returns.
- AT&T, which is likely to get regulatory approval in the coming months for its purchase of Time Warner, will likely accelerate the shift from theatrical to digital as it looks for opportunities to move consumer viewing toward its mobile network and streaming outlets like HBO and DirecTV Now.
- Warner Bros. is launching a streaming service in 2018 with new live-action and animated titles that will be based on the DC Comics universe.
- A number of cable networks including Disney’s Freeform and Turner’s TBS and TNT have talked about launching their own streaming services, which could conceivably happen by next summer.
None of these things bode well for theater chains. When the The Incredibles 2, Mission: Impossible 6, Oceans 8 and Mama Mia: Here We Go Again! arrive in theaters next summer, will we all be too busy talking about Game of Thrones and whatever’s on Netflix to notice?
Scott Porch writes about the streaming-media industry for Decider and is also a contributing writer for Playboy. You can follow him on Twitter @ScottPorch.
