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https://www.barrons.com/articles/the...ng-51615237061
Movie-theater operators are taking back some of the power that tilted to Hollywood studios at the height of the pandemic.
Over the weekend, Disney (ticker: DIS) marked its first theatrical release since March 2020, but Raya and the Last Dragon wasn’t shown in Cinemark Holdings’ (CNK) U.S. cinemas across 42 states.
Box-office sales for Raya reached a tepid $8.6 million, far less than the $14.1 million in first-ticket sales for Warner Bros.’ Tom & Jerry the prior weekend. Raya was also available for streaming on Disney + for an additional $29.99 over the regular $6.99 monthly subscription, while Tom is streaming at no additional charge over Warner’s HBO Max.
Cinemark Holdings’ is the third-largest U.S. theater -chain operator. The effect of its decision not to run Raya, which was reported in The Wall Street Journal, could have been far bigger if the chain had a presence in New York City, which allowed theaters to reopen last Friday.
San Francisco and the Bay Area, which also recently allowed theaters to reopen at limited capacity, is home to several Cinemark-owned theaters.
A Cinemark spokeswoman wasn’t immediately available. The Journal also reported that smaller theater-chain operators didn’t show Raya.
The debut of Raya was a disappointment, says B. Riley analyst Eric Wold. He wrote in a research note that “we believe this is only another example of the power that exhibitors may hold during the industry’s post-pandemic restart.”
Wold confirmed a Buy rating on shares of Cinemark as well as on IMAX (IMAX), Marcus (MCS), and National CineMedia (NCMI). He has a Neutral rating on shares of the largest theater operator, AMC Entertainment (AMC).
Cinemark stock rose 2.2% on Monday. It is up 18% over the past year, compared with the 30% one-year gain in the S&P 500.
Movie-theater chains have been struggling to get through the business disruptions caused by the pandemic. Though many theater locations have been reopened for months, big markets like New York remaining closed meant movie studios postponed big releases or moved them to streaming.
That gave Hollywood studios more power last year, when theater chains negotiated a compromise that would allow for a shorter theatrical release window. AMC and Cinemark struck agreements with Comcast ‘s (CMCSA) Universal that gave them a window to show new releases in the theater for a shortened 17 days before the movies also moved to streaming, depending on ticket sales.
Rival operator Regal Cinemas, which is owned by U.K.-based Cineworld, chose to shut down theaters over the past few months because of the lack of new movies.
AT&T’s (T) WarnerMedia decided that it would release its new movies both in theaters and on its HBO Max platform for the first month of their runs. And Disney has put a greater emphasis on its streaming operations.
“We continue to believe the balance of power that may have shifted toward studios last year during the pandemic should return toward exhibitors as moviegoers look to return to theaters,” B. Riley’s Wold said.
The reopening of major markets like New York and the spread of vaccinations through the population makes the return to theaters more of a possibility. Moviegoers who haven’t been able to see shows in theaters are eager to do so, analysts said.
Benchmark’s Mike Hickey also has a Buy rating on Cinemark. “We anticipate an accelerated trend toward a desire for normality, escapism and out of home entertainment,” he said in a recent note. The relative success of Tom & Jerry despite poor reviews “was a wakeup call that box office growth reset has emerged.”
B. Riley’s Wold agrees, saying consumers’ desire to return to theaters will put more pressure on studios to move back to the traditional model of showing movies first on the big screen. “Otherwise, we would expect studios to face additional film boycotts from the major exhibitors,” Wold said.
Over the weekend, Disney (ticker: DIS) marked its first theatrical release since March 2020, but Raya and the Last Dragon wasn’t shown in Cinemark Holdings’ (CNK) U.S. cinemas across 42 states.
Box-office sales for Raya reached a tepid $8.6 million, far less than the $14.1 million in first-ticket sales for Warner Bros.’ Tom & Jerry the prior weekend. Raya was also available for streaming on Disney + for an additional $29.99 over the regular $6.99 monthly subscription, while Tom is streaming at no additional charge over Warner’s HBO Max.
Cinemark Holdings’ is the third-largest U.S. theater -chain operator. The effect of its decision not to run Raya, which was reported in The Wall Street Journal, could have been far bigger if the chain had a presence in New York City, which allowed theaters to reopen last Friday.
San Francisco and the Bay Area, which also recently allowed theaters to reopen at limited capacity, is home to several Cinemark-owned theaters.
A Cinemark spokeswoman wasn’t immediately available. The Journal also reported that smaller theater-chain operators didn’t show Raya.
The debut of Raya was a disappointment, says B. Riley analyst Eric Wold. He wrote in a research note that “we believe this is only another example of the power that exhibitors may hold during the industry’s post-pandemic restart.”
Wold confirmed a Buy rating on shares of Cinemark as well as on IMAX (IMAX), Marcus (MCS), and National CineMedia (NCMI). He has a Neutral rating on shares of the largest theater operator, AMC Entertainment (AMC).
Cinemark stock rose 2.2% on Monday. It is up 18% over the past year, compared with the 30% one-year gain in the S&P 500.
Movie-theater chains have been struggling to get through the business disruptions caused by the pandemic. Though many theater locations have been reopened for months, big markets like New York remaining closed meant movie studios postponed big releases or moved them to streaming.
That gave Hollywood studios more power last year, when theater chains negotiated a compromise that would allow for a shorter theatrical release window. AMC and Cinemark struck agreements with Comcast ‘s (CMCSA) Universal that gave them a window to show new releases in the theater for a shortened 17 days before the movies also moved to streaming, depending on ticket sales.
Rival operator Regal Cinemas, which is owned by U.K.-based Cineworld, chose to shut down theaters over the past few months because of the lack of new movies.
AT&T’s (T) WarnerMedia decided that it would release its new movies both in theaters and on its HBO Max platform for the first month of their runs. And Disney has put a greater emphasis on its streaming operations.
“We continue to believe the balance of power that may have shifted toward studios last year during the pandemic should return toward exhibitors as moviegoers look to return to theaters,” B. Riley’s Wold said.
The reopening of major markets like New York and the spread of vaccinations through the population makes the return to theaters more of a possibility. Moviegoers who haven’t been able to see shows in theaters are eager to do so, analysts said.
Benchmark’s Mike Hickey also has a Buy rating on Cinemark. “We anticipate an accelerated trend toward a desire for normality, escapism and out of home entertainment,” he said in a recent note. The relative success of Tom & Jerry despite poor reviews “was a wakeup call that box office growth reset has emerged.”
B. Riley’s Wold agrees, saying consumers’ desire to return to theaters will put more pressure on studios to move back to the traditional model of showing movies first on the big screen. “Otherwise, we would expect studios to face additional film boycotts from the major exhibitors,” Wold said.