Jun 17 2020
The Movie Theaters industry (IBISWorld report 51213) is currently facing an uncertain future, as it prepares to fully reopen around the country. AMC Entertainment Holdings, the largest company in this industry, registered a significant decline in year-to-date revenue and a net loss of $2.2 billion in the first quarter of 2020 and will likely report a significantly worse result in the second quarter. Movie theater operators were already facing declining attendance as consumers opt for home entertainment options, fueling increased consolidation as small theaters are increasingly unable to compete with the economies of scale of larger chains, such as AMC and Cineworld Group. These long-term trends are expected to be accelerated by the detrimental economic effects of the COVID-19 (coronavirus) pandemic.
Even before the onset of the coronavirus pandemic, the movie theaters industry was facing intense competition from online streaming of television and movies, resulting in the aforementioned decline in attendance. However, this external competition has become significantly more intense in light of the ongoing pandemic. As theaters were closed around the country, companies within the Movie & Video Production industry (51211a) instead released some of their scheduled theatrical releases onto digital rental platforms and streaming services. However, this has received a degree of pushback from movie theater operators. When Universal Picture announced in May that it would continue this release strategy for some of its movies even after theaters reopened, AMC responded that it would no longer screen its movies in its theaters. The two companies are currently in negotiations to resolve this dispute.
Movie theaters across the country are currently reopening with restricted capacity and with more stringent sanitation procedures, but it remains to be seen to what extent prospective moviegoers will be willing to come back to movie theaters amid the ongoing coronavirus pandemic. In order to ensure adequate sanitation, movie theaters are expected to increase their purchases of disinfectant and other cleaning products from operators in the Disinfectant Manufacturing industry (OD5995) and the Janitorial Equipment Supply Wholesaling industry (42385), which may further eat into operating margins for these companies.
While most of the industry is facing a rocky future, the ongoing coronavirus pandemic may represent an unexpected bright spot for drive-in movie theaters, which were formerly considered a niche part of the industry. The physical set up of drive-in theaters is more conducive to social distancing than conventional movie theaters. As a result, drive-in theaters have experienced an increase in popularity as prospective movie-goers seek to balance enjoyment with adhering to social distancing guidelines. With that said, these theaters are not as viable in urban areas, which limits their ability to make up for revenue shortfalls in other parts of the industry.