What happened
Shares of Regal Entertainment Group (NYSE: RGC) fell 22.3% in August 2017, according to data from S&P Global Market Intelligence. The plunge started when rival movie theater chain AMC (AMC -2.01%) reported terrible preliminary results. When a consortium of Hollywood studios teamed up to launch a new premium video streaming service without the thumbs-up from Regal and AMC, the stock took another haircut.
So what
The movie industry as a whole had a weak summer with fewer blockbusters than expected and smaller box office totals for the handful of winning titles. Both AMC and Regal are supporting their top-line revenue streams with rising ticket prices and expanded concession menus, but foot traffic to movie theaters is undeniably falling.
On that note, the impending launch of a new streaming video service with the backing of several major movie studios looks like a fresh dagger in Regal's bleeding back.
Image source: Getty Images.
Now what
Regal, AMC, and others are fighting for their lives here. They sure don't need another studio-supported alternative movie platform. Rising ticket prices can only bolster the top line until the increases go too far, and that day may not be far off.
Many sudden price drops make me want to buy shares at a deep discount. That's not at all how I feel about the movie studios right now. AMC and Regal are fighting the wrong battles with the wrong weapons, and their stocks deserve every bit of these heavy price drops until they change their long-term strategies.
