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Don't Believe the Headlines -- Audiences Haven't Abandoned the Big Screen

By Danny Vena - Jul 14, 2019 at 12:16PM

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Even after last year's record box office take, 2019's summer season is holding its own.

Investors in movie theater stocks might be rightfully concerned given recent headlines, which have been forecasting a dismal 2019 summer movie season. There have been several high-profile flops so far this year (I'm looking at you, Men in Black International, Dark Phoenix, and Godzilla: King of the Monsters).

The result has been a wholesale sell-off of some of the most popular exhibition stocks, including AMC Entertainment Holdings ( AMC -4.19% ), IMAX ( IMAX -1.18% ), and Cinemark Holdings ( CNK -2.10% ), which have fallen 43%, 14%, and 6%, respectively, over the past three months. 

However, this is a stark example of why you shouldn't always believe the headlines.

Audience in a darkened theater in silhouette.

Image source: Getty Images.

The numbers tell a different tale

During the period this year between April 26 and July 7, North American movie ticket sales are in a virtual dead heat with the same period last year, totaling $3.03 billion, versus $3.04 billion in 2018. Choosing April 26 wasn't an arbitrary decision: That's the date this year that the Marvel/Disney (NYSE: DIS) blockbuster Avengers: Endgame hit the big screen, shattering a plethora of opening-weekend box office records.

It isn't just Earth's mightiest heroes that are saving the movie business, although Captain Marvel also played her part. The live-action reboot of Aladdin, the fourth installment of Toy Story, and the mystery thriller Us all pulled moviegoers off the couch and into theaters. Spider-Man: Far From Home just pulled into the top five, with a record-breaking $39 million opening last Tuesday, eventually raking in $395 million in domestic box office in its first 10 days.  

Perspective is needed

Not even managing to match 2018's box office totals might seem to confirm the notion that 2019 has been disappointing. But taking a long-term perspective provides a better viewpoint in which to assess the numbers. 2018's results were extremely strong, with the domestic box office totaling $11.9 billion -- up nearly 7% year over year, and a new industry record. Worldwide ticket sales were no slouch either, at $41.7 billion. Admissions for the year increased by 1.3 million patrons, up more than 5% versus 2017. In that light, keeping pace with those numbers in 2019 was actually a solid achievement for the industry. 

Some skeptics point to the rising cost of tickets as the biggest thing keeping people away from theaters -- but that simply isn't true. The average movie ticket clocked in at $9.11 last year, up less than 1.5% from 2017, according to the National Association of Theater Owners (NATO). The price of admission has been remarkably stable over time, as the average ticket price was $2.43 in 1978 -- or $9.41 when adjusted for inflation -- even higher than last year. 

Many also believe that now that consumers can stream their favorite movies at home with services like Netflix and Disney's Hulu, they'll simply have no reason to venture out to theaters. NATO put those rumors to rest with a survey it commissioned last year. It was conducted by Ernst & Young's Quantitative Economics and Statistics group, and it found that respondents who had seen eight or more movies during the previous 12 months were also among the most voracious consumers of content at home -- viewing eight or more hours of streaming content each week. 

This illustrates not only that streaming not a death knell for movie theaters, but that moviegoers are still willing to venture out -- when there's compelling content.

Theater images of a clapper board and film reels against a smokey, spotlit backdrop.

Image source: Getty Images.

What's to come

It's important to remember that there are still a number of potential blockbusters coming that could result in another record year at the movies. The live-action/CGI reboot of The Lion King along with Fast & Furious Presents: Hobbs & Shaw, It: Chapter 2, Frozen 2, and Star Wars: The Rise of Skywalker are all waiting in the wings.

While 2019 may not top last year's lofty record, the summer box office isn't nearly in the dire straits that some would have you believe. That means now might be a good time to invest in your favorite theater stocks before the market comes to its senses.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

IMAX Corporation Stock Quote
IMAX Corporation
IMAX
$16.70 (-1.18%) $0.20
Cinemark Holdings, Inc. Stock Quote
Cinemark Holdings, Inc.
CNK
$15.42 (-2.10%) $0.33
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$29.01 (-4.19%) $-1.27

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