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How the Coronavirus Is Ruining the Movie Theater Industry

By Keith Noonan - Updated Mar 16, 2020 at 6:02PM

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Things are going to get worse for the film industry before they get better.

Following the worst weekend box office performance in roughly two decades, California and New York have started to implement mandatory movie theater closings due to the novel coronavirus outbreak.

With last weekend's cumulative North American ticket sales totaling just $55.3 million, it's clear that potential moviegoers were already avoiding theaters. Two of the the biggest movie-market states in the U.S. are now implementing compulsory shutdowns for theaters, and additional state-level or federal actions will likely follow. It's shaping up to be a brutal year for the movie theater industry. 

Empty theater seats.

Image source: Getty Images.

What does it mean for the movie industry?

The CDC recently advised that people should avoid gatherings of more than 50 people in order to minimize the spread of the novel coronavirus. The theater closures in California and New York come on the heels of government-imposed theater shutdowns in coronavirus hot spots including China and Italy, and there's a good chance that additional closures will occur in the U.S. and worldwide. 

Chains including AMC Holdings (AMC -3.74%), Cinemark (CNK -1.95%), and IMAX (IMAX -0.44%) have a dismal outlook for the rest of the year, and the challenges presented by the novel coronavirus have resulted in steep valuation declines for theater operators. With the coronavirus making it undesirable to venture out, streaming distribution is the name of the game in entertainment.

Streaming-focused companies including Netflix and Roku may prove relatively resilient and could see increased engagement as a result of people opting to stay at home. However, entertainment companies including Disney and Comcast are facing pressure on multiple fronts, and their respective streaming businesses probably won't be enough to offset lost business at the box office and theme parks. 

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Stocks Mentioned

IMAX Corporation Stock Quote
IMAX Corporation
$15.68 (-0.44%) $0.07
Cinemark Holdings, Inc. Stock Quote
Cinemark Holdings, Inc.
$15.61 (-1.95%) $0.31
AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$11.58 (-3.74%) $0.45
The Walt Disney Company Stock Quote
The Walt Disney Company
$105.83 (3.33%) $3.41
Netflix, Inc. Stock Quote
Netflix, Inc.
$187.44 (0.58%) $1.09
Comcast Corporation Stock Quote
Comcast Corporation
$42.88 (2.07%) $0.87
Roku Stock Quote
$91.77 (-2.58%) $-2.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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