It's show time for AMC Entertainment Holdings (NYSE:AMC). Tenet -- the Christopher Nolan-directed time-bending thriller put out AT&T's (NYSE:T) Warner Bros. studio -- hits theaters this weekend. It will be the biggest movie in this industry's otherwise forgettable summer season. AMC Entertainment and its peers will be as close to full strength as it's been since it shuttered all of its theaters nearly six months ago.
AMC announced after Tuesday's market close that it will have 420 -- or 70% -- of its theaters open this weekend, up from 62% of its movie houses that were handing over buckets of buttered popcorn last weekend. The news sent the stock higher. Smaller multiplex operators Cinemark Holdings (NYSE:CNK) and Regal parent Cineworld Group (LSE:CINE) (OTC:CNWGY) have also been inching higher since getting back to business. All of the momentum is leading up to this weekend, and the stakes are high.
It all comes down to a palindrome
This weekend will tell you everything you need to know about the near-term prospects of the industry. Tenet is a palindrome, and it's also the beginning and the end of the summer season for the industry. Everything that has come out in the past two weeks is fluff. The rest of September isn't very exciting.
The biggest films opening in the next three weeks by AMC's own press release admission -- Broken Hearts Gallery, Infidel, and Greenland -- aren't going to be major draws. Have you heard of any of them? Most of the potential blockbusters that had to nix their spring and summer releases pushed out their premieres to next summer, later this year, or went to direct digital delivery. Tenet is the one that decided to tough it out, and this could be huge for AT&T if it does exceed expectations.
Here's where things get interesting. It will be mostly empty seats at AMC, Cinemark, and Cineworld for Tenet screenings, but it's not their fault. There will be sellouts, but the theaters are limited in the number of seats they are making available to abide by social distancing norms. AMC is selling no more than 40% of its available seats right now, and less than that based on municipality guidelines. This isn't necessarily a bad thing.
Tenet will have a longer run than usual, partly because of the low capacity levels and also because there's a lack of upcoming content to push it out of the multiplex. It's going to have a long tail, and this holiday weekend numbers might still surprise on the upside. Multiplex operators will be devoting a lot of their screens to Tenet, and why not? Why waste them on more screen time for Unhinged or The Personal History of David Copperfield?
The economy is in a hard place. Consumer discretionary income is at a premium, but the same can be said about escapism. Movie theaters have struggled through the first two weekends since reopening, but the third time could be the charm. It better be.
If AMC, Cinemark, and Cineworld have any shot at salvaging this quarter -- and possibly this year -- it will happen this weekend. It's not going to be a Hollywood ending for shareholders if things don't go well with Tenet this weekend.