Will Movie Theaters Survive or Even Thrive in 2022 and Beyond?

Despite the meme stock frenzy that has pushed AMC Entertainment Holdings (AMC) stock to new highs, there are still some big questions about what the movie theater business might look like beyond 2021. In this Fool Live clip, recorded on June 15, Millionacres real estate analyst Matt Frankel, CFP, and editor Deidre Woollard discuss where they see the theater industry heading. 

Deidre Woollard: So what do you think about the future of movie theaters, in general? Do you think EPR (EPR -0.10%) is going to gradually, I believe at the start of the pandemic, it was talking about the fact that having AMC as the biggest tenant might be an issue, is that something that they're looking at gradually adding more things and then diluting how important AMC is to the overall REIT?

Matt Frankel: They haven't specifically said it, but when they talk about getting into big growth mode again, I don't get the vibe they're going to buy more movie theaters. I think the concentration is going to go down naturally. If they spend $1 billion on water parks and ski resorts and casinos and things like that, it will naturally will reduce the concentration in movie theaters. I see that happening over time. If Simon owns the A-malls, EPR owns the A-movie theaters. There are about 40,000 movie theaters in the U.S. and most experts agree we need about 30,000; the industry can support about 30,000. The 10,000 that are going to close are not the ones in EPR's portfolio, those are the ones that are underperforming, the ones that are half-full even when there's a new movie out, things like that. EPR, I don't think they're going to expand that side of their portfolio. I think the movie theater business will be just fine, people want to go to the theaters. Even Disney (DIS -1.01%) said the future for their Pixar movies is not to put it on Disney+ at the same time, it's to put it right to the theaters, I think Warner made a similar announcement that beyond 2021, things are going to go right to the theaters and not on HBO Max. For the rest of 2021, box office revenues are going to get some subsistence level. Man, I can talk today. It's time to get off Live. Too many meetings today, I'm talked out. But the level is going to be really low for the rest of 2021. In 2022, when everyone stops putting things on streaming services at the same time as the theater releases, you're going to see the movie theater business really pop back. Movie theaters have co-existed with streaming for a long time now, it's not that streaming is going to cause the demise of the movie theater overnight. I mentioned that ticket sales peaked in 2002, they haven't declined by a ton, and per seat revenue has increased so much because the younger generations want things like the fancy seats, they want better dining options in theaters, they want theaters that have full bars and then not just like an 80-ounce Coca-Cola for $20 or whatever you used to buy. They want more of these fancier options and it's increased revenue to the point where it's even overtaken the decline in ticket sales that resulted from streaming. I think the movie theater business and streaming can really co-exist well. How long has Netflix (NFLX 1.74%) been streaming for? Did it kill the movie theater business? No. Now, even the streaming services that have great movie studios like Disney are saying that they are going to be a theater first model. I think there's a reason they are doing that, it's because that's where they can generate the most revenue. If they didn't think people are going to go to the theaters, they wouldn't be doing that. If Disney thought that they could make more money by releasing things on Disney+ for $30, that's exactly what they would do. Disney is a business, they want to make money. I think movie theaters, in general, will be just fine. If you own any other REITs that have a big movie theater concentration like Realty Income (O 0.24%) or Store Capital (STOR) or any of those, I think you don't have anything really to worry about.