It's a plot twist that few saw coming. Disney (DIS 0.18%) has gone from being a villain of the multiplex industry to rising up as a potential savior. Marvel's Shang-Chi and the Legend of the Ten Rings shattered the box-office record for a Labor Day weekend screening. Black Widow, also put out by Disney, continues to be this year's highest-grossing domestic release.
Now Disney is making its next Marvel release, Eternals, available exclusively to local movie theaters for the first 45 days after an early November premiere. Disney's next six films will not be available on streaming services, including its own Disney+ or Hulu, until 30 to 45 days after a theatrical run.
This is great news for AMC Entertainment Holdings (AMC 1.35%). It's also obviously a welcome development for rival exhibitors Cineworld Group (CINE +0.00%) (CNWGY +0.00%) and Cinemark Holdings (CNK 1.88%) as well as multiplex enhancers Imax (IMAX 0.53%) and National CineMedia (NCMI 0.15%).
Image source: Getty Images.
Reel impact
Disney's move doesn't exactly bring us back to pre-pandemic studio practices. Movie houses used to typically enjoy at least three months of screening exclusivity. Getting half that amount (or 30 days in the case of Disney's animated full-length feature Encanto come Thanksgiving) is as good as it's going to get in the new normal.
AMC CEO Adam Aron didn't waste any time in relishing the announcement.
Huge Step Forward! Kudos to @Disney for news that is extremely good for AMC. All Disney movies through year-end to have an "exclusive window" in movie theatres, before they go to the home. This is big! A smart, wise decision by Disney. AMC will sell boatloads of tickets for you! pic.twitter.com/zzb5rFDQCt
— Adam Aron (@CEOAdam) September 10, 2021
Disney is the top dog in Hollywood. It put out all five of the country's highest grossing films in 2019. This move should make movies pop early, even if the tail won't be as long as before. It will benefit AMC, of course, but what about all of the other theater-related plays that haven't already appreciated the way that the leading multiplex operator has over the past year?
AMC stock has popped eightfold over the past year, and you can stack that on top of a share count that has soared fivefold in that time. AMC has done a lot of things right to increase its market share and mindshare through the pandemic, but if folks are going to AMC to catch Eternals or Encanto in November, then Cineworld's Regal chain and Cinemark will also be major beneficiaries.
Moving beyond the past two years of depressed results for multiplex operators, the valuation gap is substantial if we look out to 2022. Cineworld is fetching an enterprise value that is three times the $9.6 billion in revenue it's expected to report next year. Smaller Cinemark's multiple is less than two times the $5.4 billion analysts see on the top line. AMC's enterprise multiple is nearly eight times next year's projected revenue.
Imax and in-theater advertising specialist National CineMedia will also be big winners. The blockbusters that folks are gravitating to in their theatrical outings are often Imax screenings that deliver super-size viewing experiences. Advertisers wanting to reach moviegoers who are harder to reach streaming from home on ad-free platforms will turn to National CineMedia now. In the same past year that has seen AMC stock take off, Imax is losing to the market with a 14% gain. National CineMedia is much lower now than it was a year ago.
AMC is going to be a winner with Disney's move. We're seeing other studios also ease up on making films available to stream at home through subscription services or on-demand options the same day they hit the silver screen. However, this is welcome news for all movie theater stocks. Out-of-favor rivals and other theater specialists will have potentially greater upside as they close the valuation gap. Screening for value among the silver screen stocks is the best way to get to a Hollywood ending.
