Audiences are starting to head back to the cinemas, and companies like AMC Entertainment (AMC 0.75%) -- the world's largest theater chain -- are bringing in revenue again. But a new hybrid model of theatrical releases simultaneous with a streaming debut is also being tested. Motley Fool contributors Jason Hall, Jon Quast, and Nicholas Rossolillo discuss two stocks that could win in this Motley Fool Live segment from "The 5" recorded on Oct. 1.
Jason Hall: It's just frankly, guys, this is just a good opportunity to talk about streaming stocks. Disney (DIS 1.19%) and Scarlett Johansson reached a settlement on Black Widow for those who don't remember. Like many box office stores, the deal that she had with Marvel Studios included bonus is based on the box office of the movies that she's in. Here's the thing, Disney chose to release Black Widow on Disney+ simultaneously to the box office open. Then of course, it announced that earned $60 million on Disney+ soon thereafter. I think it's a win-win for your hands and it's probably a win for most of the performers in the industry. But I wanted to talk about the repercussions here for the model. Is the direct-to-consumer model entirely the future? Is this a hybrid? What's the stock do you think is going to win from this? Jon, tell us your take on this and stock you think can win here.
Jon Quast: Yeah. Thank you, Jason. To your question, I think that the movie industry has changed, but I think it's been in a state of change for quite some time, and I recall an interview about 10 years ago with Steven Spielberg and George Lucas, who were lamenting that the box office is not what it used to be. To illustrate their point, this is something that I pulled up here. ET was in theaters for over a year [laughs]. Star Wars, Back to the Future, Beverly Hills Cop was in theaters for six months, 30 weeks.
Hall: I'd say that's a great thing.
Quast: [laughs] Well, the point is films used to have longevity. You could put in almost any movie, and they were more story-centric, not so much special effects-driven, not below up explosions, big blockbuster events. These were smaller movies and yet they stayed in the theaters for a long time. That's where the incentive was as the production studio, and that incentive has been slowly been eroded away. I really think that streaming is here to stay. I think that many of your non blockbuster special effects, lot of action, I don't think that those are really for the movie theater as much as they used to be in the past. I think those are going to be more of your streaming-centric things. I think that the future of theater is in the premium experience. For your typical movie, people just want to stream it at home. They want to watch it on the couch. For your premium movie theater, I think that they do stand to benefit if there is a beneficiary among movie theaters, and I just wanted to share this from IMAX (IMAX 0.44%). This is recent news here, Newest Marvel franchise Shang-Chi and the Legend of the Ten Rings delivered. I can't read the whole thing because Zoom (ZM 0.56%) is blocking it here, sorry.
Hall: I feel that happens.
Quast: [laughs] Delivered 8.5 million across 399 screens. IMAX global network earned 16.8 million, the best global box office weekend ever in September for IMAX. No, we're not talking relative to 2020 where nobody was going to the theaters.
Hall: That's ever.
Quast: Ever. IMAX's at an all-time good right now. Compare that to something like an AMC, where it's still in the doldrums. I did want to share one more thing here. Sorry. If I'm right and it's the premium experience going forward, I do like IMAX for that reason. Here's something I did want to show. Look at total liabilities over the last five-years. IMAX actually got through the pandemic relatively unscathed. If you look at what AMC has had to take on here with liabilities, it's astronomical. It's a big deal for IMAX too, but relatively better and already coming back down. But check this out. Your average shares outstanding. Over the last five-years, IMAX's share count is actually down, whereas AMC is just issuance stock like crazy to stay afloat. If you're going to go with a movie theater's stock, I'm going with IMAX.
Hall: I love that take. Nick, here's terribly boring except that it's not.
Nicholas Rossolillo: No, IMAX is a cool company. I like that. If you have to pick a movie theater stock, that's awesome. However, I do think like just to reiterate what Jon just at the movie theater business has not been the same for a long time. Netflix just set off the obvious, it's in secular decline. I don't think that's going to change. That doesn't mean it won't be here in 30 years, but at home entertainment, I think it's here to say because of streaming, TV technology, sound technology is improving. We can get a far superior viewing experience without leaving home anymore. That's pretty cool. But I like Disney in this space. Netflix (NFLX 0.10%) is too obvious, but Netflix got the ball rolling with like this direct-to-consumer movie release. Most of their movies never go to a theater. You can just stream it. When it gets released, you can stream it. I like Disney though because of the strength of the films that they have. I also have nifty little site here. Box Office Mojo, IMDb, that's actually an Amazon (AMZN +1.61%) company.
Hall: I was going to say Amazon on that.
Rossolillo: Again, movie theaters, secular decline. In streaming, it's like a growth trend. But in 2019, look at these top-grossing films. Seven of them are Disney. Between Star Wars and Marvel and then the animated films. It could be eight if you consider the Spider-Man: Far From Home.
Hall: They own more than they did it on that year.
Rossolillo: Exactly. Sony (SONY +2.84%) has the rights to Spider-Man. Marvel still get some payoff from that because it's a Marvel Universe story. That's not going to change for the next decade. They have this incredible slate of movies that they can really test out this hybrid model there. They can send it to theaters, get what they can get from theaters, but then do this premium, maybe they continue doing the premium Disney+ model where you pay 30 bucks and then the movie is yours. Maybe they don't, I don't know. But I think the model has forever changed where the theater business will struggle to make money, and movies will just much more quickly just go to a streaming service to acquire and keep subscribers on that platform. As far more profitable, long-term for businesses to have that consistent revenue, and movies are cheaper than ever just produce, which also Disney has a competitive advantage on that front too, different topic. But Disney just all-out, I think will win in this department.
Hall: Well, it's the content king, and that's the key. I said it on Twitter (TWTR +0.00%), and I think it's the most amazing thing, that people will be paying whatever is considered money for the next 100 years to view Disney intellectual property, however people view it. It's one of those rare that for me, that I think it's truly like a forever business. I really think it's incredible what they've built. I'm going to give Jon a little more credit here for IMAX because there is a secular growth opportunity they're participating in and that's in Asia where there are movie theaters being built and there is a lot of growth and there is an expansion of the consumer class that are going out to see movies and is something that a lot of places that people have never even been able to do that. An IMAX is set up for that secular trends, they really are positioned well for that. I'm not going to pick a stock here. I'm going to say you both have done good, and I've said what I think about Disney.
