It's not easy running a movie theater chain these days. Domestic ticket sales are clocking in at $470 million this year, 57% below where we were two years ago at this point. It's not as if 2020 were a fluke. We're 53% to 59% below where we were in the last four pre-pandemic years.
What's holding the industry back? It's a question that I imagine both AMC Entertainment Holdings (AMC) bulls and bears would like to see answered. Despite trading 74% below last year's highs, AMC's market cap is nearly 15 times higher than it was two years ago at this time selling more than double the tickets. Let's debunk some theories and myths.
We don't talk about "Encanto"
A popular thesis for the lack of movie patrons is that too many movies are legally available at home the day they hit theaters because they're playing on popular streaming services. AT&T's (T -3.79%) WarnerMedia put all its 2021 releases on HBO Max for the first 30 days that they were screening at the theater. Many of the leading movie studios are owned by companies that have interests in premium streaming platforms. AT&T owns Warner Bros. and HBO.
Let's throw an enchanted Colombian village into the mix to squash that notion. Disney (DIS 2.46%) gave Encanto an entire month to play exclusively in theaters. It wasn't just any 30 days, as we're talking about the seasonally potent extended Thanksgiving weekend through late December when schools were letting out for the holiday break. It wasn't exactly a bomb -- generating $94 million in domestic box office receipts and another $143 million internationally -- but it fell well short of Disney's pre-pandemic animated features.
The movie then became available to Disney+ subscribers at no additional charge starting Christmas Eve, and that is where it became a franchise property for the House of Mouse. Encanto has become the fastest title available on Disney+ to cross 200 million hours viewed. Let's dissect that milestone. The movie is 109 minutes long, so we're talking about more than 110 million families viewing it at home. Fewer than 10 million people in the U.S. had seen it at a theater the month before.
Moviemakers now know that if you want a movie to be seen, theatrical distribution isn't as important as it used to be. It's not just about more eyeballs to be had now at home. Encanto's soundtrack didn't top the music charts until it became more widespread after its theatrical run.
Multiplex operators aren't happy about the narrowing of theatrical release windows, but you can't put that genie back into the bottle now that the content creators know where the real value lies in a new project. However, even the films that have tried to honor longer theatrical release windows are bombing. Last year's remake of West Side Story hit theaters exclusively with rave reviews. It also had a generational director in Stephen Spielberg at the helm. That didn't help.
It's not the content holding theaters back. Many of the films flopping at the multiplex have solid critic and audience scores. It's not COVID-19. Other leisure industries have bounced back a lot faster. The country's two leading theme park operators have posted record results for their domestic attractions this latest earnings season.
The only thing working for movie theaters these days is high-profile action movies. Five of the six highest-grossing films last year were Marvel movies. Other top draws included the latest installment in the Fast & Furious and James Bond franchises, even though they fared historically worse than previous entries. The problem for the industry is that these big-budget superhero, action, and sci-fi flicks aren't cheap or easy to produce. Most of a theater's screens are being lightly attended.
Until AMC and its smaller peers can answer the question of what to do with the rest of its screens -- and no, it's not as if an AMC with 24 screens could've been playing Spider-Man: No Way Home on all two dozen of its digital projectors -- it's going to be a challenge for the industry. AMC has the right idea by renting out screens to affluent moviegoers so they can enjoy big-picture screenings in privacy, but it's going to take more out-of-the-box thinking like that to get folks back into its big box. Consumers have come to prioritize their film consumption after the pandemic. They'll see just big-budget productions that beg to be splattered on a giant screen with booming audio and forgivingly chatty audiences. It's no surprise that IMAX (IMAX 2.62%) is the one multiplex play that's holding up better, down just 22% from last year's high. It offers the super-sized experience that's clicking with film buffs. It is IMAX -- not AMC -- that is widely expected to return to profitability this year. IMAX is built for the new normal. AMC and the rest of the publicly traded movie theater stocks need to figure out the reinvention process.