It feels like old times for AMC Entertainment Holdings (AMC 3.96%). Folks crammed into multiplexes over the holiday weekend, taking in the long-overdue reboot of Paramount's (PARA -2.22%) Top Gun franchise.
The premiere of Top Gun: Maverick went far better than expected, shattering box office records for the Memorial Day weekend. Shares of AMC would go on to surge on the news the moment that the market opened on Tuesday, only to give back most of those gains 20 minutes into the session.
The strong debut is obviously welcome news for AMC and its smaller rivals. However, there is still a problem that exhibitors face. Thankfully there is also a solution that should tackle those industry fears. Let's drum up some tension before getting to the Hollywood ending.
Image source: Getty Images.
The need for speed
Paramount's Top Gun: Maverick flew as high as some of its Navy fighter pilots over the weekend. Domestic ticket sales clocked in at a record $156 million if you include Monday. It shatters the record for that particular weekend, set all the way back in 2007 when Pirates of the Caribbean: At World's End raked in less than $140 million.
How can that possibly be seen as anything less than a positive? Well, there is no AMC Theaters 1 out there. Most of the theater chain's locations have a dozen, two dozen, and sometimes even more screens. Fans turned out for Top Gun: Maverick, but they weren't settling for much of anything else.
Multiplex operators rang up $219 million in domestic ticket sales, short of the $230 million they generated in receipts during the 2019 Memorial Day holiday weekend or $227 million the year before that. In short, we're still not back to pre-pandemic viewership levels.
Weakness outside of the tentpole releases has been problematic. Remember when Shang-Chi and the Legend of the Ten Rings obliterated the Labor Day holiday weekend record last year? Audiences dissipated quickly after the initial weekend. Theatrical releases have shorter tails. With studio release windows narrowing, there isn't much of a point in catching a film at a movie house weeks after the premiere when you know it will be readily available on a streaming platform (if it isn't there already).
Even with this weekend's record-setting debut, box office receipts are still 40% below where they were at this point in 2019. Despite strong showings for The Batman and Doctor Strange in the Multiverse of Madness earlier this year, there are too many empty seats at your local multiplex.
This is what I call a target-rich environment
Lost in the gloom and doom is that the weakness over the past two years has happened by design. Studios have been delaying their prolific releases. Filmmakers now have premium streaming platforms to feed, but there was also general uneasiness about audience turnout during the COVID-19 crisis. We saw this weekend that the appetite for big-screen blockbusters is bouncing back.
Even over the past year when things appear to be normalizing, you can sometimes have a span of months before true blockbuster releases. There have only been two 2022 releases to top $200 million in their domestic theatrical runs. Top Gun: Maverick will obviously be the third flick. We won't have to wait long for the fourth.
Jurassic World: Domination hits theaters at the end of next week. Lightyear lands the following weekend. The spigot is finally open this summer. The pipeline of content that consumers will want to take in at least once on the silver screen is going to be gushing in the coming months, and it could be time to get optimistic about movie theater stocks again.
