I’ll try to keep the discussion this week to some positive industry indicators that will take (according to Google) around four minutes to read. That’s the least I can do after two weeks of lengthy dissertations on the current Writers Guild of American and SAG-AFTRA strikes against the Alliance of Motion Picture and Television Producers (AMPTP).
And I’ll not mention “Barbie” or “Oppenheimer” except as a public service announcement. You know your movie has reached an epic level of success when media outlets start getting press releases from completely unrelated tech companies mentioning title(s) in hopes of getting some recognition by tying themselves to a blockbuster film(s). That’s what happened this week when an announcement from NordPass hit the wires. The company specializes in password management and conducted a recent study of leaked database credentials discovering nine million passwords that referenced “Barbie” and “Oppenheimer.” So, be warned people, don’t use this summer’s biggest blockbusters as your passwords. If they happen to be the only words you can remember, at least combine the titles into something creative like… Barbenheimer.
(On a semi-related note, apparently that NordPass media marketing initiative actually worked. After all, had you ever heard of them before?)
This week, when I wasn’t busy trying to come up with new passwords this week, (I think I’m going to go with B@rbenh31mer), I was jumping between earnings calls for a number of media and cinema industry companies. Much like how Wall Street analysts and government economists will pour over employment figures, inflation reports and the consumer price index, the film industry prognosticator relies, in part, on box office returns and corporate earnings announcements.
I’m happy to say that after sitting on hours worth of conference calls listening to c-suite executives expound on EBITDA, GAAP and the benefits of free cash flow, there is primarily good news to convey. Much like after the first quarter of 2023 when most, though not all, cinema operators reported improved figures over the previous three pandemic suppressed years, the second quarter, saw continued gains. Thanks to a more robust release schedule filled with titles such as “The Super Mario Bros. Movie,” exhibitors improved their balance sheets further with increased revenue, greater earnings and, in some cases, reduced debt load. It’s important to note that we only have figures for cinema chains that are public companies, but there seems to be a broad bull market in the exhibition sector during the quarter ending 30 June.
We’ve already explained how IMAX had year-over-year growth during Q2 in revenue (+32% to USD $98 million) and earnings (+29% to USD $33 million). Last week we detailed Cinemark’s second best quarterly earnings report of all time and Wisconsin-based Marcus Theatres’ total revenue for the time frame came to USD $136.9 million, up 5.7% from a year prior. This week Cineplex, in Canada, saw revenue increase by 20.9% to CAD $423.1 million (USD $314.3 million), which allowed them to bring in CAD $176.5 million (USD $131 million) in net income during the second quarter. To put that in perspective, in 2022 their income during Q2 was CAD $1.3 million (USD $910,000). Cineplex even retired CAD $26 (USD $19.3 million) million in bank loans.
Of course, the earnings announcement everyone was eagerly waiting for was that of AMC Theatres and the world’s largest theatre operator did not disappoint. AMC saw a quarterly attendance of 66 million patrons, the company’s best admissions since the fourth quarter of 2019. Revenue grew to USD $1.35 billion, a 15.6% improvement over the same quarter in 2022. Net income may have only been USD $8.6 million for the period ending 30 June, but that beats a loss of USD $121.6 million from a year earlier. AMC seems to be generating operating cash, USD $99.8 million during the quarter and even repurchased USD $42 million of debt.
The company ended the quarter with USD $435 million in cash, down from the USD $631.5 million it had on the first of the year. That might not sound like much but it’s a better liquidity position than most had anticipated AMC being in during the third quarter of 2023. In other words, while AMC is still bogged down by debt, it has stopped some of its pandemic era cash burn. (We will be explaining AMC’s current shareholder settlement, stock conversion and reverse stock split in an upcoming post.)
Rather than go through each and every report, we published all the announcements on CJ Wire over the past three weeks. Feel free to peruse them at your leisure, though be sure not to skip over those from companies such as D-Box which only serve to emphasize a return to more profitable times.
This is not to say everyone in the motion picture business is running low on black ink after reporting Q2 earnings. There were some losses, especially among media conglomerates and mostly in two key areas; streaming losses and reduced advertising revenue. Sure, there were studios such as Sony and Paramount that reported decreased revenue from theatrical distribution, but year-over-year comparisons have always been questionable in that regard. It’s hard to compare a quarter from a year earlier in which you released “Top Gun: Maverick” against one where you had no significant release. The only thing that tells you as a studio executive or investor is that you need more releases so that one or more of them has a chance of becoming a blockbuster.
If you read between the spreadsheet lines (or rows) of studio earnings reports, the news isn’t as bad as it may seem, at least as it pertains to theatrical exhibition. The studios have signaled that the whole idea of releasing a movie in theatres before moving it over to their streaming service with an ample window of, say 60 to 90 days, makes them more money through both distribution channels. (Who knew, right?) Also, it turns out running a streaming service is very costly so some of these companies have announced price increases for their services, signaling that such hikes will be conducted regularly. This slowly eradicates the lower price benefit streamers have had over moviegoing. It may even lead consumers to cancel one of the streaming services they signed up for after cutting their cable cord.
Speaking of which, cord-cutting is seriously dragging down the financials of heavily consolidated media companies like Comcast, Disney, Paramount and Warner Bros. Discovery. The number of cable and satellite television subscribers in the United States has plummeted faster than any of these conglomerates anticipated, dropping to the lowest subscription level in over 30 years. This means that monthly carriage fees (per subscriber fees) for each of the media companies has decreased, as has the advertising revenue generated by smaller audiences. These legacy companies, not to mention Netflix, are now planning to bring advertising to their streaming services, essentially recreating the linear television business model their streaming services helped send into a downward spiral. In other words, after racing to catch Netflix, most of these media companies are returning to some form of their original revenue streams.
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