Theater Price Hikes ‘Could Force Some People To Sit On Their Couch Instead', Analyst Says

Buckle up, folks! As the 2023 Academy Awards draws closer, we're about to take a thrilling ride into the future of the silver screen. Join us, as we delve into what's at play for the box office in the year ahead. Here to spill the cinematic beans is none other than Chad Biden McQueary, our senior gaming, lodging, and theaters analyst, alongside the ever-insightful Alexandra Canal from Yahoo Finance. Let's dive right in.

Great Expectations: A Star-Studded Night Awaits

As we gear up for the Oscars, one thing is clear – viewership is on the rise. The movie industry has a delightful mix of both big-budget Blockbusters and the charming specialty Art House films. With this exciting cocktail, our expectations are through the roof. Picture this: after the exhilarating March Madness, the clock strikes six, and the masses settle in for a night of cinematic brilliance. The Oscars, scheduled at eight, are the icing on the cake, preceded by the glamorous red carpet show. As for the winners, well, my lips are sealed on that one. But what I can share is that the audience is showing a renewed love for theaters, as evidenced by the January and February results.

Box Office Rollercoaster: Up, Down, and Back Again

Hold onto your popcorn, folks, because here's where it gets intriguing. While people are flocking back to the theaters, we've trimmed our forecast for 2023 box office revenues by 10%, settling at 8.4 billion. The biggest driving factor behind this decision is the mix of films. Blockbusters are bouncing back with a vengeance and are set to reach about 85% of pre-pandemic levels in 2023. But the kicker is that this recovery is more heavily weighted towards the latter part of the year.

Where we're facing some turbulence is in the realm of specialty Art House films. These hidden gems, despite receiving rave reviews, aren't drawing in the same footfall and admission revenue as they did in the past. Our outlook for these non-Blockbusters, which typically account for about 40% of total box office revenue, is a tad more conservative.

Ticket Pricing Dilemma: To Charge or Not to Charge?

Now, let's talk about a hot topic that's got Wall Street and Main Street buzzing - variable pricing. The IMAX CEO, Rich Gelfon, is not a fan, and for good reason. It's a tricky situation. Variable pricing essentially penalizes the loyal moviegoers who make up the backbone of the industry. These are the folks who show up six to twelve times a year to soak in the magic of the silver screen.

In a world with rising inflation, jacking up ticket prices might not be the wisest move. Thankfully, many companies have found success with subscription models or discounted options, offering a 10 to 20 percent discount. But dynamic pricing, especially in a consumer market that's already feeling the pinch, is a slippery slope.

History has shown that this industry can weather recessions, but pushing up prices could have folks opting for their cozy couches over a night out at the movies.

AMC: Lights, Shadows, and the Critical Meeting

Ah, the curious case of AMC. The company that's been making headlines with its survival tactics. We've got a stock recommendation for AMC, with an underperform status and a 7.61 price target. AMC is gearing up for a critical meeting, where shareholders will decide whether to increase authorized shares and undergo a ten to one reverse split.

Here's the deal - we've got high hopes for AMC's success. We want every player in the industry to thrive, and that includes AMC. But, the road ahead is undeniably challenging. In our model, a return to pre-pandemic levels doesn't seem likely until 2024. It's a tricky journey with the backdrop of higher inflation, increased labor and utility costs, and hefty rent payments.

So, as we eagerly anticipate the outcome of the upcoming meeting, we're crossing our fingers for AMC and every other theater chain to navigate these treacherous waters successfully.

In the ever-evolving world of cinema, one thing is certain - the show must go on. And whether it's the glitzy red carpet at the Oscars, the dazzling Blockbusters, or the hidden gems of Art House films, we're in for a cinematic rollercoaster that promises to keep us on the edge of our seats. Lights, camera, action – the magic of the movies is here to stay.