After Near-Term Revival, U.S. Box Office Will Lose Billions As Pandemic-Born Window Shifts Become Permanent, Analyst Predicts

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The summer box office, starting with today’s long-anticipated release of Universal’s F9, is bringing a renewed sense of optimism about the theatrical movie business.

But Robert Fishman, an exhibition analyst with Wall Street research firm MoffettNathanson, predicts the release of pent-up demand will be followed by a significant box office correction. In a report titled “U.S. Theaters: It’s All About the Windows,” Fishman predicts that grosses in 2022 will shed $2.3 billion, or 20%, compared with 2019 due to shifts in release windows. The report does not look out beyond 2022, but it contains some ominous assessments of the marketplace over the next year-plus.

While Fishman has gone on the record previously with the 2022 estimate, his new report features a “bottom-up” analysis of studios’ current strategies, imagining they had been in place in 2019. The year 2019 is widely used as the benchmark for industry forecasts, as it was the last fully intact year before the coronavirus pandemic started upending the sector in early 2020.

Strategies adopted during the pandemic with theaters shuttered will not disappear, and will limit the revenue potential of movie theaters, Fishman expects. In terms of specific theater companies, the report notes only Cinemark, reaffirming the analyst’s “neutral” rating on its stock and a 12-month price target of $20. The circuit’s shares were up nearly 2% in mid-day trading today, just above $23.

“Now that studios essentially have full flexibility on windowing strategies with increasing
emphasis on favoring self-owned OTT platforms, the supply of theatrical releases from the major Hollywood studios into theaters should be negatively impacted, which would hurt long term attendance trends,” he wrote.

Examining the 2019 calendar through a present-day lens, the analyst estimates a bit more than 70% of ticket sales would stem from exclusive theatrical releases, or $8.2 billion of 2019’s $11.4 billion. About 20% would be non-exclusive theatrical releases, a category including day-and-date releases on Disney+ Premier Access or as no-additional-charge titles on HBO Max or Paramount+. Most of the rest, or 7%, would be films that would likely have skipped the theatrical window altogether to go direct to streaming. (Pixar’s Luca, on Disney+, is one current example.)

When viewed in terms of the number of releases, the change appears even more profound. Fishman estimates that almost 40% of the 2019 slate from Disney, Warner Bros, Universal, Sony and Paramount would have been unlikely to play exclusively in theaters.

Fishman sees an acceleration of moviegoing demand as mask mandates ease, Americans continue re-entering public life and delayed releases line up shoulder to shoulder in multiplexes. Third-quarter box office will approach $2 billion, he estimates, which is about 30% below the comparable period in 2019. The fourth quarter, though, should surpass 2019 and reach just shy of $3 billion in grosses.

Yet Fishman cautioned, “The aggressiveness of studios’ respective windowing strategies is still one of the key unknown variables in our short-term and longer-term forecast.”

Assessing each studio, the analyst said Universal will see “higher cannibalization” due to its more aggressive approach to windows. The studio has made deals with exhibition that could see some non-tentpole titles go to premium video on demand after just 17 days in theaters. Franchise films can make the move after 31 days. Most other studios are favoring the 45-day theatrical exclusive window, so overall Fishman sees an overall 5% hit to the exclusive theatrical box office due to new windows approaches.

It is trickier to predict how the non-exclusive titles will fare. “If Disney continues to push Disney+ Premier Access for its family oriented titles, we would anticipate a higher cannibalization rate,” Fishman wrote. Depending on what Warner Bros, Paramount and Universal decide to do, “we expect a meaningful cannibalization rate on historical box office for these films,” the analyst added. He pegged it at 30%, but noted that the number “could be too conservative.”

Economically, media companies see upside in sacrificing some theatrical revenue. Instead of splitting ticket sales half-and-half (or sometimes a bit more in their favor) with theaters, they can control 80% or more with PVOD or streaming. Disney, the No. 1 studio in market share, charges $30 for Premier Access releases, with the upcoming Marvel release Black Widow slated to be the next to use the format.

Netflix is a potential new element in the mix for 2022, as are Apple and Amazon now that the latter tech giant is about to ingest MGM. Netflix’s recent one-week exclusive with Army of the Dead yielded a bit less than $800,000 from 600 runs, according to industry estimates. But it was a milestone in that it played in Cinemark theaters nationwide. The No. 3 U.S. circuit had previously resisted booking Netflix fare but has become a lot more open to its titles of late as it has ramped back up toward full operation.

“We anticipate a more formal agreement between Netflix and exhibitors to help bring additional attention and eventize some of its key releases going forward,” Fishman wrote. He noted Steven Spielberg’s Amblin Partners deal with Netflix, describing the streaming service as a “helper” for the overall box office.

Fishman sees an incremental $600 million in annual domestic box office from 20 Netflix titles next year — a fraction of the streaming giant’s annual feature output. “Of course, it is unclear how many people nationally would be willing to pay for a Netflix movie only a few weeks ahead of it hitting their already paid for SVOD service on a regular basis,” he acknowledged. Plus Netflix, despite all of its cinephile overtures in taking over the Egyptian Theatre in LA and the Paris in New York, has not seemed particularly eager to take on theatrical as a core part of its business.

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