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AMC Stock: What Comparing 2021's Top Films to 2019's Tells Investors

Superheroes and franchises led the way both years, but the numbers are very different.

"Spider-Man: No Way Home" gave AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report and Cinemark Holdings (CNK) - Get Cinemark Holdings, Inc. Report a pretty big holiday gift. The movie became the biggest hit of 2021 bringing in over $400 million in domestic box office through Christmas Day.

That was good news for the movie theater business, but it's more an anomaly than a sign that the box office has returned to its pre-pandemic glory days. The top-ten films at the domestic box office earned more than twice as much money in 2019 ($4.3 billion) compared to the top ten did in 2021 ($1.8 billion).

2019 Box Office Top 10
2021 Box Office Top 10

Superheoes and Franchises Rule the Box Office

With the exception of 2021's "Free Guy," which came from Walt Disney's (DIS) - Get Walt Disney Company Report 20th Century Studios divison, every film in the top ten in both 2019 stars either a well-known superheor or comes from an established franchise.  

That has been the norm for a long time -- franchises and sequels produce big box office -- but 2021's returns suggest that while these movies still bring in theatergoers, the nunber of them has dropped. AMC and Cinemark certainly hope that the lingering pandemic has led to the drop.

The problem for shareholders in these companies is that theatrical windows -- the period in which a movie plays in theaters before people can watch them at home -- have shrunk. That leads to lower revenues for films in theaters, according to a study commissioned by the National Association of Theater Owners:

The findings are significant, as shrinking revenues in the home have put pressure on distributors to find a way to boost the fortunes of a home segment in secular decline. Shrinking the length of the theatrical release window has been the mechanism most often cited as a means to that end. This study finds that shorter release windows not only damage theatrical revenues—as expected—they damage home revenues as well.

The problem is that while shorter windows might be bad for traditional theatrical box office and, perhaps, for other revenue, that's not how major film producers inclduing Disney and Comcast (CMCSA) - Get Comcast Corporation Class A Report (Universal) neccessarily value their films. Yes, both companies want to make money in theaters, but they also want to drive subscribers to their streaming services.

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AMC and Cinemark Can Expect a Better 2022

The good news for AMC and Cinemark shareholders is that the pandemic has not ended. While a full box office recovery may be in doubt, a report from Grower Street Analytics suggests that numbers will bounce back in the coming year, Deadline reported.

The domestic, Chinese and international markets are all poised for improvement in 2022. However, says Gower Street, the most notable gain is expected to be in North America. Currently projected to hit $9.2B in 2022, up from an estimated $4.4B in 2021, that would see it move back up to its pre-pandemic position as the No. 1 global box office market, having been overtaken by China in both 2020 and 2021 — presuming the PRC comes in at the firm’s $8.2B 2022 forecast.

Grower does not see global box office recovering fully until 2023. The question -- and it's a fair one -- remains, "will people ever return to theaters in large numbers for non-blockbsuters?"

"While certain segments of moviegoers are closer to pre-pandemic levels, older moviegoers and family audiences have been slower to return," according to the Associated Press. "That’s shrunk already narrow opportunities for non-franchise films to find audiences. Well before the pandemic, superheroes and spectacles were already a bigger and bigger slice of the box-office pie. Right now, they’re closer to the whole meal."

David A. Gross, who runs the movie consultancy Franchise Entertainment,told the AP that while superhero films have bounced back to about 75% of their pre-pandemic business, other segments have not fared as well. Adult, character-driven genres (characters who don't wear masks or have superpowers) are down "down 66% to 75% from normal, and family films are at least than 50% off," AP reported.

Even Walt Disney CEO Bob Chapek, a man whose company had seven of the top 10 2021 theatrical releases in 2021, remains non-commital on exactly how his company will use theaters going forward. He did acknowledge during the company's fourth-quarter earnings call that theaters have been a driver for the company, but he seemed open to different types of releases.

We're watching very, very carefully different types of movies to see how the different components of the demographics of that market come back, and we're watching very carefully our family films as they're released over the next couple of months to make sure that that market will come back to theatrical exhibition as the general entertainment. Let's say, the films that appeal to a younger target audience have come back. And so, we're sticking with our plan of flexibility because we're still unsure in terms of how the marketplace is going to react when family films come back with a theatrical first window.

Disney has released some films on Disney+ at the same time as they premiere in theaters but at an additional charge. The company has also given its most-recent films theatre-only windows that are much shorter than what has been traditional before bringing them to Disney+ without an upcharge.