Not Even the Avengers Can Rescue Movie Theaters

(Bloomberg Opinion) -- Walt Disney Co. is almost single-handedly propping up the U.S. box office this year. That doesn't bode well for the theater industry, because 2019 may be as good as it gets for Disney's movie-making business. 

Just $5.62 billion of tickets have been sold in North American movie theaters, about a 10% drop from the first half of last year, according to Box Office Mojo. Disney, which has released a blockbuster a month since March, starting with “Captain Marvel,” drove more than a third of those ticket sales. That's by far the biggest share the company has ever taken – and that's not including the films Disney inherited from its recent $85 billion acquisition of 21st Century Fox. 

Since hitting the big screen in April, Disney's “Avengers: Endgame,” another film from its Marvel collection, has come extremely close to unseating “Avatar” as the world's highest-grossing film of all time, capturing $2.76 billion in ticket sales globally. Last weekend, it was re-released with bonus footage in a final push to claim the title. 

But while Disney works on breaking that record, theater operator AMC Entertainment Holdings Inc. is reluctantly shattering another: Its stock dropped to an all-time low on Tuesday. AMC has declined 25% year to date, amid sluggish attendance at its multiplexes. After its market value slid below the $1 billion mark last week, the company is worth barely more than the $835 million it paid to acquire Carmike Cinemas three years ago. 

Theater businesses have become increasingly dependent on food and beverage sales as they get squeezed by studios like Disney when it comes to ticket revenue, so AMC and its shrinking number of rivals have hoped that cinema upgrades and better food would boost turnout. AMC even noted prominently in its latest 10-K filing that 345 of its theaters now have recliner seating and that alcohol is offered in nearly as many.

Problem is, in the age of Netflix and a burgeoning market of copycats, a beer and comfy seat apparently aren't enough to draw a sizable audience away from their own couches. Only big-budget, superhero blockbusters and remakes of beloved classics seem to do that – and those are Disney's bread and butter. This summer's Disney/Pixar lineup is a blast from the 1990s, with “Toy Story: 4” currently in theaters and “The Lion King” opening July 19. Among the company's other coming attractions are “Frozen 2” and “Star Wars: The Rise of Skywalker.” 

Tuesday does mark the domestic debut of "Spider-Man: Far From Home,” which is distributed by Sony Corp., not Disney, even though it's part of the Marvel Cinematic Universe. Boxoffice Pro projects a strong $120 million opening weekend, which would help businesses like AMC. However, the film's hilariously bad marketing posters were mocked on social media for what looked like a beginner Photoshop job, with Samuel L. Jackson using the hashtag #headsgonroll. It speaks to the difference in quality of a Disney project. 

That said, Disney's success this year will be quite difficult to repeat, as I wrote in April. Its studios have fewer blockbusters slated for next year, and it's also slowing down production of future “Star Wars” films. After Episode IX, the next Lucasfilm release isn't until December 2022. Disney has also delayed “Avatar 2,” a franchise that came with its Fox deal, until December 2021. That means any resurgence in the theater industry may be at least two years away. 

As for the theaters themselves, there's the question of whether Disney decides to reserve future smaller Fox films for its own streaming apps instead of sending them to the big screen. Disney+, the company's version of Netflix, launches in November, and it plans to somehow bundle the product with Hulu, which it now controls. While Disney tries to drive subscriptions for those services, it'll need to make tough calls about where to direct spending and premiere its content. Its competitors, such as Warner Bros. parent AT&T Inc. and Universal Pictures parent Comcast Corp., will have to do the same. 

Disney's tent-pole pictures may always attract theatergoers. Whether that's enough to keep cinemas alive is another story.

Furthermore, the average ticket price fell this year for the first time since 1993, Box Office Mojo data show.(Some studios may also look to shorten the amount of time their flicks stay in theaters, making snacks all the more crucial to a cinema's bottom line.)

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

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