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Why AMC Entertainment, Cinemark, and Marcus Crashed Hard Today

What happened

Stocks in the movie theater industry had a very bad day on Thursday. As of 3:18 p.m. EST, AMC Entertainment (NYSE: AMC) traded 18.4% lower and Cinemark (NYSE: CNK) showed a 19.5% drop. Smaller rival Marcus Corporation (NYSE: MCS) kept a relatively stiff upper lip with a smaller price cut of 11.2%.

The theater chain operators plunged in unison as major movie studio Warner Bros. announced that its entire slate of films in 2021 will open simultaneously in theaters and on the company's HBO Max video-streaming service. Warner's parent company, telecom giant AT&T (NYSE: T), barely moved on the news.

Image source: Getty Images.

So what

WarnerMedia CEO Jason Kilar announced the scheduling change in an official blog post. The studio has 17 titles planned for the silver screen next year, including highly anticipated films such as Matrix 4, Mortal Kombat, a Dune reboot, and a new installment of the Suicide Squad franchise. The day-and-date release idea will apply to all of them.

Warner will give HBO Max subscribers in the U.S. market access to these films on the same day as their theatrical release. The experiment will actually start in December of this year with Wonder Woman 1984.

The studio's hyper-accelerated streaming releases are different from Walt Disney's (NYSE: DIS) approach to the live-action Mulan movie, which skipped theaters altogether and premiered directly on the Disney+ streaming service instead -- with a $30 premium-content surcharge for the first month. Warner's films won't carry any additional charges.

Now what

The day-and-date releases should boost subscriber counts for HBO Max in a hurry, but the studio is not making friends in the theater sector today. AMC, Marcus, and Cinemark are struggling to keep the lights on due to COVID-19 restrictions and outright theater closings during the pandemic. AMC's stock traded 5% lower in the morning as the company announced a stock offering that will raise $844 million but dilute the value of existing shares.

On the other side of the equation, movie theaters want to find a home for their finished productions and nobody has figured out what works in this strange market. Disney tried the pay-per-view approach, Warner is throwing caution to the wind with an even less traditional release model, and Comcast (NASDAQ: CMCSA) subsidiary Universal Studios is shortening the exclusive window for theater showings to 17 days.

These changes to long-held movie industry traditions are changing the whole entertainment sector in profound ways, and the effects will surely be felt for decades to come. It's no surprise to see theater chains taking Warner's big news on the chin and going down for the count. Other studios may choose to follow Warner's lead here, even if they had started down a different path.

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Anders Bylund owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Comcast and recommends the following options: long January 2021 $60 calls on Walt Disney and short January 2021 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.


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