The premieres of Barbie y Oppenheimer have returned to bring joy to movie theaters thanks to historic box office numbers, but Hollywood experts and analysts they fear that the momentum of the film industry may soon stall.
“If we went into a time machine, rewinded and went back a few months, no one would have been able to predict this,” sums up Paul Dergarabedian, principal analyst for the audiovisual sector for Comscore, in an interview with Business Insider.
Although the films have experienced very successful releases, some industry experts fear that this will not translate into a big screen renaissance after the years lost during the pandemic.
After plummeting during the pandemic, movie sales are slowly recovering.
Wedbush Securities
“Both films benefited from the phenomenon Barbenheimer that went viral on social networks, in addition to having very intense marketing campaigns and the support of the fans,” he told Business Insider Alicia Reese, equity research analyst covering the entertainment industry at Wedbush Securities. But Reese is skeptical that its success will spread to other titles.
“Barbenheimer it has provided a much-needed distraction in the midst of the commotion that has engulfed Hollywood in recent months. The industry is paralyzed by strikes by screenwriters and actors, who are demanding better wages and protection from the prospect of potential substitution by artificial intelligence.”
Four industry veterans you’ve spoken to Business Insider agree that unless the strikes are resolved soon, the much-needed revival of the film industry will evaporate.
“The pandemic wreaked havoc on the release schedule, well, a prolonged strike would be just as damaging,” David A. Gross, a director at film consultancy Franchise Entertainment Research and a former studio marketing executive, said by email.
Strikes put pressure on audiovisual giants
For now, neither unions nor employers seem willing to give an inch, and it is not clear which side of the conflict has the upper hand.
Many actors and screenwriters can count on regular residual payments from the series or movies they’ve already made, but the longer the strike lasts, the emptier their pockets will be. And although the audiovisual companies have not yet been affected by the strike, since they work with a large amount of already recorded content, will suffer if the strikes go on for months.
Movie theaters and studios would be among the first victims if the labor dispute drags on. Reese and Pachter warn that fall movies could be flops because, without promotional tours, actors won’t be able to draw audiences’ attention to the premieres of their releases, which is what made them so successful. Barbie.
“The strike has to end before Octoberbecause you really need the press events that month to get the box office going in November,” Reese explains. “The earlier movies don’t have the big names that require a tour press”.
Believe it or not, Barbie and Oppenheimer are about death
Without the crucial promotional leverage of press tours with Hollywood stars, some studios are already they are delaying the release of movies fall betting that a movie drought in late 2023 is preferable to wasting bullets of potential blockbusters with empty theaters. On the other hand, this means that cinemas may be left empty-handed in the second half of the year.
Traditional television networks risk alienating audiences and advertisers if they they resort too much to unscripted shows and rerunswhich, according to Reese, could further accelerate the abandonment of conventional television.
And although the companies streaming they have large content catalogs and large production channels, this does not make them immune to strikes, says Gross. Consumers always have an insatiable appetite for new shows and movies, and TV companies streaming that cannot keep up with the issuance of new content may experience higher churn rates.
“Los streamers they can’t afford to defraud their subscribers,” says Gross. “If Wall Street sees subscriber numbers drop because of strikes, stock prices will fall too“.
Among the industry experts with whom he has spoken Business Insider There is consensus that the pressure on the producers intensified when the actors joined the writers in their claims.
“All the elements are fundamental to making movies,” says Dergarabedian. “But if you don’t have those two, you don’t have a movie or any content.”
If the actors had an agreement and the writers went on strike alone, Gross believes the work stoppage could last longer, as the impact would not be as immediate. But now that both guilds are holding out, Hollywood is at a standstill, and the consequences could soon be devastating for everyone.
“Imagine that the team of actors from Barbie y Oppenheimer I wouldn’t have been able to go out and talk about these movies,” says Dergarabedian. “I don’t know if we’d be talking about Barbenheimer“.
Dergarabedian adds: “This weekend may be a turning point for both strikes.”
All entertainment company stocks carry risks, but some will hold up better during strikes
Hollywood’s first dual strike since 1960 is a dead end for all involved, Dergarabedian and Gross insist. However, some companies in the sector will hold up better than others.
In a mid-July note on the film industry, Reese and Pachter noted three film-related companies that are best positioned to survive in this difficult environment.
Reese and Pachter name IMAX (IMAX) as best placed to catch the film industry rebound, even before the impressive debut weekend of Barbenheimer. The company posted strong results this week and its shares rose 11%.
The theater chain is gaining market share as viewers increasingly prioritize experiences premium at the cinema. Another tailwind for IMAX is its international presence, as it continues to increase its number of local language titles while benefiting from China’s ongoing economic recovery. Also, while movie delays are a risk if actors are prevented from promoting themselves, the company doesn’t seem to mind.
“We believe that studios will be reluctant to move movies from the theater and sacrifice an already agreed IMAX window,” said Richard Gelfond, CEO of IMAX, at the conference on the company’s second quarter results held on July 26. Later, he added that the first half of 2024 should not be affected either.
“They’ve already been starving us”: Hollywood actors on strike over wages and the threat of AI are prepared for “war”
Wedbush analysts believe that Cinemark (CNK) is also on the rise, as the company’s disciplined executives continue to pay off their debts and consolidate in the Latin American market. JPMorgan’s David Karnovsky recently downgraded Cinemark’s stock to neutral alluding to film delays due to strikes like a headwind, even if the box office does better.
The actions of National CineMedia (NCMI), which runs ads on movie screens, are trading for just pennies, but could rebound if the company survives this advertising downturn, Reese and Pachter write.
The company is coming off a severe blow when theaters closed during the pandemic. There is no good news in the price of its shares for now, but it could be an interesting value for those who dare to bet on them.
Analysts give each of the aforementioned stocks an Outperform rating, as well as price targets that imply their shares have between 23% and 47% upside ahead of them.
In addition, companies of streaming as FuboTV (FUBO), which replaces pay television, and Netflix (NFLX), an industry leader, are well positioned at the moment, Wedbush’s Pachter explains to Business Insider.
FuboTV should be the winning horse, as it’s a solid alternative for those willing to ditch cable TV but still need to keep up with the latest sports news. It is also a company that will not be affected by strikes, says Pachter. The Wedbush analyst’s $5 (4.54 euros) price target for FuboTV is the highest in the stock.
“They are not worried”: Netflix is the most self-confident Hollywood company this summer
Netflix is perhaps the most fascinating company in the sector right now. Her first-mover advantage gives her an enviable library of content and an unmatched international presence that can help her produce new shows while American actors and writers aren’t working, making her ideal for getting through the strike.
“Whoever has the largest stock of ready-to-broadcast content will have a certain advantage,” says Dergarabedian, who adds: “I think everyone is well positioned in the short term, but these strikes have long-term implications. This whole situation is going to be every day more serious and profound for the sector”.
Regardless of how the labor dispute unfolds, the pioneer of streaming he is in a position to be envied by all, says Pachter.
The general opinion in Hollywood, therefore, is that Netflix should hold on, since its content catalog is deeper, but Pachter disagrees. As the only profitable provider, Netflix can afford to give writers and actors what they want while still looking good with creatives.
“Netflix is the least affected and, in my opinion, should also be the most motivated to reach an agreement. Because whatever they overpay in higher salaries for actors and screenwriters, their competitors will have to spend too, but multiplied by three, four or five. A deal that goes badly for the competition is good for them,” says Pachter.
However, Gross warns that no company in the entertainment sector can stop creating new content indefinitelyNot even Netflix. The strong position of streamer original suggests it can last at least a month longer than the competition, he estimates, but that doesn’t mean the company is exempt from the risk of losing newly added subscribers if its content stream remains a humble trickle.
Notice: Mathias Döpfner, CEO of Axel Springer, parent company of Business Insideris a member of the board of directors of Netflix.
2023-08-01 07:03:15
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