Gen Z and a Content Backlog Fuel the Movie Theater Comeback

SPEAKER_1 (0:00)

Joining us now, Chad Beynon, the Senior Gaming, Lodging and Theaters Analyst over at Macquarie. Chad, great to have you on. Now, I have always loved the movies, but I know that we saw a drop off in attendance. It does appear that we are having a much stronger year than expected though. So what is driving this change? What has changed in the movie business that's behind this recovery?

Chad Beynon (0:23)

Absolutely, thanks for having me, Marlee. I'd say it's two things. One is the content, right? So there was an actor strike, there was a Hollywood strike a few years ago, and that really delayed a lot of the content that was coming out. This was obviously a few years after the streaming wars and a lot of the content going to the home market. So one is just the overall availability of product that's out there. And then the second thing and probably the more important one is consumer demand. So we're seeing Gen Z, some of the younger age cohorts in the United States, go back to the theater, turn off their phone.

I think the content that's out there really speaks to them and also speaks to other age groups. We've had movies, obviously, like Spider-Man, which is the second most successful movie all time, still out at the movies, deliver exceptional results. You had Odyssey about a month ago, also Toy Story. So really wide variety of product and that should continue, most importantly, into 2027

SPEAKER_1 (1:24)

Yeah, in August was a record month. I want to run these numbers. 1.3 billion in domestic ticket revenue. That was up 85% year over year, 23% above the previous August record. How much of that, Chad, is this blockbuster driven surge of these movies that were slightly delayed all coming out around the same time versus evidence that we are seeing these movie goers go back to the theater? Is there a way to break that down?

Sure.

Chad Beynon (1:51)

The way that we analyze content here, we kind of look at the big blockbusters. Those are the ones that generate over 100 million dollars. Some of these generate over hundreds of millions of dollars domestically, Spider-Man being over 900 million and Odyssey being almost 600 million.

But then you have lots of good product that generated between 50 and 200 million in the US. So those are movies like Obsession and some of these horror movies. So blockbusters are doing very well, but there's also support in other areas which is really encouraging because the film rates for companies like Cinemark and AMC and for IMAX are actually slightly better for some of those smaller movies. And remember, the movie auditoriums are fairly empty Monday through Thursday. So you just need additional product there and that's done really well. And then finally, I think movie going begets movie going. People are at the auditorium, they see the previews, they tell themselves, hey, this is actually a pretty good experience. Maybe this is better than watching at home. And then they think about more movies that are coming out in the near term blockbusters or smaller films.

SPEAKER_1 (3:06)

And Chad, you said you expect this momentum to continue into the end of the year. How important is the quality and the consistency of the release calendar to sustaining this recovery?

Chad Beynon (3:19)

It's very important, and that goes back to your point on August strength. So historically, a lot of the blockbusters were released during several key time periods around Thanksgiving, around Christmas, the June, July time period. And then there were months where some of the studios were just a little bit more hesitant in terms of pumping out some of that content.

August, generally people were vacationing in the second half of August. They're at the beach. They're not necessarily in auditoriums. But this kind of bucked the trend. But as we look out, I think, again, the variety of studios, Netflix getting into the market with a few movies, Apple getting into the market. I think they're more willing to take some risks outside of the traditional risk-free delivery times. So the slate is definitely packed during the peak times, but also in some of the shoulder times.

Anyone who's starting to watch the NFL, you'll see lots of horror movies that come out in September. September usually doesn't have big blockbusters, but that's been a genre that's really done well, particularly for younger audiences, and we'll see that in the next couple of weeks.

SPEAKER_1 (4:29)

I don't think they're targeting my eight-year-old daughter, but she will be thrilled to hear it. She loves a good horror movie. As we look into the end of the year, when you're projecting 10.3 billion in US box office revenue, that's up 19 percent. But I think it's important to note, we are still almost 10 percent off 2019 pre-COVID levels. So what still needs to happen for the industry to get back to where we used to be?