Empty AMC Theaters. Netflix Evicts Viewers.

Empty AMC Theaters. Netflix Evicts Viewers.
Furiosa, Garfield, IF and Fall Guy are no match for Last Year’s Barbenheimer. How is streaming doing?
 
Memorial Day weekend is historically a time when people flock to the movies. This year, however, it was a disaster. The #1 movie Furiosa took in $32 million, for the distinction as the worst Memorial Day weekend open since 1995 (excluding 2020 when theaters were closed). According to Comscore, ticket sales are -22% behind 2023 and down -41% from 2019. Anyone who has visited an empty theater lately might be surprised that the numbers aren’t even worse.

Meanwhile, Netflix is evicting unpaid viewers, while relying upon advertising revenue to keep revenue growing. Netflix didn't have a film in the Top 5 over Memorial Day weekend. In a world where content is king, can Netflix continue to reign supreme?
 
AMC Entertainment Holdings
It's a reminder of the importance of due diligence – particularly with meme stocks. AMC soared to almost $600/share during the Reddit stock-fueled craze of June 2021, even though it was already clear that streaming was going to keep a lot of theater seats vacant. (Click to read our AMC warning from 2021.) AMC shares closed on Tuesday, June 4, 2024 at $4.79/share. The company has been bleeding cash for six out of the last seven years, with the exception of a $101.1 million profit in 2018.

On May 30, 2024, S&P Global downgraded AMC’s credit score to SD (Selective Default) after AMC shortchanged bondholders and gave them stock instead. According to S&P Global, “The downgrade follows AMC's completion of a transaction that we view as distressed and tantamount to a default. AMC completed a debt-for-equity exchange on May 15, 2024.” The company has been precipitously close to bankruptcy for years.   

How Are Streaming Services & Studios Holding Up After the WGA and SAG-AFTRA Strike?
After the strikes of 2023, revenues fared a little better than expected, and were pretty flat or only slightly down for many of the studios. Thanks to new advertising revenue, Netflix enjoyed the top revenue growth, with year-over-year gains of 15%. The company plans to scale ads revenue (while continuing to make great shows, stream live and expand their games) to hit their target of 13-15% revenue growth in 2024.
 
Warner Bros. Discovery CEO David Zaslav reminded analysts in the most recent earnings call that, “The best content will win.” Netflix is up against a plethora of streaming services, including MAX (Warner Bros. Discovery’s streaming platform). Warner Bros. has had a series of smash hits, including Furiosa, the #1 movie this Memorial Day weekend, Dune: Parts One and Two, and last year’s box office blockbuster Barbie. Netflix didn’t have a film in the top 5 over Memorial Day weekend. The company is winning in increased advertising revenue, but not content. It is also “cutting off some viewers who are not payers.” According to Netflix’s co-CEO Gregory Peters, speaking on the earnings call on April 18, 2024, “When you see our next engagement report, you are going to see some impact to our overall absolute view hours as a result of that.” It takes viewers to sell ads.
 
Even without a hit this Memorial Day, Netflix is still the brand investors associate with streaming. Not surprisingly, Netflix carries a price-earnings ratio of 45 (very high for a mere 15% year-over-year growth). By contrast, Paramount and Warner Bros. Discovery have far more modest valuations. WBD had revenue of $41.32 billion in 2023. The company’s current market value is only $20 billion. Will Max and Paramount Plus finally gain more credibility on Wall Street and see their share prices soar, if their content continues to reign supreme? Email [email protected] if you’d like an updated Streaming Stock Report Card.
 
What About an IATSE Strike?
According to an update on IATSE.net, negotiations between the film crew union and producers are continuing through the end of June. In a press release on June 1, 2024, IATSE’s International President Matthew D. Loeb wrote, “I’m hopeful that we will soon reach a tentative agreement that members will want to ratify.” If an agreement is not reached, studios, streaming services and theaters will all be negatively impacted again. If the two sides come to terms, there will be a collective sigh of relief, and a lot of filming. 2025 could see a very robust slate of films and series with writers, actors and the crew all engaged again.
 
 
Bottom Line
Theatrical streaming companies are doing a lot better than theaters. However, revenue growth is pretty flat. Some streaming services have been hammered by investors (Warner Bros. Discovery and Paramount), while others are trading at very lofty prices (Netflix and Disney). Debt remains a concern, with Paramount in junk status, and Warner Bros. Discovery and Netflix at the lowest rung of investment grade (BBB- and BBB+, respectively). The IATSE negotiations are a wild card. As David Zaslav reminds us, “Content is King.” With so many options for streaming these days, paid streamers will be attracted quite simply by whatever becomes the next breakout hit, with little incentive otherwise for brand loyalty (particularly when they’re getting kicked off Netflix).
 

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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

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