- Movie theater stocks are down again on concerns over the impact on traffic of premium video on demand initiatives.
- Catching notice today from investors is a fresh note from Morgan Stanley (NYSE:MS) warning on the "collapsing" movie exclusivity window as premium VOD lures in more studios.
- MoffettNathanson was ahead of MS in calling out the threat of premium VOD in am insightful note posted a few weeks ago.
- "Under our base case analysis, film studios stand to gain $1.3 billion from PVOD to help offset their home video declines. This could lead to a net profit loss to exhibitors of $380 million even with beneficial splits of 15%, as the upside from sharing in PVOD revenues would not be enough to offset the lost profits from lower theatrical attendance," warned the firm.
- MoffettNathanson also pointed to the impact Netflix (NFLX +0.9%) will have on the sector.
- "It is just as important to pay close attention to the impact Netflix will have on both exhibitors and studios. We estimate the company’s ambitious goals of ramping up to 40-50 movies per year could ultimately cost the exhibition industry $280-$930 million in profits.
- Source: Analyst note
- AMC Entertainment (AMC -2.6%), Regal Entertainment (RGC -4%), Reading International (RDI -1.4%), Cinemark Holdings (CNK -2.5%) and IMAX (IMAX -2.2%) are all lower on the day.
- Now read: Netflix Madness: A Safe Way To Short
Original article