Did Disney accidentally save AMC Entertainment?

Walt disney (NYSE: DIS) maybe thought of bragging about his $ 60 million since the start of Black Widow on Disney + would show how smart its simultaneous theatrical movie releases and streaming service were.

Instead, the bragging told Scarlett Johansson how much money she was losing from the practice, and now she’s suing Disney for breach of contract. It also encouraged other movie stars to consider suing the studio, which could result in a drastic reduction, if not elimination, of date and date releases.

If this happens, Disney may have accidentally just recorded AMC Entertainment Holdings (NYSE: AMC) of financial ruin.

Back to the future

Movie studios distributing films simultaneously to theaters and streaming services are a big blow to theater operators. Disney isn’t the only one doing this; Paramount, Universal, Warner Bros. and others add movies to their streaming channels the same day they air in theaters.

Cinemas have long faced a decline in attendance, and day and date releases provide an additional incentive for moviegoers to avoid the cinema. While AMC was brought to its knees by the pandemic and was only saved from bankruptcy by being elevated to memes stock, which allowed it to raise enough money to continue, the advent simultaneous film releases make its future bleak.

But Johansson’s trial, and others that may follow – Cruel Star Emma Stone is also reportedly considering suing the studio for the simultaneous release of her film – studios may rethink the practice. In doing so, they could simply preserve the theater industry’s window of exclusivity, assuring AMC, Cinemark Holdings, and the Regal theaters survive.

Since theaters make most of their money from extended film screenings, reopening the window will increase their profits. AMC CEO Adam Aron has said most of a movie’s box office is made in the first three weeks of its airing, but other channels say they are making more profit from high margin concession stand sales.

The exclusivity window that had once lasted for up to six months was all but closed during the pandemic as studios had to recoup their investment in films they had already made. Even after theaters began to reopen, studios continued to release them to streaming services.

A case of projection

According to Johansson’s lawsuit, “Disney intentionally tricked Marvel into breaking the deal, without justification, in order to prevent Ms. Johansson from taking full advantage of her market with Marvel.”

Like most actors, Johansson earns a salary for his acting and then earns extra money from the box office revenue generated by a movie. This is often the reason why actors go on long promotional tours for a film, and Johansson was very active in marketing. Black Widow.

The film grossed $ 80 million in its box office debut and has since generated more than $ 167 million in domestic revenue and $ 176 million worldwide.

Yet Disney separately benefited from his efforts, raking in tens of millions of dollars in streaming revenue that he did not have to share with the actor. It was ironic that Disney tried to shame Johansson for taking legal action by calling her ‘insensitive’ for ignoring the ‘horrific and prolonged global effects of the COVID-19 pandemic’, given the added benefits which the studio earned thanks to Johansson’s promotions.

Zeroing on the bottom line

Only movies with blockbuster potential deserve a bounty when streaming, and studios don’t make as much money on their simultaneous release because multiple people can view a single stream. They lose the income generated by multiple theater ticket purchases.

And that’s what can help cinemas stay afloat. Entertainment venues will sell more tickets, which still represent 60-70% of their revenue, but generate more concession stand sales, which account for the bulk of their profit margins.

AMC’s food and beverage sales accounted for 31% of total revenue in 2019, but only 5% of its operating costs. They accounted for 35% of Cinemark’s revenue, but only 7% of its operating expenses.

The problem for theaters is that streaming is here to stay and will continue to eat away at traffic over time. In the meantime, Disney may have just given AMC Entertainment the time needed to find a solution to deal with this age-old decline.