After more than a year of no new movies being released, the blockbusters are back with a vengeance. But are moviegoers ready to return? Kim Parlee speaks with Andriy Yastreb, Telecom and Media Analyst, TD Asset Management, about the outlook for the cinema and streaming sectors.
Originally aired October 28, 2021
ANDRIY YASTREB [00:00:48] Hi Kim, thank you for having me. You're right, absolutely. There's a huge supply of movies coming out right now. So much so that some movies are being even pushed out into next year because this lane is just so crowded. And as you mentioned, demand is also there. A lot of people are coming back and it looks like there's a pent up demand after the COVID lockdown. Just looking at the numbers, some of the recent blockbusters get really well. So if you take a look at Venom, for example, it did 90 million dollars in box office revenue. In just in North America in the opening weekend, and that compares to 60 million in expectations, so 50% above expectations. The new Bond movie was released recently. It hit 56 million in first weekend. It's a good result, but it was slightly below expectations, which were 60 to 70 million. But what's interesting there is that about 25% of people who watch the Bond movie said that it was their first time to be in the theatres after about 18 months. So definitely you're seeing a lot of demand, but it still remains to be seen if demand will catch up to pre-COVID levels, as some people might be still less eager to go back to movie theatres, either because of health issues or because of alternatives.
KIM PARLEE [00:02:05] Yeah, that is the big question, isn't it, about, you know, what's it going to take for people to want to go back in mass? Maybe they go to one, like you said and they go "OK, that was good. I'm going to stay home and stick with streaming." What do you think? What are the challenges for movie theatres right now?
ANDRIY YASTREB [00:02:18] I think there are a lot of challenges for the business model, and I'll just focus on a couple that there are more important. So one challenge for the business model overall is that the theatrical window, which is the exclusive window when movies are shown only in theatres after being released, it used to be 90 days before COVID. Now it's shrunk significantly. For many movies it will be 30 days for some movies it will be as short as 17 days. And what that means is that, at least on the margin, theatres are losing some of the exclusivity that they used to have before. And second issue for movie theatres is that, as you mentioned, streaming provides more alternatives to people, right? So it's a lot easier for them to watch something else. Or given that movie theatre exclusivity window is shrinking, just decide to wait a little bit more. So if it's not a must see movie, maybe I don't have to go to a movie theatre and pay for a price of the movie tickets. Maybe I'll just wait a couple of months and see it for free on this streaming platform that I subscribe to.
KIM PARLEE [00:03:27] So what wins out? I mean, is it going to be streaming or is it going to be going back to movies? Or do you see a world of, you know, much like all of us, it's hybrid, it's a little bit of both.
ANDRIY YASTREB [00:03:36] Well, that's a very good question, and I think there's still a lot of debate about it. I think at least for the foreseeable future we will see a bit of both. And the reason for that is that I think there are a couple of good reasons why blockbuster movies still belong in movie theatres. One of the of the reasons is that studios, when want to make blockbuster movies, they look for the best ways to monetize them, especially given that some of those movies cost $200, $300 million to make, and box office is the perfect avenue for them to do that and to recover their costs quickly. Some of those movies can recover their costs in a couple of days after being released if the demand is there. And second reason is that from a consumer perspective, there is still a lot of demand to go and watch an exciting movie on a big screen that is very high quality production. So there's definitely a niche for that. But on the other side, as we just discussed, there's more choice for consumers, right? Streaming gives you the opportunity to say, OK, maybe I don't need to go and watch the movie right now. Maybe I can wait a couple of months and watch it on streaming.
KIM PARLEE [00:04:43] And maybe for others too, I don't know if it's just me, but I stream movies on my phone while I'm multitasking, and that's something that, you know, time is valuable to me. Listen, Andrew, I've only got just under a couple of minutes, but if we look at some of the big names that are poised, I'd say, to benefit from us to kind of keep on streaming, names like Disney or Netflix. Maybe tell me what what you like about them and what some of the opportunities and challenges might be. Let's start with Disney.
ANDRIY YASTREB [00:05:08] Well, I think Disney is an interesting combination of both worlds, right? They literally dominate the box office with their blockbusters like Marvel and Star Wars and so on. So they definitely benefit a lot from that exclusivity window and from getting a big share of the revenue from movie theatres. At the same time, they also have a whole slate of streaming services that are growing pretty quickly, such as Disney Plus, ESPN Plus and Hulu.
KIM PARLEE [00:05:42] Now what about Netflix? I know Netflix is dipping their toe in gaming. What is what does that mean for them?
ANDRIY YASTREB [00:05:48] I think Netflix right now, is more about pure exposure to streaming. Gaming might be important for them down the road, but I think they will go slowly for the next several years. So it's all about streaming videos. And for investors who don't want to guess what box office and theatre releases will look like in the future, and they just want to get pure exposure to streaming, Netflix is probably the best way to do that. On top of that, Netflix has a different strategy slightly in terms of content. While all major studios are trying to make more blockbusters and rely heavily on known franchises that have been around for decades, such as Star Wars or Bond or Marvel superheroes, Netflix is trying to do something different. They're trying to encourage and foster unknown talent around the world and give them opportunity to create new content and see where it goes. And from that came a number of exciting surprises, such as Money Heist and Squid Game recently.
KIM PARLEE [00:06:55] We're going to have to leave it there, Andriy. It's a great, great round up. Next time I know we'll touch on some of the theatre stocks, which have become meme stocks, but not today. Andriy, always a pleasure. Thanks so much.
ANDRIY YASTREB [00:07:05] Thank you, Kim.