Movie theaters continue to not die

by
Reel Blog   


BusinessWeek has an article today explaining to its readers that movie theaters just might be a good investment.

“People have assumed for years that home theater and DVDs were killing off the business,” says money manager Steve Birenberg, president of Northlake Capital Management and the media sector blogger for market research firm SNL Kagan. “Now we’re seeing that’s not true and it’s much more stable and sustainable than investors thought.”

Over the recent Easter weekend, the top 12 films brought in $130 million, up 61% from the same weekend last year. The previous weekend, which took in $148 million, was the biggest draw ever in April. And that comes after first-quarter receipts rose by 10% to 15% from the same period a year ago.

Now they’re seeing that’s not true. So are DailyFinance and Barron’s (subscription req’d). Barron’s published an investment note from Wall Street analysts at Piper Jaffray, which says, in part:

Year-to-date the domestic box office is up nearly 15% despite the battered consumer, lending credence to our thesis that solid content, escapism and low ticket prices relative to most other forms of out-of-home entertainment will combine to fuel solid box-office performance throughout 2009.

Double-digit increases in box office certainly do lend credence to that thesis. So do three straight years of gains at the box office. To be fair, though, it took the three previous down years for analysts to begin predicting the untimely demise of the movie theater industry. Both perspectives ignore the fact that the movie theater industry is on a three-decade path of modest, sustained growth.

Decade

       Average Annual Admissions

1971-80

995 million/year

1981-90

1.13 billion/year

1991-00

1.28 billion/year

2001-08

1.447 billion/year 

The current ride of big box office and attendance increases is great fun and a rare bright spot in a tough economy. It’s important to remember, though, that it will not always be this way. There will be years of slower growth and there will be years when attendance shrinks, but it’s the long term trends and fundamental strengths of the business to keep an eye on. Trust me: the movie theater industry has been dying for 40 years and will continue to do so for as long as I can imagine.

What a way to go.