On Thursday, Warner Bros. Pictures said it would release its slate of 2021 films on HBO Max at the same time the titles are added to domestic move theaters. After a month, the films will be removed from HBO Max and play in cinemas in the US and internationally. Movies that are expected to roll out under the new plan next year including a sequels to "Space Jam" and "The Matrix" as well as an update of cartoon "Tom & Jerry."
Shares in AMC Entertainment (AMC), Cinemark (CNK) and IMAX (IMAX) dropped on Thursday, although Cinemark and IMAX were in the green on Friday. AMC stayed lower.
Wedbush Securities analysts including Michael Pachter and Alicia Reese said AMC is the highest risk among movie exhibitors, "given its high debt and low available liquidity, resulting in a higher probability that the company will need to restructure." AMC Chief Executive Adam Aron said the company has started "immediate and urgent dialogue" with Warner on the matter, according to reports.
"Because Warner Bros. made this announcement unilaterally, without having negotiated with its exhibitor partners, we do not think it will play out as advertised," the Wedbush analysts said. "We think the exhibitors will aggressively negotiate for far fewer films to be released day-and-date on HBO Max, based on the timing of vaccine distribution instead of the full calendar year."
On Nov. 16, Cinemark and Comcast (CMCSA) unit Universal Filmed Entertainment Group settled on a three-weekend window of theatrical exclusivity for its films before they are made available on premium video-on-demand platforms. Wedbush said talks between exhibitors and Warner Bros. are likely to be in line with the Universal deal.
"Warner Bros is framing this decision as a temporary one, and they acknowledge that it is best seen as trying to make lemonade out of lemons," said MoffettNathanson analysts including Craig Moffett in a note Friday. "We have a hard time believing the messaging that this is only a temporary 2021 plan, however, even if that might be the current plan today. Once the windows change, it will be hard to go back."
And if theaters agree to the type of release plan announced by Warner Bros., that will "flash a green light to every other studio" with a streaming-video on demand platform to try a similar move, MoffettNathanson said. The Warner Bros. move comes ahead of an expected update from Walt Disney (DIS) next week on its own strategy, they added.
Price: 29.56, Change: +0.33, Percent Change: +1.11
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