For several years now, commentators have been pointing to an apparent downfall of Hollywood, as cinema ticket sales fall and increasing numbers of people choose TV or on demand options instead of a traditional trip to the silver screen.
This year, the Brazilian world cup has exacerbated the effect even more, by drawing yet more potential viewers from the movies. So is the perceived ‘death’ of cinema starting to play out on the markets?
One part of the film industry that appears to be in a good position to prosper in the face of dropping cinema attendance continues is its major studios. Most major studios, including Warner Bros, Disney, 21st Century Fox, Lions Gate, Universal and Paramount have a major hand in television as well. Warner Bros, for instance, are owned by Time Warner (who own HBO); Paramount and Universal are run by Viacom and Comcast respectively.
Perhaps because of that, there are some impressive success stories from major film makers on the markets. The Walt Disney Company has seen steady growth for some time, and is currently over 140% higher than it was at the beginning of 2012. That’s over double the growth of the S&P 500 for the same period.
21st Century Fox has seen similar growth, which despite levelling out this year has still resulted in an increase of over 100% in the past two and a half years.
DreamWorks Animation has, until fairly recently, focused mainly on film (though it is currently attempting to diversify, unlike most of its competitors it does not yet run its own TV channel). It has also been unable to replicate the success on the markets of other top studios, losing around 40% in value from the beginning of the year. That has been contributed to in part by the notable failure of films like Rise of the Guardians and Turbo.
If the business plan to protect against a potential drop in cinema attendance – make sure you have a leading TV brand – is clear for studios, leading cinema chains have a tougher way out. And it has been a poor year so far for Cineworld in the UK, whose share listing has dropped from a peak of £439 in January to £329.
That drop has largely been caused by Cineworld’s poor earnings announcements, but statements from the company indicate that they believe a slew of releases this summer and at the end of the year – Guardians of the Galaxy, the conclusion of the Hobbit trilogy, and Hunger Games: Mockingjay Part One amongst them – will see their fortunes improve once more.
Elsewhere, the picture is a bit better. Major US chains like Cinemark and Regal are both on a broadly upward trend and Everyman, an independent chain in the UK, appears to be having a good year too.
The starkest indication of a rise in home viewing against the cinema comes in the stock performance of alternative media companies, however. Netflix are probably the highest profile provider of on demand films and television, a position that has resulted in growth of just over 400% growth since the beginning of 2013, despite a brief blip earlier on in the year. That easily outstrips almost every competitor in the UK, US or elsewhere: and Netflix are showing no signs of slowing down. After a year in which their in house television and films proved successful, they have announced further plans to move abroad and continue their aggressive expansion.
At the moment, it appears that the jury is out amongst the markets on whether there is a real long term future in cinema. That’s unsurprising, as negative stories about the medium appear increasingly often and the true impact of the web on this venerable industry is probably not yet fully clear. For those investing in any aspect of the film industry, though, caution is probably an advisable course of action.
By Patrick Foot, financial markets writer at IG, a leading online trading company. Why trade CFDs with IG?