Are Any Theater Chains Poised to Do Well in 2021?
Marcus Theaters is set to become a buyer. They're somehow keeping the lights on during the pandemic.
We've reported that theater chains like AMC and Cinemark have been suffering around the world. The pandemic has throttled the theater-going experience, and as we await the vaccine, it's still hard to get back.
Enter Marcus Theaters.
For those of you who don't know, Marcus Theaters, run by Marcus Corp., is the fourth-largest in the U.S., with 1,110 screens in 17 states. Like many theater chains, they've had the worst year in their history. But somehow, it wasn't as bad as the number-one chain. While Marcus' stock fell 58%, AMC's fell 71%.
And Marcus seems to already be in the mode of recovering.
See, instead of renting the land or buildings your theaters are in, which caused empty chains to go bankrupt and lay off employees, Marcus makes a point of owning the land and buildings. That means they aren't subject to rent hikes when things open back up either. No landlords are trying to take a bigger cut from them.
In 2020, Marcus’ rent expense will only be 10.3% of its revenue, compared to 42.6% for Cinemark and 76.2% for AMC.
“Owning the majority of our real estate is a significant advantage for us relative to our peers as it keeps our monthly fixed lease payments low and provides significant underlying credit support for our balance sheet,” president and CEO Greg Marcus told The Hollywood Reporter. "It also allows us to move quickly as market dynamics dictate. When we moved to install recliners, add large format screens, and build out very sophisticated food and beverage concepts, we did so quickly because we did not need to negotiate with a landlord."
Another way they've been able to stay afloat is that they choose only suburban locations, and not cities. They pick places where their theaters will be highly trafficked and where they have little to no competition.
I say all this because we are about to see a huge shakeup in the theater chain business. Cinemark and AMC have really had trouble this year and we could possibly see bankruptcies there.
With chains and locations available, I think you could see Marcus coming in to purchase locations. These large chains have been around for quite some time. Having a new voice in the game will make things interesting. It also will stave off studios from buying these places, and just showing their movies around the clock.
Time will tell what happens, but I am optimistic theaters can come back in a big way. Even if it's different companies running them.
Give us your thoughts in the comments.
Source: The Hollywood Reporter
