This is the first of a three-part series.
As the COVID-19 pandemic begins to abate, movie theaters are reopening in many areas of the U.S. (although subject to limitations). But some movie theaters that closed during the pandemic — such as the one closest to where I live — have decided not to reopen at all, believing that the business will never recover.
It's very difficult to assess how many people have permanently switched to streaming as their preferred or only way to consume new entertainment. Clearly the powers in Hollywood, like Disney, intend that some new releases will be streamed exclusively. The flip side of the question is that a big screen with big sound can still be a pleasurable experience, and most people do like to get out of their homes on occasion. Teenagers need places to take dates, for example.
It's not the first time that the survival of movie theaters has been questioned. Predictions of the demise of movie theaters were widespread 70 years ago when television entered its mass-market stage. In retrospect, those predictions were only half right. Some movie theaters did close, especially the large ones in downtowns that were deteriorating. But suburban movie theaters, particularly multi-screen theaters, actually thrived despite TV.
Many also predicted that VCR and DVD sales and rentals would hurt movie theaters. That turned out to be true for art houses specializing in exhibiting old movies; they were vulnerable to Criterion Collection DVDs available from Netflix. But it wasn't true overall.
If you own a shopping center, this question is top-of-mind because you might get stuck with a lot of empty real estate if your movie theater tenant goes out of business… and you can't count on leasing that space to retailers because they're being run out of business by Amazon and Walmart.com. If you're an investor or a creditor of the large movie theater chains (AMC, Regal, and Cinemark) that borrowed a ton of money during the last 25 years to expand, you are justified in worrying that your investment is at risk. And if you're a farmer who grows popcorn or the employee of a candy maker, your own livelihood could be threatened.
I'm not that interested in the movie business, but it's an example of how quickly things might or might not change. People who can accurately forecast the rate of change can make a killing. Knowing the direction that a trend is taking is one thing. That's merely being observant and imaginative. Knowing the pace and the extent of the trend is something else. That's a rare skill. Corporations pay top dollar to get those skills in-house or to engage consultants with those skills.
Parts II and III of this series will look at gasoline stations and the travel industry (specifically, hotels and airlines). They're facing major change, too.
