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Box office expected to close 2023 below pre-pandemic levels

2023 has marked a trailblazing year for movie attendance, from the summer "Barbenheimer" hype and Taylor Swift's Eras Tour and Beyoncé's Renaissance concert films.

Macquarie Group Senior Analyst Chad Beynon explains that while box office profits are on course for notable year-over-year gains, expected to reach $2 billion in the fourth-quarter, returns are not yet back to pre-pandemic levels.

Beynon joins Yahoo Finance Live to share his outlook on movie theater operators AMC Entertainment (AMC) and Cinemark (CNK), and theater experience and projection company IMAX (IMAX), while commenting on the impact of the Hollywood strikes.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: So lots of hype around Beyoncé's new film that has been released here this weekend. How big of a win do you see it being for the movie theater chains?

CHAD BEYNON: Thanks, Seana. Yeah. As was just covered, I think, Shawn was pretty spot on there, just in terms of how we're thinking about this weekend. We do need something different. That's what we got with Taylor Swift a few weeks ago.

The second and third quarter were actually really good quarters for the industry. We saw domestic box office above $2.5 billion, which is where it was in 2019. Unfortunately, for the fourth quarter, we do expect a little bit of a dip here. There is a lull in the season here. We're not seeing the complete breadth and depth of product.

And we're expecting closer to $2 billion of box office for Q4. We actually just brought down our estimate. And as a consequence, we also brought down our price targets for Cinemark, ticker CNK, AMC, and IMAX. We still do like Cinemark and IMAX, just given the business model. But it was a little disappointing, just in terms of what we saw in October and November results.

BRAD SMITH: So are there any winners on the horizon for the movie theater operators here, when you continue to think about and evaluate the slate of titles that are expected in 2024?

CHAD BEYNON: Yeah. For '23, the total amount of product was back to about 80% to 85% of pre-pandemic. So that's the number of widely released titles. For '24, I wouldn't expect that to be much different. First quarter is going to be a little bit of a drag just because of what we saw with the strikes. So some of it could be backfilled loaded. We did bring down our estimate for '24 from about $10 billion of box office down closer to $9.7 billion.

In terms of who could be the winners, we still like the companies with the best business models. So that would be IMAX and Cinemark at this point.

SEANA SMITH: Chad, when it comes to the Hollywood, the strike that we saw play out and exactly the impact that it's continuing to have, when it comes to release dates, how big of a-- is that, at all, going to move the needle in terms of maybe some of the pressure that we had been anticipating, and it won't be as bad as maybe some had feared?

CHAD BEYNON: Yeah. I think there's still opportunities for some movies to fall into some windows, where we don't have a big release. This weekend's a big example of that with Beyoncé. This was a nice surprise getting something in this weekend, especially after last week. I thought "Napoleon," "Hunger Games," "Wish," it could have been a bigger result with some nice legs there. The results were a little bit below expectations.

For '24, I do still think there's some opportunities. What we're seeing is the amount of $100 to $300 million movies are about the same, where we're seeing a gap is the 300 plus, which are, obviously, harder to predict. The "Barbie" and "Oppenheimer" are the top guns. Those big well-marketed, well-budgeted movies, and then some of the smaller films, just outperforming.

So where we'd like to see a little bit more is on the big releases with. "Napoleon," for example, I don't think it was as marketed as it could have been. And that's maybe one of the reasons why it's coming in shy of what could have been a huge box office hit.