Public Live: AMC's Next Act—and Top Gaming Trends To Watch

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Even casual investors likely heard about the tear AMC and Gamestop went on; however, what does the gaming and entertainment industry hold for the future? During a recent Public Live audio show, business journalist Dion Rabouin sat down with Michael Pachter, a Senior Research Analyst with Wedbush Securities, to talk about what the outlook of this sector looks like. Here are some highlights from their discussion.

Dion Rabouin: What is your outlook on the movie business?

Michael Pachter: Investment opportunities are a bit upside down… all movie exhibitors will start to generate profits. We are in a no man’s land. We had seven or eight months of nothing and big-name films got delayed. Now, they are coming out, and we are backed up with great films… we will have 25 by the end of the year, and there is pent-up demand. You’ll see films last eight or ten weeks [in theaters]. As far as stocks go, these stocks trade at a high single-digit multiple when compared to EBITDA, but AMC is trading at 30x, which is a multiple that is not sustainable.

DR: Are we going to a model that is just big blockbusters at the theaters?

MP: Yes, more blockbusters and fewer small movies at the theaters. We’ve seen a drop of 40 percent in total numbers of movies being made, which is mostly romantic comedies [dropping]. This is what goes straight to streaming, and Netflix and Amazon are funding these smaller movies. You won’t get small movies anymore. Most theaters will be blockbusters. We saw the same in video games.

DR: AMC’s CEO said they will show the McGregor-Poirier fight, is this a pivot you will see in the future?

MP: I predicted this in 2000. The impediment is that promoters don’t trust it. Fortnite recently had a Travis Scott concert in the game and 22 million people saw it. Eventually, all entertainers will stream content.

DR: Is it sustainable?

MP: They have an internet connection, and they can stream anything to those screens. I think you will see a lot of this moving forward. I’m not sure if PPV fights are the way to go, but you may see concerts moving forward.

DR: Could the streamers steal some of this content?

MP: The movie studios dictate when Netflix and Peacock get their content. The movie studios use linear programming to maximize their profit. The biggest profit driver is a theatrical exhibition. Netflix might want the next “Avengers” movie, but Disney wants it in theaters. Streamers will never kill theatrical.

DR: What is the outlook for the video game sector and investing there?

MP: I love them. We are one-third of the way through what we saw with movies and TV [from the 1940s to the 2020s] There are numerous ways to see a movie, which increases revenue for movie makers. The same thing is happening for video games. You don’t necessarily need a console or a computer, you just need a TV and an internet connection. That increases your customer base from 250 million to 2 billion, increasing revenue. Game studios can use a free game to add more people to the sales funnel, driving up premium sales. 

DR: What about the GAMR ETF?

MP: It’s the most diverse… it’s in about every country with gaming stocks on a public exchange. It has a good blend of American, European, and Asian stocks. It’s very diverse… it plays every aspect of gaming.

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The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.