The movie theater sector got a bit of a lift to start the second half of 2024 with several movies, such as “Inside Out 2,” hitting impressive box office figures.
A new report says there could be more optimism ahead for the movie sector, but it might not favor movie theater companies as much as other sectors.
What Happened: The global box office is expected to post a year-over-year decline in revenue in 2024, with the first half of 2024 posting a significant drop to the prior year already.
A new report from PwC shows the global total cinema revenue passing pre-COVID-19 pandemic levels in 2026.
The "Global Entertainment & Media Outlook" covers 13 sectors and 53 countries with results summarized in a recent report from The Hollywood Reporter.
Among the highlights are subscriptions to streaming services growing 5.6% on a compound annual growth rate from 2023 to 2028. The report also sees advertising revenue topping $1 trillion globally in 2026 as the fastest-growing of three core revenue categories in the next five years.
For movie theaters like AMC Entertainment Holdings AMC and Cinemark Holdings CNK, the good news is box office revenue will hit pre-pandemic levels in 2026.
The bad news is this is now a year later than the original forecast from PwC last year.
"This is primarily driven by a larger budget slate expected to drive more box office sales and more ad spend," PwC's Bart Spiegel told The Hollywood Reporter.
The PwC estimate sees 2025 box office revenue hitting $37.68 and 2026 box office revenue hitting $40.23 compared to the pre-pandemic 2019 total of $38.55 billion.
While box office revenue could return to pre-pandemic levels, the report doesn't see admissions hitting pre-pandemic levels until after 2028.
Factors for lower attendance include "changes in consumer habits following the pandemic, the increasing popularity of streaming platforms, the impact of rising inflation, and audience fatigue with superhero movies," according to Spiegel.
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Why It's Important: The report notes that the total revenue of the 13 sectors grew 5% in 2023 to $2.8 trillion despite economic headwinds.
Going forward, the sectors are expected to grow at a compound annual growth rate of 3.9%.
While the report could be somewhat optimistic for movie theater stocks, it might be more important for streaming stocks like Netflix Inc NFLX.
PwC sees the large number of streaming choices and lower fees for ad-supported plans as boosting subscriber figures and usage going forward.
"Companies are responding by offering lower subscription fees in exchange for showing ads," PwC writes.
PwC estimates that global subscribers to over-the-top video services will hit 2.1 billion in 2028, up from 1.6 billion in 2023.
"We anticipate ongoing declines in the linear ecosystem as more users transition to digital offerings," Spiegel said. "While some major legacy media companies now offer digital options, they all still face challenges in reducing churn, managing the rising costs of content, and delivering a compelling value proposition to their subscribers."
The report estimates that advertising will make up 28% of the revenue for streaming platforms in 2028, up from 20% in 2023. PwC said 2028 advertising revenue will be double what the figure was in 2020.
"Advertising is projected to account for 55% of the total entertainment and media industry's growth over the coming five years."
Streaming companies like Netflix that are focused on their ad-supported plan could have the best chance to capture the growth of the overall movie entertainment market based on report findings.
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The image was created using artificial intelligence MidJourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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