Hold on to your hats, October is about to be the best box office month in a long time

It absolutely is a turning point, Michael. And I think that — I think you use Labor Day as the day, but I think you could go back a little before that when Free Guy came out and that did some very strong numbers and our indexing was very high. And it’s been a long — it’s been a long pandemic with a lot of up and downs. But I think we’re finally, I finally can say that we’re there and that the business looks very good going forward.

Rich Gelfond, IMAX CEO, in response to GS Analyst Michael Ng’s question on whether the movie industry is at a post pandemic turning point

Owning movie stocks has been a ride. Readers – you guys know how wild it has been holding NCMI / IMAX / CNK through a wild rally, swift and punishing drawdown and then another wild rally. Let the charts tell the story:

If you’re (un)fortunate enough to have owned these stocks since Q3 2020, you can tell your grandkids what wild volatility and crazy news cycles look like. The story of movies since the news that a vaccine was coming looks something like this to me:

– Q2 2020 – Movie names do whatever they can through capital raises, furloughs and other measures to stay alive. Japan / China actually offers some signs of hope as box office does extremely well in both despite the pandemic
– Q3/4 2020 – Vaccines authorized for emergency use. Films like Croods 2 and WW1984 do better than expected at box office, but still terrible in comparison to pre-pandemic.
– Q1 2021 – Godzilla v. Kong opens some eyes that domestic box office can still do well
– Q2 2021 – Quiet Place II, F9 and to an extent Black Widow show box office isn’t dead
– Q3 2021 (what a quarter) – Delta and the threat of dual releases (Black Widow making headlines) reignites the narrative that movie theaters are dead. A few films including Top Gun start delaying releases still next year. Stocks get crushed. Free Guy and Shang Chi both do well on no-pre-existing franchise. Shang Chi posts record Labor Day domestic box office returns and later becomes highest grossing US post pandemic film. Disney announces they’ll respect the theatrical window for a few marquee films for the rest of the year.  Sony moves release of Venom up. Stocks start to rally back
– Q4 2021 – ?

It feels fitting to write this on October 1 as we start the fourth quarter. October is going to be a big test of the box office as four key films are coming out, one each week:

– Venom, Let There Be Carnage this weekend (early estimates at $40-$60mm)
– No Time to Die (new James Bond) October 8th
– Halloween Kills October 15
– Dune October 22nd

On the latter three films, I haven’t seen estimates, but I think one of the three (Dune is my bet) could do over $100mm in a weekend. October will definitely be the best box office most post pandemic just on the strength of releases. Any way you cut it, this is going to be a big news month for the movie names, and the market clearly is expecting good news as the ones I track have all had nice rallies off the bottom (NCMI ~+45%, IMAX ~+40%, CNK ~+38%).

If you’re a technical person, the charts look excellent during a time when the market has been up and down as supply chain concerns and inflation have ravaged other names. You know what’s great about movies? They’re largely unimpacted by supply chain or inflation. NCMI basically spends nothing in capex. Theaters have fixed costs and distribute content. Advertisers like NCMI use the butts in seats to convince advertisers to pay them to show ads.

Remember NCMI has exclusive deals with AMC, CNK and Regal and is the largely unchallenged market leader for access to movie-going audiences. This audience has proved resilient in my opinion in 2021 and Shang Chi, F9, Quiet Place II, Free Guy and hopefully the October slate prove out that tentpole films are no less attractive to movie-goers in 2021 than they were pre-2020. NCMI on their last call were very clear advertisers were starting to show renewed conviction and pay ahead for advertising slots. If October lives up to the hype and we don’t get any pandemic Delta-like surprises, there is no reason to think 2022 is not a typical year for the industry.

I’ll be watching this month closely and am excited for what’s ahead,