We've all known that the movies have been...different...since March, when the first outbreaks of COVID-19 first hit and shut down pretty much every place that wasn't selling food. What video stores remained took an even worse hit than seen in the last few years. This is especially true of Family Video locations, as the last major video store chain shut down around half its location total over the last few months. Yet the theaters may have taken an even bigger hit, and that in turn leads to bad news for studios like AT&T (NYSE:T), whose Warner Bros arm just saw a keystone production turn into a bomb by historical standards.
Not Really That Wondrous a Woman After All
The numbers came in on “Wonder Woman 1984,” which was one of the biggest releases of 2020. Granted, that's not particularly difficult in a year where the biggest releases included “The War With Grandpa,” but still. “Wonder Woman 1984” turned in an opening weekend figure of $16.7 million in North America. By present-day standards, that's an incredible win. By pre-COVID standards, that's a nightmare. By way of comparison, a pre-COVID-19 2020 release, “Bad Boys for Life”, which hit theaters January 17, brought in an opening weekend figure of around $62.5 million.
January has, historically, been a bad month for theatrical releases. It's sometimes referred to, along with February, as a “dump month” in releases, and many studios will schedule movies they don't expect to do well in a January release slot so as to satisfy contractual obligations while costing themselves little. For further reference, “Bad Boys for Life” came in on Box Office Mojo's highest-opening weekend titles at number 160. That a DC Universe title aspires to reach the opening weekend figure of the third installment of a buddy cop series started back in 1995 shows just how dire the situation has become for Hollywood.
Analysts Likely Thankful for Diversification
After the disaster that was the “Wonder Woman 1984” release, analysts are likely thankful that AT&T's reach is well beyond movies. Our latest research notes the company currently carries a consensus rating of “hold”, and it's been adjusted down a peg in the last month. Currently, the company holds four “sell” ratings, eight “hold” and 13 “buy”. Last month, it was four “sell”, seven “hold” and 14 “buy,” which was the best aggregate figure it had seen in the last six months total.
Price targets, however, have been on the decline for the last six months, going from $36.06 six months ago to $34.04 three months ago. Then, on to $32.48 a month ago and $32.39 today.
An Unavoidably Changing Landscape
If the box office figures look disastrous, it's not just you. They are. We've already seen one example of the now night-and-day difference between major release box office totals, and there's no denying that $45 million-plus in lost opportunity is a big loss to take. It gets worse given that “Wonder Woman 1984” had a shooting budget, reports note, of $200 million. Bringing in $16.7 million on a $200 million dollar investment is a loss that defies description; any adjective you attach seems like understatement. Call it disastrous, call it nightmarish, call it apocalyptic...it all seems pale compared to what actually happened.
Yet that's not the full story here. “Wonder Woman 1984” didn't just open in theaters. It came out on HBO Max, the new streaming service, the same day. Whether or not it can be said to keep customers on that particular reservation and streaming is unclear, but since HBO Max represents about $176 million of business per month for AT&T (12.6 million subscribers as of December 8 at $14 a month, roughly), it's easy to look at this figure a different way. Yes, it cost $200 million to make “Wonder Woman 1984” happen, and $16.7 million in return is dismal. But if it keeps that $176 million a month flowing, it's a huge help. Two months of that and the movie is, sort of, profitable...if looked at the right way.
Even with theaters starting to reopen—and close again, and reopen—over the course of 2020, it's become obvious that the landscape has changed for good. The video store took a crippling blow as retail shut down for months with no way to simply shift to online operations. Theaters did likewise; remember what we heard from AMC Theaters (NYSE:AMC) about going broke? They're now set to be bankrupt this January. Like about a week from now January.
The notion that streaming was the future of entertainment had always been on the back burner, but now, it's set to be the major game in town soon. That likely means a lot of changes in how, and which, movies get made. For AT&T, however, it's unclear just what these changes will ultimately mean. Thankfully, movies are just one part of the AT&T juggernaut, and divesting a weak division has always been an option.
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