Coronavirus shutters movie theaters as certain films choose direct-to-consumer routes

The movie theater landscape is changing amid the coronavirus pandemic. Yahoo Finance's Alexandra Canal breaks down the latest. Zack Guzman joins in on the conversation.

Video Transcript

ZACK GUZMAN: Meantime, we're also watching how industries continue to get impacted by the coronavirus crisis spreading across the US as more Americans stay home. Theaters particularly hardest hit here, as they suffered their worst weekend box office numbers ever.

And we are joined by Alexandra Canal with the update in this week's Fame or Fortune. Ally, what can you tell us?

ALEXANDRA CANAL: Yeah, so the theater industry is definitely struggling here. You mentioned the worst weekend in the box office since the year 2000 last weekend. That prompted three of the biggest movie theater chains-- AMC, Regal, and Cinemark-- to close their theaters nationwide.

Now, AMC gave guidance that they'll be closed about 6 to 12 weeks, but I honestly think that's going to be even longer than that. So best-case scenario, these theaters will reopen in mid-May. Worst case, we could see this continue into the summer where you know a lot of blockbusters are slated for that time. So that's going to cause even further disruptions here.

Now, in response to this, a lot of movies have decided to just go direct to consumer, go on demand. We saw that with "The Invisible Man," "The Hunt" and "Emma." They had very limited theatrical runs before going online. And the "Trolls" sequel, that-- this is probably the riskiest move from Universal. They're totally bypassing their theatrical release on April 10 and just going direct to consumer for $20. We'll see how that does. Bit of a risk for Universal since the original movie brought in about $350 million at the box office in 2016, and this is just expected to take a hit here.

For example, last year, movie purchases and rentals, they accounted for a reported $9.3 billion across digital and physical platforms, and you compare that to 2019's record $42.5 billion in box office revenue. So that's why we're not going to see these major movies like "Mulan," "Fast & Furious 9," "No Time to Die," go direct to consumer, at least at this point. They're going to try and push themselves to the theater because that's where they're going to make the most money.

ZACK GUZMAN: Yeah. No, I'm just looking at Netflix shares today, up 3%. We've seen those shares maintain their value pretty well compared to some of the other industries we've seen through all this. Real quick, any update on that front for them?

ALEXANDRA CANAL: Yeah, so Netflix announced yesterday that it would be reducing the quality of its video. They actually made an arrangement with EU leaders and regulators to do this because over in Europe, people were just downloading so many movies, so many TV shows, and it was affecting the internet speed throughout the entire EU. So they are going to be reducing its bit rates across its streams in Europe in order to preserve the functioning of the internet during the time of this COVID-19 crisis.

And this just sort of emphasizes how desperate people are for entertainment right now. And it also-- you know, this is a future-- potential future for these movie production companies. If they can't push out their content in physical movie theaters, perhaps they can look to streaming like Netflix, like Disney+, in order to get some sort of revenue here. But that is going to hurt the physical theaters in the long run.

ZACK GUZMAN: Yeah. I mean, just to put a button on it, when we look at the S&P 500, off more than 30% through all of this. Netflix shares have been able to maintain about a 3% gain. So that is one of those names relatively less impacted, if at all, through all of this for now. Alexandra Canal, thank you so much for bringing us that.