Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Movie Theater Industry
Transcript
- Lucas: So here's a number that stopped me this week: US movie theater attendance is running about 15 percent below pre-pandemic levels, but revenue per patron is up almost 22 percent since 2019. That's the stagflation theater in a nutshell — fewer people going, but those who do are paying a lot more. Luna: I felt that one personally. I paid twenty-eight dollars for an IMAX ticket last weekend, and the theater was maybe half full. But the guy next to me had ordered a full dinner at his seat. Lucas: Exactly. And that's the bifurcation we're seeing. The premium end — IMAX, Dolby, dine-in concepts — is thriving because they've turned a movie into an event. It's not just a film, it's an outing. Meanwhile, the traditional multiplex is struggling to fill seats with $12 tickets. Lucas: And look, I'm not saying this to bemoan the old model. The data is pretty clear that consumers are trading down in some categories but trading up in experiences they really care about. The CPI data we got last month showed overall inflation easing a touch — CPI at 332.6, down from 333.98 — but service inflation is still sticky. That's the environment theaters are navigating. Luna: Right. And import prices just posted a surprise gain, especially from China, hitting the highest since 2008. That eats into theater margins on everything from projectors to popcorn supplies. Lucas: It does. But here's what I find really interesting: the discount chains are actually responding in a smart way. Cinemark, for example, has been leaning into value pricing — they've got matinee tickets under $7 in some markets, and they're bundling concessions. Their attendance is actually up quarter over quarter. They're positioning themselves as the affordable night out. Lucas: Now, if walking through the economy with us has made something click — maybe helped you spot a trend at work or in your own spending — and you'd like to help keep these conversations ad-free, there's a simple way to do that. You can support the show at buy me a coffee dot com slash fexingo. It's a small gesture that goes a long way, and we genuinely appreciate it. Luna: Yeah, I'll second that. We don't run ads, so listener support is what keeps this going. And it really does make a difference. Lucas: So back to that bifurcation — the other side of the coin is the luxury chains like AMC and Alamo Drafthouse. They're investing heavily in recliner seats, full food and beverage service, and premium large format screens. AMC's revenue per patron hit an all-time high last quarter, even though total attendance was down. They're effectively raising prices by changing the product. Luna: But isn't there a risk they price out their core audience? I mean, a family of four at a dine-in theater can easily spend $150 for a movie night. Lucas: That's the bet, right? They're betting that the audience they keep is more loyal and spends more per visit. And the data supports it — the premium chains have much higher repeat visitation rates. But the bigger structural challenge is the theatrical window. Luna: Which is getting shorter and shorter. Studios now release movies on streaming just 30 to 45 days after theatrical, sometimes less. Lucas: Exactly. And that's a direct result of streaming economics. The studios — Disney, Warner Bros., Universal — they all have their own streaming services now, and they need content to feed those platforms. So the old model where a movie played in theaters for three months before hitting home video is gone. That puts pressure on theaters to capture as much revenue as they can in that narrow window. Luna: Which is why they're pushing premium formats and event screenings. You have to give people a reason to leave the house when they could just wait a month and watch it on their couch. Lucas: Right. And that's where the 'event-ization' of cinema comes in. I'm talking about live broadcasts of concerts, sports, even Broadway shows. AMC has been doing this with their AMC Theatres Live series. They showed the World Cup final last week and sold out in dozens of locations. That's not a movie, but it's a reason to go to the theater. Luna: And that ties into something the Fed mentioned in their latest Beige Book — the World Cup gave bars and restaurants a needed boost. So theaters are trying to capture some of that same live-event energy. Lucas: Exactly. And it's working, to a degree. But the economics of live events are different. The margins on a concert broadcast are thinner because the revenue share with the content provider is higher. Still, it fills seats and sells concessions. Lucas: Now, the other factor that's not getting enough attention is the impact of global supply chain disruptions on theater operations. With renewed Hormuz tensions, shipping costs are spiking again. That affects everything from the digital projectors that come from Asia to the physical film reels that some independent theaters still use. Luna: I hadn't thought about film reels. I assumed everything was digital by now. Lucas: Most major chains are digital, but about 15 percent of independent theaters in the US still use 35mm film. Those reels are mostly manufactured in Europe and shipped via container. If shipping costs double, that's a direct hit to their bottom line. And they can't easily pass that cost on to customers. Luna: So the indies are caught in a squeeze: higher costs, shorter windows, and competition from streaming. It's no wonder we've seen a wave of independent theater closures. Lucas: Yeah, the National Association of Theatre Owners reported that about 400 independent screens have closed since 2020. That's accelerating. But here's the twist — some of those closures are actually creating opportunities for the discount chains. Cinemark has been acquiring shuttered indie theaters in smaller markets and converting them to their value model. Luna: That's actually a smart consolidation play. They get real estate at a discount, and they bring in a proven format. Lucas: Exactly. And it's a pattern we're seeing across industries during stagflation — the strong get stronger by absorbing the weak. The question is whether the premium chains can sustain their pricing power if the economy slows further. Real GDP growth is at 2.1 percent annualized, which is okay, but jobless claims just dropped to 208,000, so the labor market is still tight. That's supporting consumer spending, for now. Luna: But wage growth is only barely keeping up with inflation. Average hourly earnings are at $37.60, up maybe 3 percent year over year, while core PCE is still running above 2 percent. So real purchasing power is fragile. Lucas: Right. And that's the core stagflation dynamic. Consumers have to make trade-offs. Going to the movies is discretionary, and it's competing with streaming subscriptions, dining out, and other entertainment. The chains that win are the ones that make the trade-off feel worth it. Lucas: So where does this leave us? I think the movie theater of 2026 looks very different from the movie theater of 2019. It's more polarized — you either get a bare-bones discount experience or a full-service premium one. The middle ground is disappearing. Luna: And the question is whether that middle ground can come back if inflation moderates. Or have consumer habits permanently shifted? Lucas: That's the billion-dollar question. My bet is that some habits will stick. People who've gotten used to watching new releases at home aren't going to suddenly flock back to theaters. But the social aspect of cinema — the shared experience — that's not replaceable. Theaters that lean into that, with events and premium formats, will survive. The rest will keep shrinking.