There is no question that online streaming services have forever changed the way that people watch movies. This is especially true for younger people who are part of the millennial generation. These young people have grown up with smartphones and tablets. They learned much of what they know by watching videos on YouTube. The Internet has defined a large part of their existence. Therefore, it is no surprise that millennials would stream a movie online instead of getting in a car and driving to a movie theater.
The lack of interest that millennials have in going to movie theaters has become a unique opportunity to make money for financial traders known as short sellers. These are people who attempt to make money on predicting when share prices in certain industries will start to drop in value. Traders are currently doing this with the movie theater industry by boosting short interest in the biggest movie theater companies in the United States. These are Cineplex, Cinemark, AMC and Regal.
These traders believe that the emergence of Hulu, Amazon, Netflix and other streaming services will continue to take a massive chunk out of the money that the major U.S. movie theater chains can make. Disney also announced plans to create their own streaming service. It is only a matter of time until other major movie studios follow suit. These studios will be able to cut out the streaming service that is acting like the middle man. They will then be able to keep all of the profits.
One of the biggest reasons that traders are betting that shares in the movie theater industry will drop is the fact that 38 million less movie tickets were sold in 2016 as compared to 2015. This is a massive decline that simply cannot be ignored. It should not be a surprise that movie theater stocks are in the tank right now. It is situations like this that short sellers are always looking for. They love to see a depreciating stock that does not have much hope of going up again in the near future.
It remains to be seen how much money that these short sellers will be able to earn by betting against the movie theater industry. However, the sheer amount of online streaming services available make it unlikely that movie theaters are going to be rebounding any time soon. Short sellers believe they made a wise decision.