CDPR Sued For Securities Violations

[shawnhcorey]

Is their problem acute or systemic?

As strange usage of the word systemic. I did not know systemic meant the natural end of its lifetime. The natural end of a lifetime would not be brought on by the system. Sooner or later everything ends, regardless of the system.

 

[embee]

As strange usage of the word systemic. I did not know systemic meant the natural end of its lifetime. The natural end of a lifetime would not be brought on by the system. Sooner or later everything ends, regardless of the system.

Corporations don't have lifespans. They are legal entities that only exist by dint of law and will continue on for as long as they are solvent. JP Morgan Chase, DuPont, and Remington are all over 200 years old. Nintendo is over 125 years old and originally sold cards.

Corporations die of insolvency, not old age.

 

[shawnhcorey]

Corporations may not have lifespans but technology does. Theatres are losing out to streaming services because its the end of their technology.

Think of it like species. When one species is replaced another, it's the end of lifespan because it can no longer complete. Same with technology.

 

[embee]

Corporations may not have lifespans but technology does. Theatres are losing out to streaming services because its the end of their technology.

Think of it like species. When one species is replaced another, it's the end of lifespan because it can no longer complete. Same with technology.

Theaters are losing out to streaming technology because they spent the last two decades spending on capital improvements.

In 1999, they switched to digital projection pursuant to George Lucas' demand to do so in order to be eligible to exhibit The Phantom Menace. Then there were continual upgrades to sound to maintain THX certification, expenditures to install a mini-IMAX screen, FreeStyle soda machines, and renovations for installation of improved stadium seating, not to mention infrastructure improvements to allow eTicketing.

This also involved paying out fees to Fandango and other third-party ticket sellers (they get a cut of the exhibitors' cut), and losing revenue due to studio-favoring shifts in the revenue (again, starting with The Phantom Menace and which Disney has started using again, beginning with The Last Jedi). Disney didn't get 50% of that movie. It got 65%.

On top of this, the operating costs kept growing. Rent, payroll, maintenance, electricity. In the best of times, exhibitors had about a 4% profit margin.

Now, take that optimal environment where the exhibitor turns a 4% profit and turn off the revenue stream. No income for 9 months. They still owe rent. They still have to maintain equipment. But they don't take money in.

I'm not saying they were doing well. Movie theaters are in the same situation as coal mines. Their decline really began around the time that Disney and WB started laying down the new 65% split. And COVID put a bullet in the heads of the theater chains. Streaming is the studios' solution to COVID in an attempt to recoup their investment. And yes, that will quite possibly kill movie theaters. AMC is likely to run out of operating cash in the next few months. Regal might not see 2022.

But streaming isn't killing theaters - COVID and studio consolidation are.

 

[shawnhcorey]

COVID, as I understand the term from above, is an acute problem. Eventually it will go away. And yes, businesses can go bankrupt because of acute problems.

Studio consolidation is a monopoly problem. If the studios didn't want to promote streaming over theatres, they would not have demanded 65% of the revenue. Back before the internet, theatre chains had a tight grip of movies. (They didn't quite have a monopoly.) But technology has changed that and they are suffering for it.

But I would not call this a systemic problem. This is expected behaviour within the system, not a problem caused by the system.

 

[Ryujin]

I still don't get it! If you as a shareholder sue the company, and the company has to pay you money, the value of the company goes down, so your shares are now worth less, surely? You've just sued yourself, effectively.

Eh. I know. I'm about as clueless as can be with stuff like that. I'm sure it makes sense to people who know how it works.

So you enrich yourself, personally, at the cost of the company. Hopefully the company's overall assets outweigh the amount of equity held by stock holders, by a large margin. If all that you're looking for is a top-up and to divest yourself of the stock completely, then you don't really care what happens to the company afterward. And some (far too many) people refuse to think long term and are only about realizing profit, today.

 

[dragoner]

This sounds like it is brought by investors to recoup losses, either from the company, brokerage, or a tax write off. Not my purview, though I am usually named in lawsuits 3-4 times a year, it's just the way business is done, and why people retain lawyers.

 

[Ryujin]

This sounds like it is brought by investors to recoup losses, either from the company, brokerage, or a tax write off. Not my purview, though I am usually named in lawsuits 3-4 times a year, it's just the way business is done, and why people retain lawyers.

So far by an investor, who wants to have a class certified.

 

[embee]

COVID, as I understand the term from above, is an acute problem. Eventually it will go away. And yes, businesses can go bankrupt because of acute problems.

Studio consolidation is a monopoly problem. If the studios didn't want to promote streaming over theatres, they would not have demanded 65% of the revenue. Back before the internet, theatre chains had a tight grip of movies. (They didn't quite have a monopoly.) But technology has changed that and they are suffering for it.

But I would not call this a systemic problem. This is expected behaviour within the system, not a problem caused by the system.

I feel that we are speaking past each other when it comes to language.

Let's look at something like Uber.

If an Uber driver assaults a passenger, resulting in bad press and ensuing decline in revenues and share price, that is an acute problem. It is a relatively isolated problem.

If Uber has a toxic corporate culture that exposes it to workplace liability, that too may be an acute problem that can be fixed through management changes. If such changes do not fix the problem, that problem may become a systemic problem.

Additionally, if Uber's business model relies on paying its drivers under an "independent contractor" model as opposed to as a "W2 employee" and a jurisdiction determines through statute or court ruling that the drivers are W2 employees, that's also a systemic problem. The company cannot function within that system.

_____________________________________________________________________

And the studios didn't want to promote streaming because of ease of piracy. Transmission of files to exhibitors is far more secure. Why the 65% squeeze play? Because if an exhibitor doesn't have Disney movies, it doesn't have movies. It doesn't have Marvel. It doesn't have Star Wars. It doesn't have Pixar. It doesn't have Disney. Disney had the advantage, not the exhibitors. And if AMC, Regal, and Carmike all got together to strategize how to counter, that could run afoul of anti-collusion laws. And none of them alone are big enough to fight back.

Yeah - sucks to not have a monopoly.

As for streaming, well, how much do they make? No one knows. There have only really been two examples: Mulan and Wonder Woman 84. Disney CEO gave no figures on performance during the November earnings call, saying only that he was "pleased" with Mulan's performance. The next experiment is Soul, which won't be in an earnings call until Q2 at least.

Ultimately, theaters have several problem. The acute problem of COVID and how to remain solvent with crippled income. There is also a systemic problem with how to remain solvent with rising costs and lower returns due to studio consolidation. And there is a second systemic problem with whether, due to technology, theaters can generate sufficient demand for their product - the theater experience.

People may line up around the block in July and December to see the Avengers and the Star Wars gang but the theater still needs to pay the rent all the other months of the year.

Bottom line: I think we agree. Movie theaters may not survive. I think we disagree on the cause of potential death.

 

[dragoner]

So far bay an investor, who wants to have a class certified.

Which could be on the inside, so that the company can declare bankruptcy.