President Donald Trump seems set on reshaping Hollywood – one of many tasks he’s taken on in his second term.

On January 16, days before he officially reclaimed the Oval Office, he named Sylvester Stallone, Mel Gibson, and Jon Voight as “special ambassadors” to “troubled Hollywood.” His Truth Social post on the subject went on to clarify their mission as:

… bringing Hollywood, which has lost much business over the last four years to Foreign Countries, BACK – BIGGER, BETTER, AND STRONGER THAN EVER BEFORE! It will again be, like The United States of America itself, The Golden Age of Hollywood!

This week, he has announced further steps to reach that goal. As per another Truth Social announcement, Trump plans to slap 100% tariffs on “any Movies coming into our Country that are produced in Foreign Lands.”

The announcement got resounding approval from International Brotherhood of Teamsters general president Sean O’Brien and motion picture division leader Lindsay Dougherty. They released a joint statement saying:

For years, Hollywood studios have hollowed out the industry by following Corporate America’s crooked playbook of outsourcing good union jobs. Studios chase cheap production costs overseas while gutting the American workforce that built the film and TV industry.

These gigantic corporations line their pockets by recklessly cutting corners, abandoning American crews, and exploiting tax loopholes abroad. While these companies get rich fleeing to other countries and gaming the system, our members have gotten screwed over.

I understand their enthusiasm over reversing that damage. I even agree with it.

But as investors, we have to recognize both the positives and negatives of this move. And the latter, at least in the short term, includes higher costs for movie production. Which brings us right back to a reoccurring question of the 2020s.

Can movie theaters survive the decade?

The Many Problems Plaguing Movie Theaters

As longtime readers know, I make it my business to keep tabs on almost every corner of the commercial real estate market. That includes entertainment properties like movie theaters. And you’d be hard pressed to find a more troubled corner of this market in recent years.

Movie theaters have not been doing well ever since the 2020 shutdowns. As Variety noted back in January:

The domestic box office in 2024 was… down from the year prior, as the Hollywood release calendar took a hit from the 2023 actors and writers strikes. Last year’s revenues were $8.7 billion, down 3.3% from 2023 and 23.5% from 2019, the last pre-pandemic year, which reached $11.3 billion.

Nor is it looking good so far in 2025. First-quarter receipts were down 7% year over year in the U.S. and Canada.

That’s a lot to recover from, even with a summer lineup of expected hits like the live-action remakes of Lilo & Stitch and How to Train Your Dragon, Mission: Impossible – The Final Reckoning, Jurassic World Rebirth, and Superman.

After all, last year’s warmer-weather movies included success stories like Bad Boys: Ride or Die, Inside Out 2, and Deadpool & Wolverine. Yet they still weren’t enough to keep summer box office revenue from falling more than 10% domestically.

That all weighs heavily on movie theaters for obvious reasons. They’re just not bringing in the kind of revenue they used to… despite repeatedly raising their prices on everything they offer, from tickets, to drinks, to snacks.

But there’s yet another issue the industry faces today that is just as problematic: There are too many movie theaters in existence.

That was actually true decades before the pandemic, with some areas featuring three or four in a 15-mile radius. That kind of competition was always too much to be sustainable.

It became more pronounced once online streaming services like Netflix began making their own movies. And then it became even more so in 2020, when theaters shut down completely and films went straight to TV.

The result has been about 3,000 closures across the U.S. since 2019. But that still leaves 40,000 in existence, a number that needs to fall further still.

President Trump’s 100% tariff plan could be the next catalyst to make that happen.

I Don’t Expect the Death of Theaters Anymore, However…

That’s the downside to the movie theater story. But there are upsides as well, including how these businesses have defied the odds this far.

According to the experts back in 2020 – myself included, I admit – movie theaters were bound to go the way of Blockbuster Video by 2025, thanks to lasting pandemic results. Instead, many of these businesses are updating and outright remaking themselves by:

• Improving sound and picture quality

• Adding in more comfortable seating

• Providing more desirable food choices

• Hosting events

• Adding in non-movie features such as bowling alleys and other experiential offerings

That’s obviously more of a burden for smaller chains. However, mom-and-pop operators always face greater financial problems than big businesses like AMC Entertainment (AMC), Regal, and Cinemark (CNK). It’s just the way of life.

Back to the positive, it’s also “just the way of life” for people to crave actual human interactions. Yes, modern entertainment technology makes staying home in our pajamas so very tempting.

But for most of us, it’s not tempting enough to completely eschew society. Even in a world with DoorDash and Peloton, you’ll still find your local diner packed on a Sunday afternoon, your gym far from empty…

And your preferred seats already taken at the movie theaters during big releases.

In short, people are still interested in experiencing life in person. They just have to be properly incentivized to act on that interest, which movie theaters are working hard to do.

Moreover, if Trump’s larger plans spur the economic boom he says they will, then maybe the consumer experience will become more affordable. Maybe the thought of spending $23 on a ticket, a soda, and a bucket of popcorn won’t be the turn off it is now.

Frankly, even if that isn’t the case, I don’t expect movie theaters to die off altogether. We’ve seen too much proof of their resilience over the past five years to count them out anymore.

However, I also don’t think the industry is done changing just yet. Not when the nation remains so saturated with cineplexes and Trump is planning major shakeups for the Hollywood productions behind them.

I’m always on the lookout for a good value in the real estate investment trust (“REIT”) market. And at first glance, several movie theater-heavy REITs would seem to fit the bill. But the line between a great value and a value trap can be razor thin. And for now, at least, movie theaters fall just on the wrong side.

Until we see more progress on both fronts, I’m more than happy to go out and see the occasional movie. But I wouldn’t recommend investing in them anytime soon.

Regards,

Brad Thomas
Editor, Wide Moat Daily

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