Netflix, Inc. (NFLX) – The Next Industry to Die: Hollywood?

Theater businesses could suffer

If Spielberg and Lucas are right, having money invested in big-name movie chains might not be the wisest decision. While movie theaters aren’t going to go extinct overnight, higher ticket prices and fewer movies means that less theaters would be needed. Rather than have a movie theater every five miles, a handful of theaters could likely service an entire city.

Cinemark Holdings, Inc. (NYSE:CNK) and Regal Entertainment Group (NYSE:RGC) are two of the bigger movie theater stocks investors should be aware of.

As of its last annual filing, Cinemark Holdings, Inc. (NYSE:CNK) had 298 theaters spread throughout the US, and 167 in various Latin American countries. It pays a decent dividend of 3% and trades with a price-to-earnings ratio of about 20, just slightly above the broader market.

For its part, Regal Entertainment Group (NYSE:RGC) has 540 theaters in the US and no International exposure. It pays a higher dividend than Cinemark, 4.80%, but trades with a higher PE of 23.

Of the two, Cinemark Holdings, Inc. (NYSE:CNK)’s international exposure seems to give it superior staying power. Latin Americans, with lesser digital distribution infrastructure and household wealth, could continue to flock to the movies for quite some time.

But if Spielberg and Lucas are right, both stocks will inevitably become value traps. There simply won’t be much need for their theaters in the long-run.

The death of the movie industry?

Is the movie business on its last legs? It would be easy to dismiss the idea as futuristic nonsense if it wasn’t being advocated by such film stalwarts as George Lucas and Steven Spielberg.

If they’re right, Hollywood’s creative talents could be re-directed to Internet streaming services such as Netflix, Inc. (NASDAQ:NFLX). At the same time, movie theaters could find their businesses challenged, as fewer theaters would be needed in the world that Spielberg and Lucas envision.

The article The Next Industry to Die: Hollywood? originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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