Let's not go to the movies

Movie attendance is down to some of the lowest numbers Hollywood has ever seen. The box office slu mp is bad news for owners of movie theater chains. Regal Entertainment Group, the nation's largest theater owner with more than 6,600 screens in nearly 580 multiplexes, is expected to report a sales increase of just 1.6 percent and a decline of more than 25 percent in earnings per share when it releases third-quarter results Thursday. And analysts are forecasting a nearly 75 percent drop in third-quarter profit for Carmike Cinemas, the third largest movie exhibition company in the U.S.

Investors may be betting that the worst is over for the industry. Some believe the box office can see a bounce in the next two months thanks to high-profile releases, such as Harry Potter and the Goblet of Fire. Income-oriented investors may also be intrigued by the big dividends that the two companies offer, however, if the industry has another off-year they may not be able to continue to offer such high dividends. Despite increased optimism about a box office increase in 2006, this is not reflected in the sales and earnings estimates for Regal and Carmike.

Movie theater attendance is down and the reason for this is a subject of intense debate. Is it a backlash against rising ticket prices? Why do ticket prices keep rising? Are the movies just not very good? What would make 2006 movies better than 2005? Would people rather sit at home and watch DVDs or OnDemand Movie Services? Is the opportunity cost of going to see a movie in the theaters higher than watching it at home? Should investors be rushing into investing in these movie theater chains?