It was largely overlooked in the news this week that there may be some horrible developments happening in the movie theater chain operators. Movies are supposed to be hot during the summer for kids and adults alike, but the parade of annual blockbuster films that have been released or are set to be released in summer of 2017 just is not living up to snuff. There may be some problems beyond this summer as well, in the second half of 2017 and into 2018.

Credit Suisse issued an analyst downgrade on Cinemark Holdings Inc. (NYSE: CNK) on Thursday that effectively gave the movie cinema chain the equivalent of a “Sell” rating. While Cinemark took it the worst, this really did spell out a bad scenario for the entire movie chain industry. Shares of all the movie theater-related companies were lower on Thursday and there was a negative cloud over rivals like Regal and AMC.

Credit Suisse’s Omar Shiekh has noted that box office trends are weak so far in 2017. While that is a current-year weakness, Sheikh is worried about premium video-on-demand (VOD) potentially being around the corner. His opinion is that consensus earnings and revenue forecasts will come down for 2017 and 2018, and that means more analysts would issue downgrades or lower of estimates.

Cinemark was downgraded to Underperform from Neutral and the price target was cut to $34 from $38. Earnings estimates were also cut. Sheik’s concern is that Cinemark’s earnings multiple will compress further in the back half of 2017.

The firm warned in this downgrade that box office trends are weak and second-quarter revenues are on track to decline 2% from 2016 and are expected to show zero growth in 2017 versus 2016 as a whole.

As far as how bad things may be after summer, third-quarter movie theater industry trends are likely to be down 15%. This was due to a tough comparison to the prior boost from “Secret Life of Pets,” but Credit Suisse also warned that the fourth quarter’s box office sales will have to rise 15% from the prior year just to make Credit Suisse’s numbers. That means their own estimates are coming with risk.

In the Cinemark downgrade, Sheikh’s note signaled that premium video on demand trends could be coming, that they could be real and that they are not a good opportunity for theater chains:

We continue to believe that studios will push hard for premium VOD rentals to begin in 2017. As we have previously highlighted, we struggle to see how a new window in week 4 priced at $50 won’t reduce industry profitability: the “average” $100 million movie attracts 2.6m theatre-goers in weeks 4-13, and assuming 25% of attendees in those weeks (6% of total attendees) switch to premium VOD, incremental demand from 1m people would be needed for the window to be accretive for exhibitors – this looks challenging. We also believe exhibitors have less leverage over studios than studios have over them, and that once an experiment begins, it will be hard to return to the status quo ante.

Again, all the major movie plays took a hit in the call: AMC, National CineMedia, IMAX and Regal.

Cinemark shares took it on the chin the worst of the whole theater lot on Thursday. Its shares closed down 4.67% at $37.96, and the trading volume of over 2.5 million shares was more than two and a half times an average day’s trading volume. Cinemark shares have a 52-week trading range of $32.60 to $44.84 and a consensus analyst price target of $45.62. The company has a market cap of $4.4 billion.

Credit Suisse sees Cinemark heading lower, and there are still even more downside risks if you read into the firm’s downgrade and outlook ahead. Maybe those endless risks of movies going direct to consumer with faster and faster internet connections, a risk that has been in place since the 1990s, are finally coming to a head.

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