James Bond may have been the last straw for Regal and Cineworld, but the analysts I spoke with agree: the only thing that will truly save theaters in the United States is a COVID-19 vaccine.
On Thursday, Regal Cinemas – the second largest theater chain in the United States with 536 theaters and 7,076 screens – will officially close all its doors in the United States for the second time during the global pandemic. Its parent company Cineworld will also close 127 cinemas in the UK. Over 45,000 people could lose their jobs or be fired and there is no timeline for reopening.
In what seems like good news, AMC and Cinemark, the first and third largest US chain respectively, will. don̵
But if you love theaters, you shouldn’t necessarily take it as a respite – even with Regal out of the picture, AMC and Cinemark are squabbling over pieces of a pie so small that both of them could still starve. Financial records show that AMC lost $ 2.7 billion in the first six months of 2020 and Cinemark lost $ 230 million.
This is not surprising because the revenue for every company almost evaporated as people stopped going to the cinema, decreasing 98.7 percent for AMC and 99 percent for Cinemark compared to the previous summer, respectively at just under $ 20 million and under $ 10 million, compared to the $ 65 million paid by Cinemark in rent. “They are in a state of no revenue and this is the most dire situation you can imagine,” says benchmark analyst Mike Hickey.
Each chain has publicly stated that it can only hold out until part of 2021 unless things change – despite taking on hundreds of millions of dollars in debt this year, renegotiating rents with owners, laying off tens of thousands of employees. , reducing wages and closing some small number of theaters permanently.
It’s mostly a question of renting, explains Wedbush Securities analyst Michael Pachter. Big chains largely don’t own their own buildings, so even if they stop showing movies, fire their employees, and stop selling food – Cinemark had to throw away $ 2.4 million worth of perishable food last quarter – they still have to pay. the rent, and there is only a matter of time before the owners, many of whom have to pay their mortgages, come to collect. “If we don’t get visibility on a vaccine soon, you wonder how long the owners will be patient,” Pachter says.
And these are just the remaining majors, which (along with Regal) accounted for just 53% of US movie screens. On September 30, the National Association of Theater Owners warned Congress that “69 percent of small and medium-sized theater companies will be forced into bankruptcy” if things continue as they did in the second quarter. “Many of them are small chains, moms and pop businesses, sometimes generational. I think a lot of them won’t be able to survive this, ”says Hickey.
Now, things are not quite as bad now as in the second quarter, because those numbers date back to when theaters were largely closed in the United States. AMC and Cinemark only started reopening for real only in August, before Christopher Nolan’s release Principle. The theaters had hoped Principle it would bring the crowd back and the director and owners had repeatedly insisted that the film would not jump from theaters and be seen there.
But Principle it opened for just $ 20 million over Labor Day weekend, a number that could have been generously considered “good” given the pandemic, and it didn’t even manage to top $ 30 million by September 13. Now $ 300 million has gone by global box office grosses, but exhibitor relations analyst Jeff Bock tells us it may not be good enough: with a budget of $ 205 million plus a huge marketing campaign, the film could have taken $ 450 million to reach the draw.
“This is a high risk game, and with Principle probably reaching a maximum of $ 350 million worldwide, that’s not enough, “he says, adding that it’s estimated it was a $ 700 million movie before the pandemic. That’s a lot of popcorn and candy that theaters don’t sell ( which is largely how cinemas make money).
After seeing the first Principle received, Warner Bros. quickly decided not to risk it Wonder Woman 1984 on that audience, pushing it to Christmas day. But in the wake of There is no time to die is Dune each of them was rejected for a year and Regal Cinemas closed, we wonder if Wonder Woman will actually arrive this Christmas.
What will theaters do if Wonder Woman (or Disney / Pixar’s Soul, the other big family movie out this year) are further delayed?
“You need good content to bring people back to the cinema,” says Hickey, arguing that studios and cinema owners will have to coordinate if cinemas are to survive, instead of continually rejecting movies. He says it’s a good sign that Disney hasn’t delayed Soul however, and that if key markets like Los Angeles and New York reopen their theaters, maintain security requirements and “make good movies,” he thinks audiences will start coming back.
But Pachter argues that it won’t matter until there’s a vaccine because people are still afraid of COVID-19 – “Imagine you’re at the theater and hear someone cough,” he asks – and neither Benchmark nor Wedbush will. they expect things to normalize anytime soon. “The box office is pretty much destroyed from mid-March 2020 to mid-March 2021,” says Pachter, calling it “a lost year” for the industry. Hickey says his company’s models bring us “close to normal” in 2022.
And while Pachter thinks it’s “very easy” for studios to continue to reject films right now and hope to find an audience later, particularly as the pandemic initially created a multi-month gap in film production, leaving a void. for these films – they won’t be able to do it forever because there isn’t enough space. With 130 major studio releases each year, there are only so many movies that can be pushed before there are too many for theaters to screen.
“[We] they have to prepare for the inevitability that one (or more) of the major chains – AMC, Regal, Cinemark – may not survive if this goes into next summer, “says Bock, referring to the impact of COVID-19 on cinemas. There are many factors that could prevent a vaccine from arriving before then.But even if one or more of the big theater chains goes bankrupt, it’s not necessarily the end of American cinema on the big screen.
Nobody I’ve spoken to believes Disney’s experiment to skip theaters with Mulan was necessarily a hit, or that Netflix, Amazon and other streamers will just catch the big blockbusters, killing theaters in the process. Studios still need cinema to maximize their earnings. “Theaters will survive; they simply may not be run by the same people, “says Pachter. He points out that it is not easy to simply turn a multiplex into a department store and suggests that while hundreds or thousands of theaters may close, failing movie chains may simply be taken over by new ones investors.
“A vaccine is coming. If it arrives in a year, I think the owners of the directory chains will change. If it’s in the next three months, they all survive, “says Pachter.” Even if the announcement is in 10 months, I think the owners will work with the movie chains and not force them to leave. It’s not knowing it’s the risk. “
So, like the rest of American society, theaters remain in limbo.