By Ciara Linnane, MarketWatch
Will the cinema-going experience survive the coronavirus pandemic?
Almost certainly, according to experts. Fans — and that’s most of us — have an emotional and sentimental attachment to the cinema that started in childhood and will flood back to the movies as soon as it’s deemed safe to do so.
In the meantime, the uncertainty facing theaters as long as COVID-19 stops people gathering indoors in large numbers means a long period of upheaval. And there will be casualties.
“Cinemas are facing a ‘Mad Max’–style all-out war that is inflicting on them a dangerously high level of financial pain,” said Eric Schiffer, chief executive and chairman of Patriarch Organization and Reputation Management Consultants.
That pain became more acute this week with the news that AT&T Inc.’s Warner Bros. will release 17 films -- including “Dune,” “The Matrix 4” and “The Suicide Squad” -- to its HBO Max streaming service for 31 days the same day they debut on the silver screen in 2021, shattering movie-release norms.
Cinema revenue is set to experience its sharpest contraction in at least 21 years, according to PricewaterhouseCoopers. That’s when the firm first started to publish an annual outlook for the entertainment and media sector.
“Cinema has taken a big hit this year, and we’re not forecasting revenues to recover to pre-pandemic levels until post-2024," PwC principal CJ Bangah told MarketWatch. “The big theater experience, early access to blockbuster films and nostalgia have all played a role in getting us into seats. But that doesn’t mean cinema won’t face a new level of competition [from] in-home entertainment options. Innovations such as AR and VR plus the strong performance of some movies released direct-to-consumer have challenged common sentiments around how and when we want to engage with cinema content.”
There’s a lot at stake. PwC estimates the global entertainment and media business is a $2.1 trillion industry that will contract by 5.6% — or $117.6 billion — in 2020 alone. With no sign of a vaccine yet in sight, the revenue hit is expected to continue into 2021.
Companies that have had to endure months of closed theaters are feeling the pinch. AMC Entertainment Inc. /zigman2/quotes/200235402/composite AMC +1.64% , the biggest cinema operator in the world, warned in a recent regulatory filing that it may run out of cash by year-end or early in 2021. AMC is too big to qualify for bailout loans like those available under the Paycheck Protection Program but has tapped capital markets, reorganized its debt and reached out to investor groups in an effort to bolster cash and stay afloat.
Then there’s Cineworld /zigman2/quotes/206525056/delayed UK:CINE +6.55% /zigman2/quotes/208174566/delayed CNNWF +9.02% , the owner of the Regal chain and the second biggest cinema company in the world, which in early October temporarily closed all cinemas in the U.K. and U.S., putting 45,000 jobs at risk.
Cinemex Holdings USA, operator of Miami-based CMX Cinemas, filed for bankruptcy in April .
And Tim Richards, head of the cinema chain Vue International said demand is still there, but there are no major movies being released for consumers to watch, after the latest James Bond film, “No Time to Die” was delayed a second time. “Our problem right now is we have no movies, and this was a big blow for us,” he told BBC Radio.
A bailout? Fuhgeddaboudit
Like other industries, cinema groups have asked Congress for bailout funds . The Directors Guild of America, the National Association of Theatre Owners and the Motion Picture Association in a joint letter to congressional leaders warned that, without aid, “our country’s beloved movie theaters” could die.
“If the status quo continues, 69% of small and midsized movie-theater companies will be forced to file for bankruptcy or to close permanently, and 66% of theater jobs will be lost,” said the letter. “Our country cannot afford to lose the social, economic and cultural value that theaters provide.”
The letter optimistically requests that Congress redirect unallocated funds from the CARES Act relief bill to cinemas, or enact new policies, such as the RESTART Act, a loan program that would extend PPP loans for longer to give the hardest-hit businesses time to qualify for loan forgiveness.
“That’s not gonna happen,” said Schiffer. “It would be viewed as devastatingly inappropriate to bail out theaters. Instead, they will face the death rattle and have to pick up the pieces. It won’t be the last act of cinema, but it will be brutal.”
Steve Spitzer, managing director at restructuring firm AlixPartners, agreed that a bailout is a long shot but said there are ways in which cinemas can generate a regular flow of funds.
“Cinemas could change their model to a subscription service and ask their customers in the short term to help them bridge the financial gap,” he said. “They might get consumers willing to spend money today to ensure they are there tomorrow. It could be the customer doesn’t get the benefit now, but the assurance that the service will be there in the future, and they will get some kind of discount.”
Smaller, privately held cinemas in New York City have done exactly that with some success, according to a New York Times report. Others have made films available for streaming on their sites as a way to remain engaged with customers. Some have survived by cobbling together a mix of bank loans, emergency grants, deferred mortgage payments, concessions from landlords and donations.