James Bond may have been the last straw for Regal and Cineworld, but analysts I agreed with agreed: the only thing that can really save cinemas in the US is a COVID-19 vaccine.
On Thursday, Regal Cinemas – the second largest theater chain in the US, with 536 theaters and 7,076 screens – will officially close all doors in the US for the second time during the global pandemic. Parent company Cineworld is also closing 127 theaters in the UK. Over 45,000 people may lose their jobs or be on leave, and there is no timeline for reopening.
AMC and Cinemark, the first and third largest US chain, will not follow Regal's lead. Everyone confirmed today that over 80 percent of their US-based theaters are open and will stay open despite Regal's decision.
But if you're into the theater, don't take that as a procrastination – even if Regal isn't in the picture, AMC and Cinemark are fighting over pieces of cake that are so small they could both still starve. Financial reports show AMC lost $ 2.7 billion and Cinemark lost $ 230 million in the first six months of 2020.
"You are in a state of no income"
That's not surprising given that revenue for any company pretty much evaporated when people stopped going to theaters, and 98.7 percent for AMC and 99 percent for Cinemark compared to the previous summer to just under $ 20 million $ 65 million, or less than $ 10 million, compared to the $ 65 million Cinemark paid in rent. "You are in a state of no income and that is about as bad as you can imagine," says benchmark analyst Mike Hickey.
Each chain publicly said it can only hold out until part of 2021 if nothing changes – despite borrowing hundreds of millions of dollars in debt that year, renegotiating rents with landlords, laying off tens of thousands of employees , Salaries cut and some closed has small number of theaters permanently.
Cinemark sold just $ 37,000 worth of tickets and $ 124,000 worth of concessions in the second quarter.
When the theaters close, many costs drop dramatically – but that's still a $ 65 million rent in the second quarter.
It's largely a question of rent, explains Michael Pachter, an analyst at Wedbush Securities. Most of the big chains do not have their own buildings. Even if they stop showing movies, take their employees off and stop selling groceries – Cinemark threw away $ 2.4 million perishable food last quarter – they'll still have to pay rent, and it's only a matter of time until landlords, many of whom must pay their own mortgages, come to collect. "If we don't get a glimpse into a vaccine soon, you'll wonder how long the landlords will be patient," says Pachter.
And that's just the remaining majors, who (along with Regal) only made up 53 percent of the big screen in the US. On September 30, the National Association of Theater Owners warned Congress that "69 percent of small and medium-sized theater companies will be forced to file for bankruptcy" if things continue as they did in the second quarter. “Many of them are small chains, mom and pop companies, sometimes generations too. I don't think a lot of them will survive this, ”says Hickey.
Now things aren't as bad as they were in the second quarter, as those numbers are from when theaters in the U.S. were largely closed. AMC and Cinemark only reopened in August before Christopher Nolan's Tenet was released. The theaters had hoped Tenet would bring the crowd back, and its director and owners had repeatedly insisted that the film would not skip theaters and be seen there.
"Tenet" was the test and did not achieve the grade
But Tenet opened for just $ 20 million on Labor Day weekend, a number that could only be generously considered "good" in the face of the pandemic, and failed even to sell $ 30 million by Sept. 13. To exceed dollars. Global box office revenues have now surpassed $ 300 million, but exhibitor relations analyst Jeff Bock tells us this is nowhere near good enough: with a budget of $ 205 million plus a huge marketing campaign the film may need $ 450 million to break even.
"This is a high-stakes game and with Tenet likely hitting a maximum of $ 350 million worldwide, that just won't be enough," he says, adding that it is a $ 700 million movie before the pandemic Dollar traded. That's a lot of popcorn and candy that theaters don't sell (that's how theaters make money).
After seeing the early tenet receipts, Warner Bros. quickly decided not to risk Wonder Woman 1984 for this audience and pushed it for Christmas Day. But after No Time to Die and Dune each pushed back a year and shutting down Regal Cinemas, we wonder if Wonder Woman will actually arrive this Christmas.
What will the theaters do if Wonder Woman (or Disney / Pixars Soul, the other big family movie out this year) is further delayed?
Many hopes were attached to "Wonder Woman" and "Soul".
"You need good content to get people back to the cinema," says Hickey, arguing that if the theaters are to survive, the studios and theater owners need to coordinate rather than keep pushing the films back. He says it's a good sign that Disney hasn't delayed Soul yet. If key markets like Los Angeles and New York reopen their theaters, meet security requirements, and "play some good movies," he believes audiences will return.
But Pachter argues that it doesn't matter until there is a vaccine because people are still afraid of potentially getting COVID-19 – “Imagine you're in the theater hearing someone cough,” he asks me – and neither Benchmark nor Wedbush 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. According to Hickey, his company's models will bring us “almost normal” in 2022.
And while Pachter is of the opinion that it is "very easy" for the studios to keep pushing films back and hope that they will find an audience later – especially because the pandemic initially created a hole in film production lasting several months and a void for these films – they won't be able to do this forever because there isn't enough space. With 130 major studio releases a year, there are only so many films to be pushed before there are too many for theaters to show.
"(We) need to prepare for the inevitability that one (or more) of the big chains – AMC, Regal, Cinemark – may not survive if this goes into next summer," says Bock of the effects of COVID-19 on the cinemas. There are many factors that could prevent a vaccine from arriving before this time. But even if one or more of the big theater chains go down, it won't necessarily be the end of American cinema.
Nobody I've spoken to believes that Disney's experiment in skipping theater with Mulan was necessarily a success – or that Netflix, Amazon, and others will just snap up the big blockbuster movies and kill theater in the process. Studios still need theaters to maximize their return on investment. “The theaters will survive; They may not be run by the same people, ”says Pachter. He points out that simply turning a multiplex into a department store is not easy, and suggests that hundreds or thousands of theaters could close, but the failed film chains could easily be picked up by new investors.
“A vaccine is coming. When it comes a year from now, listing chain owners will likely change. If it's in the next three months, everyone will survive, ”says Pachter. “Even if the announcement comes in 10 months, I think the landlords would work with the film chains and not force them to leave. It is ignorance that is risk. "
Like the rest of US society, theaters remain suspended.