Will movie theaters — and moviegoing — survive coronavirus closures?
Like virtually every other cinema in the U.S., Fairfax, Va.'s popular second-run movie house, Universal Mall Theatres, has been closed since last week because of the spreading coronavirus outbreak. The three-screen exhibitor’s revenues shrank to zero. Its 20 employees’ hours were scrapped.
So owner Mark O’Meara, 67, got creative. The company started selling popcorn for curbside delivery, mimicking how shuttered restaurants across the nation have tried to stay afloat. The theater advertised to-go large popcorn orders for $3, a deal that caught the attention of a local radio DJ, who promoted it on the air.
On Sunday, the multiplex sold roughly 200 tubs of popcorn.
As movie theaters shut down and studios delay major releases, studios may turn to more digital releases.
“It’s not enough to pay the rent or anything,” said O’Meara, who also owns the nearby six-screen Cinema Arts Theatre. “But it’s enough to keep a couple kids working.”
Even before the exhibition industry effectively shut down nationwide last week, the COVID-19 pandemic had deteriorated into a dire situation for movie theater companies, many of which are mom-and-pop indie shops with just a handful of theaters. Some of them were already struggling amid the fluctuations of the box office.
But this is a crisis without precedent. Even during past recessions, consumers still flocked to theaters to forget their troubles.
With ticketing and concession sales now evaporated, many analysts fret that some cinemas will not be able to survive without government assistance. The National Assn. of Theatre Owners, which represents 33,000 U.S. screens and 600 small and large exhibition companies, has been lobbying Congress and the Trump administration for relief for its members in the form of loan guarantees and other measures.
Whatever the definition of a distressed industry is, we definitely qualify.
John Fithian, president, National Assn. of Theatre Owners
John Fithian, president of the Washington-based theater lobby, said the nearly $2-trillion stimulus bill working its way through Congress would save the film exhibition industry from total destruction. The bill includes $500 billion to shore up struggling companies. Senate Democrats and the White House agreed Tuesday to a nearly $2-trillion stimulus package to combat the economic fallout of the coronavirus outbreak. A Senate vote on the deal could occur quickly, with the House potentially following soon after.
Movie theaters have gone from a $15-billion-a year business — about $11 billion in domestic box office grosses and $4 billion in concessions — to effectively no revenue, Fithian said. On top of ongoing fixed costs, including rents and maintenance, many theaters are entering this uncertain period with heavy debt burdens after spending to expand or upgrade auditoriums with recliners.
“Whatever the definition of a distressed industry is, we definitely qualify,” Fithian said. “The longer we have to shut down, the greater the liquidity concerns will be.”
The hardest-hit players include Los Angeles’s art-house chains and independent theaters, which cater to the area’s enthusiastic community of cinephiles by showing foreign films and edgy dramas. Those theaters already face tough commercial prospects due to the dominance of Hollywood blockbusters and competition from Netflix and video games.
“Frankly, we’ve already been in a fight to stay above water with streaming,” Christian Meoli, owner and operator of Arena Cinelounge in Hollywood, told The Times last week.
It’s not only small movie theaters that are struggling with the closings.
AMC Theatres, the biggest theater circuit in the U.S. owned by China’s Dalian Wanda Group, is saddled with long-term debt of $4.85 billion. The company has spent big on acquisitions, including Carmike Cinemas and London-based Odeon Cinemas, and by retrofitting existing locations with luxury amenities. AMC’s stock is down more than 50% this year, due largely to fears of the coronavirus’ effect.
In the latest sign of financial strain, AMC on Wednesday furloughed about 600 employees in its Leawood, Kan. headquarters. The plan, which applies to top executives as well, calls for reduced working hours at reduced pay, or no hours at no pay, while AMC’s theaters are closed, the company said.
“Literally we don’t have a penny of revenue coming in the door,” said AMC Chief Executive Adam Aron in an interview on CNN last weekend. “Three weeks ago, AMC was an immensely healthy company. But now with expenses out the door and no revenues, we are burning through cash. What we need is liquidity, and only the government is going to provide that.”
Shares surged on Wall Street after House Speaker Nancy Pelosi (D-San Francisco) said lawmakers were nearing a deal on the stimulus package. AMC’s stock jumped 13% to $3.56 Tuesday.
But for now, the cinema industry remains under enormous pressure as it grapples with the uncertainty of the coronavirus situation. There’s still no clear idea of how long the closures will last. Some anticipate the lights will be out for as long as four months.
Hollywood studios have pushed the vast majority of their releases to later dates, with some delayed until next year. Distribution executives are trying to avoid a pileup of major releases that might cannibalize ticket sales, but they have little information to work with.
Universal Pictures angered theater owners by taking the bold step of announcing the DreamWorks Animation film “Trolls World Tour” would be released for online rental on April 10, the day of its scheduled theatrical release.
Most movies wait an average of 90 days between their debut in multiplexes and their release for home viewing. Theaters have long decried early releases that threaten their long-established business model. Paramount Pictures and MRC followed by selling their comedy “The Lovebirds” to Netflix after canceling its theatrical release. Netflix has not yet determined the streaming release date for the film.
But Fithian said the studios’ most extreme release decisions are an aberration and not an indication of a changing strategy for Hollywood. Other films have simply moved to other dates, including Universal’s next “Fast & Furious” movie, which was delayed nearly a year. Warner Bros. on Tuesday pushed the release of “Wonder Woman 1984" to August.
“It was, symbolically, just a bad move,” Fithian said of “Trolls.” “But one movie doesn’t change a business model. If other movies postpone and release later, we’re going to be fine.”
Meanwhile, theater owners are trying to cut back on whatever expenses they can in order to ride out the shutdowns.
Jeff Logan, owner of Logan Luxury Theatres in South Dakota, has 100 employees (largely students working part-time and adults with other day jobs) that now can’t work. He’s had to cancel appointments from pest control and cleaning companies to cut costs.
Logan is luckier than many because he owns, rather than leases, the buildings that house his auditoriums. Like other theaters, he’s been able to sell gift cards during the shutdown. He’s also trying to find out if he can legally rent a drive-in theater property he owns to churches that want to hold services there. Additionally, he’s considering curbside popcorn sales of his own.
Still, Logan said he’ll need additional funds to stay afloat. He’s used his time during the closure to fill out bridge loans and take on maintenance projects himself. On Tuesday, when contacted by The Times, he was toiling away replacing ceiling tiles in a projection booth.
Once people feel safe, we’re going to be slammed. I’ve got people saying, ‘I’m sick of Netflix,’ already.
Mark O’Meara, owner, Universal Mall Theatres
“We can survive,” said Logan, 69, whose company operates three small-town cinemas. “But we will have to do it by borrowing money, and that adds to our debt load and operating expenses.”
Even when theaters reopen, it may take a while for audiences to pack seats again. Many people will likely be eager to seek entertainment out of the home after weeks of being cooped up with little to do. But some moviegoers may still be nervous to venture out in public when authorities lift restrictions on gatherings, exhibitors said.
“We can’t count on a surge,” Logan said. “I think there will be a pent-up demand, but sometimes you need time for people to regain their confidence.”
The theater owner association is looking for a precedent in China, which has recently begun to open a small fraction of cinemas after about two months of closures. There are about 500 cinemas open in China now, and theaters have maintained seating restrictions to keep space between patrons. China, with 70,000 screens, is the second-largest box office market behind the U.S. and Canada.
“It’ll probably take another month before people are really confident enough to come back in strong numbers,” Fithian said of China. “It won’t be instantaneous. You don’t click on the lights and suddenly you’re full.”
Other companies have found clever ways to try to generate revenue for struggling cinemas. New York-based distributor Kino Lorber last week launched a “virtual theatrical exhibition initiative” to let audiences support certain local art houses while viewing films digitally for a fee, including the Brazilian picture “Bacurau.” Participating theaters include Film at Lincoln Center in New York, Riviera Theatre in Santa Barbara and the Frida Cinema in Santa Ana.
O’Meara said he’s already working on a special program of films to encourage people to come back to the multiplex once the COVID-19 pandemic is under control. He’s hopeful it won’t take long for the industry to return to full strength.
“People are going to be so sick of staying home that, once people feel safe, we’re going to be slammed,” O’Meara said. “I’ve got people saying, ‘I’m sick of Netflix,’ already.”
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