With all spring blockbusters delaying release, theater chains will soon have to make some hard decisions
Between the ongoing anxiety about the coronavirus pandemic and Hollywood studios’ decision this week to postpone of the next month’s slate of wide releases, movie theaters are facing increased pressure to make some tough decisions about whether they can and should remain open.
“It is pretty obvious what is going to happen,” Exhibitor Relations analyst Jeff Bock told TheWrap on Thursday. “With everything else that is public shutting down, from sports leagues to concerts to Disneyland, it will begin to seem irresponsible for movie theaters not to do the same. This is the way public sentiment is going and I just don’t see a lot of theaters, at least in major cities like Los Angeles and New York, staying open for long after this weekend.”
As recently as Tuesday, one exhibition executive who asked to remain anonymous said that closing theaters was not something that had been widely discussed, as the focus remained on whether or not to hold the CinemaCon trade convention later this month in Las Vegas. That event was canceled on Wednesday, the day before studios announced that tentpoles like Paramount’s “A Quiet Place Part II,” Disney’s “Mulan” and Universal’s “F9” would not be hitting theaters in coming months.
There are no global wide releases on the calendar through the end of April with the exception of “Trolls World Tour,” a Universal animated family film that’s more reliant on domestic grosses and is still set for an April 10 release. With that lack of high-profile product in the coming weeks, the executive said, talks about closure will likely kick up in the coming days. A rep for the National Association of Theatre Owners declined to comment for this story.
“It’s going to be a decision that will have to be made on a case-by-case, day-by-day, and city-by-city basis,” Bock said. “It’s important to remember that while this is shutting down events all over L.A. and New York and some other big cities, there are smaller towns where this is yet to become more than just something they see being talked about in the news.”
Before the postponement of expected blockbusters like “Mulan,” analysts told TheWrap that the coronavirus was expected to cost the global box office around $5 billion. Now those estimates have grown to at least $8 billion and could reach $10 billion or more depending on how long the pandemic lasts. Multiple theater owners have told TheWrap that they were already seeing lower turnout this week than they’d expect in March, when schools begin to go on spring break. That’s a change from just last weekend, when Disney’s “Onward” hit projections of a $40 million launch in place long before the virus hit American shores.
The movie theater industry has already made moves to reassure the public that it is safe to go to theaters. Both national movie chains to specialty/regional ones like Marcus Theaters and Alamo Drafthouse have promised customers that their locations will undergo more frequent and deeper cleanings of auditoriums and that hand sanitizer will be readily available for employees and moviegoers. In the strongest precautionary step, Alamo Drafthouse’s San Francisco location has restricted its largest auditoriums to the 250-person limit set by California Gov. Gavin Newsom for all public gatherings (even though he did say that theaters are generally exempt from that rule).
But exhibitors still expect to take a hit even if they manage to keep their doors open as the pandemic drags on or potentially worsens. Lower turnout or closures may be fatal to regional chains or independently owned theaters, the latter of which were already struggling with rising costs and rental fees.
National chains like AMC, which is carrying billions of dollars in debt and had seen a stock downturn even before the virus outbreak, are also vulnerable. Two weeks ago, AMC announced that its top executives would be taking salary cuts to boost the company’s stock performance, which had declined 80% over the past five years despite record high box office worldwide in 2018 and 2019. In an earnings call, AMC CEO Adam Aron downplayed the company’s debt load that had been taken on in part because of territory expansion and acquisitions, saying that overall revenue was up 2.4% in 2019 and that the company’s debt was not set to mature until 2024.
But AMC’s stock has gone down with the rest of the global market, falling to under $3 per share on Thursday, and there will be no light at the end of the tunnel any time soon now that blockbusters worth billions in expected revenue are indefinitely off the slate. AMC, along with national chains Regal and Cinemark, did not respond to TheWrap’s request for comment on this story, but several theater owners said that they expect that the entire industry will be having hard talks in board rooms about how to cut their losses, and that the air of uncertainty surrounding everything connected to the coronavirus is just going to make things even more difficult.
“Maybe when all of this is over, there will be a big boom worldwide, because I can see a lot of people, especially in areas under lockdown or even just in cities with a lot of canceled events, being desperate to get out and do something,” one owner suggested.
“But some films are going to get squeezed out by all these cancellations and won’t make back the lost profits, and I can see some theaters not making it through this if it stretches out for many months. We just don’t know how long this is going to last, and there’s only so much we can control. There’s never a good time for something like this to happen but here we are.”