How Congress ‘Dramatically Improved’ Movie Theaters’ Chances of Surviving Coronavirus

“It’s not just the theaters that we need to get through this. We need the employees to get help too,” NATO Chief John Fithian tells TheWrap

The Motion Picture Association and the National Association of Theater Owners have both expressed a sense of renewed optimism that the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act will provide a life preserver to more than 5,500 movie theaters nationwide.

NATO chief John Fithian went as far as to say that the current outlook for theaters, which are expected to remain closed for at least the next two months and possibly longer, compared to last week is “day and night.”

The stimulus bill that unanimously passed in the U.S. Senate is expected to be approved by the House of Representatives and President Trump on Friday. But some questions remain.

“I’d say that things have dramatically improved now that this bill has passed the Senate,” Fithian told TheWrap. “We went from chugging along in an industry that enjoys $15 billion in annual revenue — in concessions, not just tickets — to having zero revenue for an unknown amount of time in a matter of days. There are multiple provisions in this bill that can ot only help theaters maintain their liquidity and handle costs while doors are closed but can also help our hourly employees, many of whom have had to be furloughed at this time.”

The number of hourly cinema employees that now find themselves out of a paycheck reaches tens of thousands just from the national theater chains alone. More than 90% of the workforce for AMC Theatres, Regal Cinemas and Cinemark has been furloughed, as have AMC’s employees at its corporate headquarters. Add in the employees at smaller chains and family-owned cinemas, and you have more than 150,000 employees suddenly without income.

For those employees, NATO hopes that they will be supported by increased unemployment benefits in the CARES Act that includes expanded unemployment insurance for up to four months as well as an additional $600 to go with state unemployment payments. A source from the MPA also points to looser eligibility requirements that will make it easier for workers across the entertainment industry to access unemployment benefits despite the unconventional nature of film & TV production employment.

“It’s not just the theaters that we need to get through this. We need the employees to get help too,” Fithian said. “Whenever this ends, it would make it much easier to get back to full speed if we have trained employees ready to return to work rather than having to train thousands of new ones.”

As for owners, there are options being made available for federal loans. Among them, a $454 billion loan fund that would allow “distressed businesses” to cover their fixed costs during the COVID-19 lockdown. NATO believes that theaters would definitely qualify as “distressed,” as chains like AMC are tightening their belts as tight as possible to maintain their cash flow while doors are closed while dealing with debt from major ventures like the acquisition of Carmike Cinemas. Analysts have told TheWrap that a lockdown that extends through the usually lucrative summer blockbuster season would put AMC and Regal on the ropes, so federal loans will buy them some much needed time.

For smaller theater chains, which NATO says makes up the majority of their membership, the Small Business Association is getting a $350 billion loan fund that will allow businesses with less than 500 employees to get financial aid with the possibility of having their loans forgiven if they maintain payroll. Those who keep employees on payroll will also be eligible for payroll tax referrals and special tax credits.

But none of this will mean much if movie theater owners and employees — as well as the rest of the American economy — are ensnared in red tape if they attempt to apply for these benefits. The individual unemployment benefits will be distributed through state UI systems, many of which are unprepared for the unprecedented surge in applications they will receive in the coming weeks. In California, a claim to the state Employment Development Department takes about three weeks to process. However, a report from the California Legislative Analyst’s office says that with millions of unemployment claims expected to come, it will likely take much longer than usual for applicants to receive a check in the mail.  A Wall Street Journal report showed that 22 states are not prepared for such a surge, with many already experiencing website crashes as applications pour in.

A similar overload could also hinder the SBA’s attempts to send out small business loans through this new fund, as reports have already surfaced of high web traffic on the administration’s site. Just as many individuals and families who live paycheck-to-paycheck are now in need of immediate assistance, many small movie theaters and other business don’t have much cash flow to survive on before they hit bankruptcy. If the aid from the CARES Act is too slow to reach where it is needed, it may be too late to save hundreds if not thousands of mom-and-pop cinemas.

It’s a problem that John Fithian knows is the next hurdle that must be overcome.

“The first challenge was getting the right money in the bill. Now the next challenge is getting the execution right,” he says. “We pushed very hard for the legislation to include text requiring the SBA to move quickly on these loans and we are hopeful that they are in good position to do so. Over the next few weeks we will be looking closely at how this bill is implemented and will be in communication with our members to make sure that they are getting the aid they ask for.”

Fithian is also looking closely at what is happening in China, where 500 movie theaters in provinces that were least affected by the coronavirus outbreak reopened last weekend after being closed for two months. Turnout at those theaters has been expectedly low, as many would-be moviegoers still aren’t comfortable about mass gatherings and the potential of a resurgence in virus infections is still on the minds of many. The Chinese government also has some misgivings as well, as they announced on Friday morning that all of those theaters will have to close again. 

But how China’s movie theaters handle their eventual return could provide a guide for the rest of the world’s theater owners. Fithian says that NATO recently held a global teleconference with Chinese theater companies about how they are strategizing for a steady reopening of their locations. Chains in Mexico also provided advice on how they reopened their theaters after a flu pandemic forced them to close in 2009, though that situation did not come with the additional problem of film distributors around the world indefinitely postponing some of the box office’s biggest potential hits.

“Right now, the situation there looks like there will be a slow reopening of theaters, with Wuhan and Hubei likely being last, and that will likely take about 2-3 months” he said. “During that time, there will be the social distancing policies you saw before theaters here were closed down, with 50% capacity and deep cleaning of all auditoriums. Once people feel comfortable going back to theaters, then we will see the product return, starting with some older films or some smaller new films, and then will come the blockbusters. While I can’t give you specifics since we don’t know when this will end in the rest of the world, that path China is taking feels like the general pattern theaters will follow.”

Overall, this is not how NATO thought it was going to be spending its spring. Next week would have been the week where thousands of theater owners would have gathered in Las Vegas for CinemaCon, NATO’s annual trade show and declaration to the world that the movie theater industry has and will continue to survive whatever is thrown at it. Instead, the entire Vegas Strip has gone dark, and cinemas are trying to survive a blow worse than anything the Great Depression, two World Wars, the rise of home video, the 2008 recession, or even the new threat of Netflix has dealt it.

“Three weeks ago our main concern was whether or not we’d be able to have CinemaCon, and now such worries feel incredibly quaint,” Fithian admitted. “I still fully believe that whenever this ends, it won’t be long before movie theaters are full again. But there’s no denying that this is the biggest test in the over-century-long history of our business.”

UPDATE 3/27, 10 AM: This piece has been updated to note the Chinese government’s decision on Friday to once again close movie theaters nationwide.

Jeremy Fuster

Jeremy Fuster

Box Office Reporter • jeremy.fuster@thewrap.com



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