When the third quarter started in July, cinema auditoriums across the country were empty and closed from the coronavirus pandemic. Hope came a few weeks later, however, as Warner Bros. announced plans to debut “Tenet” over Labor Day weekend.
The theater operators saw the beginning of their recovery in the release of Christopher Nolan’s spy thriller. Fast forward to today and the script didn’t play that way.
Instead, three publicly traded cinema chains reported losses of more than $ 1 billion in the third quarter, and there is no immediate end in sight.
Once again, the fate of companies rests in the hands of film studios who they hope will release new films and the audiences who they hope will return, even if Covid-19 cases pick up again. And even the welcome news of progress on a vaccine, Which drove the group’s shares Monday isn’t going to bring immediate relief.
A vaccine is unlikely to be generally available to the public until mid-2021 at best. While the news is promising, it does not address the short-term problem cinemas face: a lack of revenue.
Last quarter AMC, The world’s largest cinema chain saw sales decline nearly 91% in the three-month period ended September 30 CinemarkThe third largest cinema chain recorded a drop in sales of almost 96%. Marcus CorporationThe fifth largest movie theater owner, who also owns a number of hotels and restaurants, saw sales decline 84%.
While the theaters were able to increase some sales through special ticket offers and re-releases of classic films, it was not enough to bring them into profitability. Cinemas need a steady stream of film releases, and hopes for that ended with Tenet’s poor performance at the home box office.
“Admissions were minimal, due to virus problems of course, but perhaps more important as only two major new films have been released in theaters since mid-March,” said Adam Aron, CEO of AMC.
The majority of AMC theaters are 40% to 50% full, but only 10% to 20%. Aron said to be profitable the company needs to have a presence of around 25%. That probably won’t happen without new films.
Overall, AMC’s domestic stake fell 97% year over year, he said.
Street performers in Minnie Mouse costumes walk past an AMC movie theater in New York’s Times Square at night on October 15, 2020.
Amir Hamja | Bloomberg | Getty Images
Since the movie theaters generate a fraction of the revenue they made last year, the companies are burning cash. AMC and B & B Theaters, the sixth largest cinema chain, both warned that Bankruptcy threatens if these trends continue. Studio Movie Grill, a Dallas-based dine-in theater chain, filed for Chapter 11 bankruptcy protection last month.
To avoid bankruptcy, cinema chains have renegotiated contracts with lenders and landlords and raised donations to replenish their cash reserves. The concern is that banks and landlords will ultimately not be able or willing to give these companies that much leeway. The majority of cinemas do not pay rent and instead offer part of the income as collateral.
Financial worries weighed on the group’s share prices. Cinema stocks have been falling since January. At the close of trading on Friday, Cinemark was down 74%, AMC was down 66% and Marcus was down 75%.
Cinema chains had to be creative to generate income. Some have turned parking lots into concert halls, launched quiz nights, and even negotiated contracts with local colleges to rent space for personal study.
Most major movie theaters are now offering cheaper private theater rentals to attract reluctant moviegoers. These rentals allow customers to choose who is in the theater with them and make them feel more comfortable going to the theater.
Cinemark’s US registration revenue reached $ 14.9 million in the third quarter. Around 17% of these came from the company’s private watch parties.
“Since we started private watch parties four months ago, we’ve sold nearly 50,000 of these private events,” said Mark Zoradi, Cinemark CEO, during a call for earnings last week. “Remarkably, to date, more than 600,000 people have attended a private guard party. A significant number reported that it was the first time since the theater was closed.”
But movie studios may need more evidence that audiences will come before releasing new films.
Theater owners are playing a waiting game, hoping that Wonder Woman 1984 will stay on the calendar for Christmas. However after Disneys “Free Guy” and “Death on the Nile” are both gone from their release dates, cinema owners are concerned.
Warner bros. hasn’t signaled the film will move, but news of his departure would come this week if that decision is made. Studios begin their intensive marketing between eight and ten weeks before a movie is released, and we are currently close to that timeline.
The The number of new Covid-19 cases is increasing rapidly. On Sunday, the 7-day average of the daily new infections was over 108,000. The nation has topped its previous day high for at least 10 consecutive days, and Sunday’s record is up 34% from the previous week. If studios get cold feet and start drawing new titles, cinema chains will continue to suffer.