October 4, 2020
In a stunning blow to the movie theater industry, Cineworld, parent to Regal Cinemas, may re-shutter all screens in the United States and United Kingdom. The nation’s No. 2 theater chain had just announced on social media the re-opening of all screens in North Carolina.
Cineworld Oct. 4 tweeted, “We can confirm we are considering the temporary closure of our U.K. and U.S. cinemas, but a final decision has not yet been reached. Once a decision has been made we will update all staff and customers as soon as we can.”
Media reports say the move by the second-largest exhibitor in the world, after AMC Theatres, comes following Metro Goldwyn Mayer and Universal Pictures’ decision to further delay the release of the new James Bond movie, No Time to Die, until April 2021. That followed Disney’s previous decision to further delay the release of Marvel Studios’ Black Widow, among other tentpole releases, until 2021.
Regal runs 546 theaters (7,211 screens) in the U.S., in addition Cineworld’s 128 theaters in the U.K. and Ireland. The company lost $1.6 billion through June 30.
The industry has been grappling with the effects of the coronavirus pandemic since March when screens worldwide were forced to close. Industrywide revenue is down more than 75% year-to-date.
AMC Theatres, which has re-opened about 75% of its domestic screens, reportedly has enough liquidity to continue operating about six months. That’s because operating largely empty theaters is costing the chain about $115 million monthly in overhead expenses.
As a result, S&P Global Ratings Oct. 2 downgraded the parent company’s fiscal rating to CCC- from CCC+. The lower grade makes it harder for the chain to borrow money.
“A liquidity crisis is all but inevitable even if the company were to fully re-open all of its theaters,” S&P wrote in a note.
Specifically, the report contends cinema attendance will remain constrained by consumers’ health and safety concerns and social-distancing measures until an effective treatment or vaccine becomes widely available.
The firms believes a vaccine won’t be widely available until mid-2021, with the exhibitor industry not fully recovering to 2019 levels until 2022.
Michael Pachter, media analyst with Wedbush Securities, argues that going to the movies should not be a life and death decision for families.
“Theatrical exhibition is in the middle of a perfect storm,” Pachter wrote in a note over the summer. “Theater closures not only deplete cash reserves and sources of liquidity, but may alter consumer behavior indefinitely.”