Studio Bosses ‘Rooting’ For Theatrical Turnaround

With the nation’s movie exhibitors either shut down and or hamstrung by COVID-19 safety protocols, the industry is eyeing fiscal ruin as studios push back major releases until next year and wary moviegoers stay home.

Speaking Oct. 15 on a virtual panel at the 2020 Milken Global Conference, Donna Langley, chairman of Universal Filmed Entertainment Group, and Ann Sarnoff, CEO of WarnerMedia Studios and Networks Group, were asked if the studios would consider acquiring financially distressed theaters after a federal court in August struck down the 1948 Paramount Decrees abolishing studio ownership of movie theaters.

“We have no plans to do that currently,” Langley said, sharing a sentiment echoed by Sarnoff. “We have no plans either,” she said.

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The executives’ unanimous responses underscore just how far exhibitors such as AMC Theatres and Regal Cinemas have fallen. It was just a year ago that the theater industry generated $11 billion in revenue — a tally that is projected to plunge 80% in 2020. Now, Regal has re-shuttered all North American and U.K. screens indefinitely, and AMC Theatres parent, AMC Entertainment, announced it would run out of cash by the end of the year without more borrowing.

“I’m kind of an armchair sociologist and I believe people want to have communal experiences and especially with certain genres,” Sarnoff said in a nod to select tentpole titles such as Wonder Woman 1984, which is still slated to release in theaters on Christmas Day — and multiple delays.

“We’re big fans of the exhibitors,” Sarnoff said. “They’ve been good partners of ours for many decades. We’re rooting for them. I know it’s tough sledding right now. I’m hoping they come out on the other side, probably even stronger.”

Langley said Universal also remains committed to theaters despite Universal Pictures more proactively embracing premium VOD and transactional VOD than any other studio. Indeed, Universal this summer succeeded in getting AMC Theatres to agree to a 17-day theatrical window in exchange for sharing PVOD revenue.

“It took Covid-19 to demonstrate that it is not cannibalistic but it is, in fact, additive,” Langley said of PVOD. “It will enable us to continue to make movies and put them in theaters.”

Sarnoff said Warner Bros. has grappled with the concept of early release PVOD and digital retail, saying that doing so might seem an easy option, when in reality it is messing with tradition.

“It’s not so easy as it’s happening, because oftentimes these are new moves that you’re making so you have to think about all of the constituents,” Sarnoff said. “You have to think about your fans and what they want, and predict what the results are going to be without any market data.”

 

European Cinema Operators ‘Shocked’ at Movies Bypassing Theaters for Disney+

Similarly to the situation in the United States, European theater operators are reeling from studios delaying new-release movies due to the coronavirus pandemic. Now the International Union of Cinemas (UNIC), the trade group representing European exhibitors, has lashed out at Walt Disney Studios’ decision to bow Pixar Animation’s Soul on SVOD service Disney+ rather than in theaters.

“Disney’s decision to release Soul directly onto their streaming platform, depriving many audiences across Europe from seeing it on the big screen, has shocked and dismayed all cinema operators,” UNIC said in a statement.

Indeed, Soul represents the third major Disney title (after Artemis Fowl and Mulan) to forgo a theatrical release due to the pandemic. UNIC is upset since control of the pandemic is better in Europe than in the U.S., which has resulted in significantly better box office revenue.

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The vast majority of cinemas across Europe are now open and able to offer a “safe and enjoyable” return for moviegoers, according to UNIC. Like U.S. exhibitors, European operators have invested heavily in social distancing and sanitation protocols in theaters.

“Yet again, however, they find a distributor delivering another blow,” UNIC wrote. “The decision on Soul is doubly frustrating for operators who were counting on the release after the film was previewed at a number of key European film festivals.”

The trade group argues that there is compelling evidence that where moviegoers have returned, their experience was both safe and enjoyable. It also stressed that without major new releases, consumers won’t return to the big screen. Indeed, across Europe, many cinemas have since re-opening screened countless local releases, underlining the fact that first-run titles are now more important than ever.

UNIC said decisions to postpone titles, bypassing cinemas and the value they create, are extremely disappointing — and concerning — and will only delay the day that the whole industry is able to put crisis behind it.

“It is no exaggeration to say that by the time some studios decide that the moment is right to release their films, it may be too late for many European cinemas,” read the statement.

Alamo Drafthouse Renting Entire Theaters for $150

As the movie theater industry continues to suffer during the pandemic, Texas-based Alamo Drafthouse is allowing customers to rent out entire theaters for $150.

Renters must buy tickets (or have friends and family buy them) and buy a minimum of $150 in food and drinks (no outside food).

Renters must pick from a list of movies that include new releases, such as Tenet (at select theaters), and older movies such as Jurassic Park, The Matrix and Wonder Woman.

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“When we began rolling out Your Own Private Alamo in select Alamo Drafthouse locations in August, we had no idea what the response would be,” reads the Alamo website. “It was big. Really big. In just the past few weeks we’ve hosted over 700 groups of families and coworkers at just a handful of theaters. And now we’re excited to expand to even more locations and, for the first time, open up the ability to book new release titles like Christopher Nolan’s epic Tenet.”

AMC Entertainment Sells 15 Million Shares to Raise Equity Level

AMC Entertainment Holdings, which operates the world’s largest movie exhibitor, AMC Theatres, Sept. 24 disclosed it has authorized the sale of 15 million shares of Class A common stock in an effort to build equity levels during the ongoing coronavirus pandemic.

Operating 70% of its domestic screens at reduced capacity due to social distancing requirements, AMC said it has seen 1.4 million  moviegoers frequent theaters through Sept. 14, which is down 81% from the previous-year period. With many AMC screens still shuttered in California, Maryland, Michigan, New York, North Carolina and the state of Washington, the company said the affected theaters represented 28% of its entire 2019 revenue.

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As of Aug. 31, AMC’s cash balance was $507.9 million, which included the initial $37.5 million proceeds received from the sale of its Baltics theaters. The company’s cash burn for July and August, excluding the proceeds from the sale of the Baltic theaters, was $230.4 million, or an average of approximately $115.2 million per month, and was primarily impacted by initial reopening expenses, including initial costs associated with the chain’s “Safe and Clean” initiative and minimum lease payments as theaters began to reopen.

With studios further delaying major releases into 2021 due in part to the lack of a virus vaccine, AMC is scrambling to keep the lights on.

“We currently estimate that unless theater attendance levels improve significantly from the third quarter of 2020 to the fourth quarter of 2020 and again into 2021 and we achieve levels of attendance approaching approximately three-quarters of normalized levels, we will continue to require additional sources of liquidity to meet our obligations … and our required amounts of additional liquidity may be significant,” AMC said in a statement.

Exhibitor Stocks Tumble Following Lackluster Box Office Weekend

Top domestic movie theaters closed down Sept. 21 at the end of Wall Street trading following a disappointing weekend box office. Shares of AMC Entertainment, Cineworld (which owns Regal Cinemas) and Cinemark fell 6%, 7.8% and 3.7%, respectively. Imax dipped 4.8%, while National CineMedia dropped 15.1%, and Marcus and Reading International each fell 5.1%. Studio parents AT&T (which owns Warner Bros.) and The Walt Disney Co. closed down 1% and 2.5%, respectively.

The culprit: Warner’s Tenet, which continues to underwhelm in the U.S., while thriving internationally. The Christopher Nolan-directed thriller was supposed to jumpstart domestic screens, and instead saw ticket sales plummet 30% to $4.7 million following the previous weekend’s $6.7 million. The movie has generated $36.1 million over three weekends, compared with $203 million internationally.

Meanwhile, Disney’s The New Mutants sold $1.6 million in tickets at 2,518 theaters through Sept. 20 to bring its total box office to $17.7 million in the U.S., $35 million worldwide.

With the coronavirus pandemic still a major concern for indoor venues such as movie theaters, exhibitors are finding consumers unwilling to take the risk.

New data from Morning Consult found just 18% of 2,200 responses from a survey conducted Sept. 10-13 felt comfortable going to a movie theater.

“It seems that people want to see changes in the news with cases and policies,” Alyssa Meyers, brand and marketing reporter at Morning Consult, said in a statement. “It’s not enough for places to just be reopening.”

Wedbush Securities media analyst Michael Pachter remains bearish on the movie theater business, arguing exhibitors’ aggressive plans to re-open screens during a lull in the coronavirus pandemic is wishful thinking.

“People may be eager to visit the theaters once they feel safe doing so, but we think it is unlikely crowds will return to any semblance of normal before a vaccine is widely distributed, particularly in urban and suburban markets,” Pachter wrote in a recent note.

‘Mulan,’ ‘Tenet’ Boost Global Box Office Ticket Sales

The Walt Disney Co.’s live-action Mulan remake opened at No. 1 in China this weekend with an estimated box office gross of $23.2 million, Disney announced Sept. 13 — bringing its total theatrical earnings to $37.6 million.

Domestically, the film bypassed theaters and instead premiered on streaming service Disney+ Sept. 4, at a premium access price.

Also this weekend, Warner Bros.’ Tenet crossed the $200 mark globally, but in the North American market — the United States and Canada — the film earned $6.7 million in its second week of release, a 29% drop from week one. While more than 70% of all U.S. theaters are now open, capacities are limited due to COVID-19 restrictions and in certain key markets, including Los Angeles and New York, theaters remain dark.

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In its third weekend, Disney’owned 20th Century’s The New Mutants earned an estimated $2.1 million domestically, bringing its domestic cume to $15.3 million, Disney reported.

Internationally, the thirteenth and final installment in the “X-Men” franchise expanded to 36 “material” markets, Disney said, including opening in Germany and Korea, earning an estimated $3.8 million over the weekend.

Report: Online Ticketing Key to Theatrical Re-Openings in COVID-19 Era

With movie theaters slowly re-opening in the COVID-19 era, online ticketing is being viewed as more than a convenience.

The business, which is spearheaded by Atom Tickets, Fandango, Big Tree Entertainment and all the major exhibitor chains, is poised to grow by $14.8 billion through 2024, progressing at 7% annual growth rate during the period, according to new data from Technavio.

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Although the coronavirus pandemic continues to transform the growth of various industries, the immediate impact of the outbreak is varied. While a few industries will register a drop in demand, numerous others will continue to remain unscathed and show promising growth opportunities.

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As has been oft reported, theaters have put a premium on sanitation, social distancing and related healthcare measures to instill a sense of preparedness and normalcy to consumers. Technavio found emphasis on better customer experience within the movie industry is a key trend to driving market growth going forward. Online ticketing is one of those experiences.

“The increased use of mobile applications will offer immense growth opportunities,” read the report. “To make most of the opportunities, market vendors should focus more on the growth prospects in the fast-growing segments, while maintaining their positions in the slow-growing segments.”

AMC Reopening Additional 170 Screens on Aug. 27

After reopening more than 100 locations nationwide, AMC Theatres is preparing to reopen its second wave of theaters, with 170 additional locations set to open Aug. 27, ahead of the release of 20th Century’s The New Mutants. After the second wave of theaters re-openings, AMC will have nearly 300 locations operational nationwide. Kansas-based AMC is the world’s largest exhibitor, with about 1,000 screens, which have been effectively shuttered since mid-March due to the coronavirus pandemic.

This second wave of reopenings is part of a phased plan to reopen AMC in the United States. AMC currently expects to open approximately two-thirds of its more than 600 U.S. theaters in time for the Sept. 3 release of Warner Brothers’ Tenet. The remainder of AMC’s U.S. theaters will open only after authorized to do so by state and local officials.

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In addition to New Mutants, moviegoers can screen Unhinged (Solstice Studios), Words on Bathroom Walls (Lionsgate/Roadside Attractions), and The Personal History of David Copperfield (Disney). Pending new releases include The Broken Hearts Gallery (Sony Pictures/TriStar) and Infidel (American Cinema International) on Sept. 11, and The War with Grandpa (101 Studios) on Sept. 18.

AMC CEO Adam Aron said consumer feedback to theater reopenings has been positive, with the theater imposing seating restrictions and mandating moviegoers wear masks while inside.

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“Our comprehensive commitment to operating our theaters safely now includes social distancing through limiting ticket sales and automatic seat blocking, seamless contactless ticketing, greatly enhanced cleaning procedures, the availability of hand sanitizer and disinfecting wipes throughout our theaters,” Aron said in a statement.

Whether that will be enough to lure consumers remains to be seen. Wedbush Securities media analyst Michael Pachter contends consumers won’t feel safe returning to the cinema until there is a coronavirus vaccine — a requirement that likely won’t materialize until 2021.

AMC Theatres locations are also screening catalog titles such as Warner Bros.’ Inception; Universal Pictures’ Jurassic Park; Raiders of the Lost Ark; The “Rocky” franchise; Spider-Man: Homecoming; Spider-Man: Far From Home; Shrek; and Sonic: The Hedgehog. Tickets are just $5 each.

AMC is also offering an array of $5 food and beverage treats, including regular popcorn, regular Coca-Cola Freestyle drinks and KidsPacks, through the end of October. All AMC Stubs members will earn double points on all ticket and food and drink purchases through the end of October.

“We have invested millions for high tech solutions to sanitization and disinfection, including electrostatic sprayers, HEPA vacuums and MERV 13 air filters,” Aron said. “Guests returning to AMC can do so knowing that we’ve been in constant dialog with top scientists and experts in public health and cleaning about how best to reopen our theaters in ways that will be responsible and welcoming.”

Theatrical Storm Clouds Grow Darker

With Disney and Warner Bros. further delaying or pulling tentpole movies from theatrical distribution, exhibitors took another headshot in their efforts to jumpstart the moribund box office.

AMC Theatres, the nation’s largest exhibitor, along with Regal Cinemas and Cinemark, had counted on Disney’s live-action Mulan and Warner Bros.’ Tenet from director Christopher Nolan to send consumers wearing masks back to the cineplex. But both movies are effectively removed from distribution until the ongoing coronavirus pandemic is better controlled.

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Many states, including box office epicenter California, have refused to allow theaters to re-open due to surges in virus infections. AMC had counted on a July 15 re-opening, which was then pushed back to the end the month, and then into August. AMC generates about 70% of revenue from U.S. screens.

The Q2 domestic box office ended down 99.9% year-over-year to $3.69 million, as most domestic theaters remained closed throughout the quarter.

Cinemark began its first wave of re-openings on June 19 with three Dallas-area screens, and added two more in the Dallas area on June 26. These theaters remain open on a very limited weekend schedule, while the remaining re-opening phases Cinemark had planned have been delayed.

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“We think these re-opening dates may again be delayed given various regional spikes in COVID cases throughout the U.S. and further release slate delays,” Michael Pachter, media analyst with Wedbush Securities in Los Angeles, wrote in a note.

Pachter does not expect attendance levels to begin to normalize until the end of the year at the earliest. Indeed, with 30% of moviegoers in the 50+ age group and another 30% between 30 and 50 (according to MPAA), “a significant portion of moviegoers are not going to be bold enough to return to theaters,” according to the analyst.

“Losing a substantial portion of this demographic, and especially their children, could drive studios and exhibitors to delay more releases until there is a vaccine,” Pachter wrote.

AMC is attempting to avoid bankruptcy as it burns through cash ($275 million in Q1) with little revenue coming in. Earlier this month many of AMC’s holders of $2 billion in long-term debt told the chain it was in default.

AMC Entertainment Holdings July 27 announced an agreement that will see the chain issue about $1.46 billion of New Second Lien Notes to lenders in the U.S., and £495.8 million to lenders in the U.K.

Meanwhile, the Rose Bowl parking lot in Pasadena, Calif., was filled over the weekend with motorists who paid to watch catalog movies presented by Tribeca Film Institute’s Drive-In summer campaign.

Cinemark Delays Re-Opening Movie Screens to July 24

Cinemark June 30 announced it would delay the phased reopening of its U.S. theatres to July 24 as a result of recent shifts in new studio content — and spikes in coronavirus infections. The Dallas-based chain will open screening select studio classics and elevated cleaning and safety standards.

Cinemark, with 555 theatres and 6,145 screens in 41 states domestically and 15 countries throughout South and Central America, plans to begin screening new-release movies on July 31 with Solstice Studios’ Unhinged, starring Russell Crowe, and Sony Pictures’ The Broken Hearts Gallery with Selena Gomez on Aug. 7, followed by Warner Bros.’ Tenet on Aug. 12, Disney’s Mulan on Aug. 21, Orion Pictures’ Bill & Ted Face the Music on Aug. 28, and Paramount Pictures’ A Quiet Place Part II on Sept. 4.

Cinemark CEO Mark Zoradi said Cinemark’s initial five-theater test-and-learn phase in the Dallas area went well, suggesting similar results nationwide.

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“Our multi-phased reopening plan was thoughtfully designed with multiple contingencies in place that enable us to efficiently adapt to today’s ever-changing environment,” Zoradi said. “We continue to pay close attention to status of the virus, local mandates and availability of new content while prioritizing the health and safety of our guests, employees and communities.”

Indeed, all Cinemark theaters will boast “The Cinemark Standard” upon reopening with greatly enhanced cleanliness, sanitizing and safety measures. Each theater will also have a designated “Chief Clean and Safety Monitor” on duty to ensure standards of safety, physical distancing, cleanliness and sanitization.