Analyst: Q2 Box Office Down 100%

When sales decline 100%, it can’t get much worse for a business. But that’s the reality facing movie exhibitors. Through May 21 of the second quarter, the box office is trending down 100% year-over-year as the industry remains shut down due to the coronavirus.

Wedbush Securities media analyst Michael Pachter expects “very minimal” box office revenue in the current quarter, with most domestic theatres likely remaining closed through June 30.

The first quarter domestic box office ended down 25.4% $1.79 billion as most theaters didn’t shutter until March. The North American box office in 2020 is trending down 58.1% compared to 2019.

“We do not expect attendance levels to begin to normalize until the end of the year at the earliest,” Pachter wrote in a May 26 note.

The analyst says theaters and studios have some incentive to release new content before a return to normal, as a theater would be able to show a single film on all of its screens thereby allowing for social distancing while still providing the studio with the opportunity to drive box office revenue.

Director Christopher Nolan’s Tenet (Warner Bros.) is poised to be the first in line to take that risk, although Pachter doubts the international espionage thriller will be able to hold its current release date target of July 17.

“Our estimates are clearly subject to change given the fluidity of the release slate and the mood on social distancing as stay-at-home orders begin lifting across the country,” the analyst wrote.

He thinks it unlikely consumers will return to cinemas with any semblance of normal before a vaccine is widely distributed. Additionally, the dearth of newly produced content may negatively impact theatrical attendance in 2021, while streaming services will be competing at the highest levels for content to bolster their offerings in an extremely competitive environment.

There are now 68 films that have been moved or pulled from the release slate, worth an estimated $7.5 billion. Of these films, seven moved to a streaming platform, worth an estimated $358 million in box office dollars. Fifteen have yet to be rescheduled or slated for streaming, worth an additional $652 million in box office dollars.

“All 15 are likely to be moved to streaming platforms, in our view,” Pachter wrote. “When taken together, we expect the negative impact to 2020 domestic box office to be $3.1 billion, only partially offset by a positive impact to 2021 domestic box office of $1.5 billion.”

Survey: 77% Ready to Return to Theaters in a Few Months

An Atom Tickets survey found 77% of respondents were ready to return to theaters within a few months, with 25% willing to return immediately. Only 1% said they never plan to return to theaters.

Digital movie ticketing platform Atom surveyed more than 1,500 moviegoers about their moviegoing intentions in the midst of theaters’ temporary closure due to the COVID-19 pandemic.

When asked to identify the most important safety measure to make them feel confident about going back to a movie theater, having spaced seating in the theater auditorium was by far the most critical safety feature at 42.2% or respondents. The next most critical safety measure was heightened theater cleaning procedures at 21.14%, followed by staff and guests wearing masks at 14.36%. Only 6.41% of moviegoers said taking staff and guest temperature readings before screenings was the most important condition that must be met before they would feel comfortable returning.

More than 88% said that purchasing digital tickets from their own device and eliminating the need to interact with a cashier was an important safety measure. As far as concessions, customers were interested ordering ahead and picking up their items instead of waiting in crowded lines and being served directly over the counter. Of those who have never pre-ordered movie theater concessions, 61% said they are now likely to try it.

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“Moviegoers are telling us that they miss the experience of going to the movies and they’re ready to get back, but that the experience needs to look slightly different than before,” said Matthew Bakal, chairman and co-founder of Atom Tickets, in a statement. “We anticipate a rapid acceleration in digital ordering, just as we have seen in other industries, in order to reduce the amount of person-to-person interactions. We’re eager to resume being together with friends and family, but we want to do so responsibly. Atom is working with our theater partners to roll out spaced seat maps so that guests can see the steps being taken in order to provide a safe environment.”

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In terms of films moviegoers were looking to see, the female superheroes led the pack with Black Widow and Wonder Woman 1984 taking 58% and 51% of votes, respectively. The James Bond installment No Time to Die, Disney’s Mulan and Top Gun: Maverick round out the top five. Millennial moviegoers weighed in slightly differently with John Krasinski’s A Quiet Place Part 2 coming in third.

NATO Applauds $2 Trillion Stimulus Agreement

While passage of the $2 trillion stimulus bill in the U.S. Senate remains caught up in partisan bickering, the National Association of Theatre Owners March 25 said it applauded the bipartisan agreement announced earlier today.

“We applaud the agreement … to provide relief to movie theaters their employees and so many other public-facing industries that have had to close their doors due to the COVID-19 pandemic,” the trade group said in a statement. “With this agreement, movie theaters can look forward with confidence to re-opening and once again serving their communities when this crisis has passed.”

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Details in unemployment benefits, which some GOP lawmakers say could incentivize workers to stay unemployed, remain a key obstacle in the bill getting through the Senate. If passed, it would have to be approved by the House and then signed by President Trump.

Regardless, NATO said the stimulus would provide a $454 billion loan guarantee fund providing access to capital and enabling movie theaters and other businesses to pay their fixed costs while they are unable to generate revenue through normal operations.

The bill would expand Small Business Administration programs enabling small businesses — or the majority of theater companies — to deduct several categories of expenses for loan forgiveness.

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It would also afford deferral of payroll taxes, expanded opportunity for loss carrybacks for businesses, and technical corrections regarding qualified improvement property. Employee retention tax credit for businesses that keep people on the payroll despite closures or that see large sales losses. And up to four months of direct aid to workers through extended and expanded unemployment insurance, including increases in the weekly dollar amount and eligibility for part-time employees. It would also advance tax deductions to workers payable now.

“With this aid, movie theaters can get through this crisis confident in being able to re-open, knowing their vital, trained workforce is able to weather this pandemic and have jobs waiting for them when it is safe to reopen,” NATO said in a statement. “We look forward to its quick passage in the House and signature by the President.”

Disney, Universal Suspend Box Office Data Reporting

With most movie theaters shuttered due to concerns over the spread of coronavirus, Walt Disney Studios and Universal Pictures say they are suspending reporting box office results. The move comes after domestic weekend ticket sales plummeted to a 20-year low and most screens around the world remain closed.

While Warner Bros., Paramount Pictures, Lionsgate and other studios have announced similar actions, they are expected to follow suit.

The move late March 19 by Universal and Disney comes as California Gov. Gavin Newsom ordered state residents to remain at home as a precaution against the spread of the coronavirus, which has claimed the lives of 10,000 people globally. The United States saw COVID-19 infections more than double on Thursday.

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“Given the current large number of theater shutdowns around the globe, Disney will suspend global weekend reporting for the time being. Wishing you and your families the best during these testing times and please be safe,” Disney said in a media statement.

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Media analyst Michael Pachter downgraded AMC Entertainment, the world’s largest exhibitor with more than 1,000 theatres, to “neutral” rating heading into the weekend.

“If closures last longer than we estimate, AMC would need additional relief from either government assistance, rent relief from landlords, or additional sources of cash in order to avoid a potential breach of debt covenants, which could force debt restructuring,” Pachter wrote in a March 20 note.

 

Fandango VIP Presale Buyers of Ch. 3 Can Get Free Copy of a Previous ‘John Wick’ Film on FandangoNow

Fandango VIP members can get a copy of either of the first two “John Wick” movies when they buy advance tickets for John Wick: Chapter 3 – Parabellum on Fandango.

Presales are April 15-17 for Fandango’s VIP advance tickets for the third installment of Keanu Reeves’ neo-noir action franchise.

Fans who purchase Chapter 3 tickets through their Fandango VIP accounts can get a free SD or HD copy of John Wick or John Wick: Chapter 2 on FandangoNOW, Fandango’s transactional video streaming service.

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Members of Fandango VIP, Fandango’s free-to-join rewards program for movie-ticket buyers, can get insider perks such as discounted movies to stream at home, exclusive movie gear, and access to advance screenings.

MoviePass Seeks to Improve Customer Relations

MoviePass has a customer relations problem.

The subscription ticket service March 5 announced it inked a partnership with TaskUs to improve relations with subscribers. It also hired former Jake Petersen, former senior manager of client services at TaskUs, as the company’s VP of customer experience.

Since cutting the monthly sub price six months ago to $9.95, MoviePass has generated more than 2 million members – with a goal of 5 million by yearend.

At the same time, the New York-based company has endured myriad complaints from subs unable to get membership cards and/or being denied access to screening in select markets, among other complaints.

“We want to ensure that all MoviePass subscribers feel that they are being heard and cared for,” CEO Mitch Lowe said in a statement.

Lowe, who has been making the media rounds promoting the service, reiterated MoviePass has been overwhelmed by consumer interest in seeing a theatrical screening daily for a month for less than the cost of standard ticket in a major market.

TaskUs, which as worked with startups such as Tinder, Periscope, Hotel Tonight and Hootsuite, is tasked with providing consultative solutions and scaled support systems to improve MoviePass’ bottom line.

Indeed, the service pays theater operators full value of every ticket acquired by subscribers – an untenable business model without revenue sharing agreements with theaters or millions of infrequent movie-going subs.

At TaskUs, Petersen was responsible for building and running customer experience operations for a number of hyper-growth companies. Prior to TaskUs, Petersen served as the head of professional support and acquisition for Houzz, where he helped grow the service team to over 60 members, while the company grew from 5 to 40 million users.

“We have a massive opportunity here to create something special within the entertainment industry,” said Petersen.

Movie Ticketing Heads to the ‘Gym’

NEWS ANALYSIS — In an age of over-the-top video, two services have emerged selling movie tickets via monthly subscription – a business model predicated on user indifference toward actually going to the movies.

MoviePass, the New York-based service headed by Mitch Lowe, former CEO of Redbox, enables subs access to one theatrical movie per day for a flat $9.95 monthly fee.

The service – majority owned by Wall Street investment firm Helios and Matheson Analytics – ended 2017 with 1 million subs (after dropping the original $29.99 price). It recently partnered with Costco selling $89.99 annual passes. The promotion includes access to indie film service Fandor.com.

Cinemark, which operates nearly 6,000 screens in the United States and Latin America, last month launched Movie Club enabling members access to no more than two tickets monthly for a discounted $8.99 fee. The service allows users to roll over unused tickets and discounts on concessions – a significant perk and unavailable at MoviePass.

Both MoviePass and Movie Club are targeting consumers who attend movie theaters infrequently. Indeed, audiences between the ages of 18 and 24 attended an average of 6.5 movies over the course of the year – more than any other age group, according to the Motion Picture Association of America.

This data is key to the survival of both services, especially MoviePass, which pays theaters full price of any subscriber ticket admittance.

In a sense, MoviePass and Movie Club operate like a gym membership, marketing loss-leader pricing to a wide spectrum of consumers, hoping only a small percentage of members actually use the service as advertised.

For MoviePass to make a gross profit, on average each of its subs would have to visit the theater at most once a month. Two or more visits per month on average would drive significant losses for the company, at least until MoviePass is able to secure additional sources of revenue.

The platform has revenue-sharing agreements with select indie theaters, which comprise less than 6% of its tickets sold, according to Wedbush Securities’ Michael Pachter.

The analyst contends MoviePass would achieve less than 1% gross profit on 2 million subs and 20% rev/share with indies.

“[It] could surpass break-even gross profit if its subs on average see only one movie per month throughout the year,” Pachter wrote in a note. “If its members on average see more than one movie per month its losses will be substantially higher.”

By comparison, Pachter believes Movie Club’s exposure to Cinemark’s bottom line is more manageable.

“We expect the net impact to be positive, with the magnitude dependent upon the program’s ultimate penetration,” he wrote.