Why Movie Theater Chains Are Unlikely to Reopen Anytime Soon

As coronavirus cases continue to rise across the U.S., the roadmap for theaters to draw the curtains and turn the lights on again is looking more and more precarious. AMC Theaters, Regal, and Cinemark all this week pushed back the planned reopening dates for their theaters from early July to later in the month. That came after several major studios shuffled release dates again as states’ reopening plans remain in flux as they struggle to get the number of cases under control. Are theaters simply kicking the can down the road, delaying reopenings two weeks at a time, waiting for something to change? “We’re always talking about getting through this and figuring out what the new normal is, but I’m now thinking this is the new normal,” Bruce Nash, box office analyst and founder of TheNumbers, said. “The virus doesn’t really go away, and we’re in this wave of coronavirus cases subsiding and spiking and maybe there’s a vaccine early next year, but this is how it’s going to be for as long as we can see right now.” California Gov. Gavin Newsom on Wednesday ordered Los Angeles County and 18 other counties in the state to close movie theaters and dine-in restaurant service for at least the next three weeks as infections continue to surge. To boot, New York Gov. Andrew Cuomo last week said that movie theaters will not reopen on schedule. Cinemark CEO Mark Zoradi said in a recent statement that the chain’s reopening plan was “thoughtfully designed with multiple contingencies in place that enable us to efficiently adapt to today’s ever-changing environment.” He also remained confident based on the company’s five-theater test run in Dallas, Texas. “We continue to pay close attention to the status of the virus, local mandates and availability of new content while prioritizing the health and safety of our guests, employees and communities,” he said. Given the relative ease for studios to continue to delay releases or altogether shelve films, B. Riley FBR analyst Eric Wold wrote in a recent note, because of the sparse slate of films, exhibitors are in an increasingly difficult position. They’re stuck between simply holding out on opening theaters until the release calendar is more certain, and re-hiring and opening anyway, but to minimal box office demand with older library films. The latter, Wold wrote, would likely result in negative operating cash flows. Nash said cinema chains need to start thinking outside of the box (office). “We need to get more creative because you’re not going to open up theaters for any level of regular operations anytime soon,” he said. “So do you say, we’re done. We’re just going to shut and down and we’ll let you know when we reopen. Or do you say, we’re going to figure out a way to, I don’t know, do screenings in the parking lots of malls or something.” In the midst of the pandemic, where people are discouraged from going out among crowds, like at a movie theater, movie drive-ins have seen renewed interest and popularity. Amazon is even hosting a summer movie drive-in series with Michael B. Jordan’s production company Outlier Society to celebrate diverse voices, starting in July. Cinema chains, Nash suggested, could consider exploring pop-up style drive-ins while the future of movie theaters still remains uncertain. “Although we continue to see a path toward more normalized attendance trends in late 2021 and into 2022, we believe the near-term film slate uncertainty reignites the focus on balance sheet liquidity for the exhibitor group,” Wold said in his note. Nash said it’s hard to imagine bigger theater chains reopening any time soon, except for maybe the smaller markets. “There are really only two potential saviors for the movie theater business: Government action and the other is the studios,” Nash said, referencing studios helping to pay exhibitors’ digital print fees during the switch from film. “What that looks like for putting ‘Tenet’ out in a movie theater, I don’t know. But everybody in the industry wants that to happen… It’s maybe more about what we do with the situation that we’re in.”