the future

The Fate of American Movie Theaters Looks Terribly Bleak

Theater owners across the country explain how they’re going to survive 2020: “It’s a darker time now than when theaters were initially closed.” Photo: Alexi Rosenfeld/Getty Images

On August 28, after five long months of dramatically locked doors and darkened screens, the Logan Theatre — a small, independently run movie theater in Chicago — readied itself to reopen. With major titles like New Mutants and Tenet set for debuts that weekend and the next, the cinema felt optimistic about its chances to slowly crawl back to profitability after making zero dollars for nearly half a year.

“We’re really happy to be back!” the company said in a rosy Facebook post at the time, touting its intensive, COVID-era safety measures, which included the institution of a 25 percent seating capacity, the use of sanitizing foggers, and mandatory temperature checks for all staff. Guests were equally excited. “Thrilled to have you reopening!” replied one fan. “Can’t wait to see New Mutants!” said another, emphasizing that proximity to the theater was one of the reasons he moved to his neighborhood.

However, on September 23, less than one month after the reopening, the Logan Theater posted another, more somber message. Its Tenet and New Mutants sales were stagnant. The theater would be closing its doors once again. “Once it becomes clear that there is a consistent flow of films to play,” the statement said, “we will make plans to reopen.”

It’s a predicament theaters large and small are struggling to cope with: After months of uncertainty — during which just about every major studio blockbuster save for Christopher Nolan’s thriller and the critically lambasted X-Men saga dropped off the 2020 theatrical release calendar — and with no vaccine in sight, how do you entice people to return to the cineplex in the middle of a pandemic?

“The industry is kind of in chaos,” says Albert Waitt, director of operations at Smitty’s Cinema, a regional theater chain based out of Maine. “A month ago, I’d say we only have to make it to Thanksgiving and we’ll be fine. But, looking at it now … who knows what will happen.”

Following news that No Time to Die would not release until April 2021, Regal announced it would be closing its American theaters. Photo: Nicole Dove/United Artists Releasing

While neither Warner Bros. nor Nolan ever spoke explicitly about their ambitions for Tenet, there were enough breathless headlines — “Tenet is more than a film. It’s the saviour of an industry,” declared Esquire Middle East — to set a narrative on its course: The release of Tenet would herald not only the return of the studio movie but of the exhibition space at large.

Even insiders were cautiously optimistic that a blockbuster action-thriller from Nolan (whose films have grossed over $2 billion domestically and received 34 Oscar nominations) would jump-start the movie-theater industry. After news broke that the thrice-delayed film would finally premiere in U.S. theaters in early September, states like New Jersey and Maryland scrambled to reopen locations as local officials lifted restrictions on public gatherings. Between investing in new safety protocols and the staff training required to implement them, it was a risky and expensive proposition. But with so many other previously postponed titles set to follow in Tenet’s footsteps and release in September and October of 2020, theater owners bet there would be plenty of bankable films to keep willing patrons buying tickets thereafter.

Then Tenet opened.

Warner Bros. refused to publicly confirm the film’s box-office performance (as of October 5, it’s reportedly totaling only $45.1 million in the U.S. and just over $300 million abroad), but experts soon began speculating that the movie would fail to break even on its estimated $400 million budget. The fawning headlines were no more, replaced instead with a question: “Tenet Failed to Save the Box Office, Now What?”

It wouldn’t take long to answer. Shortly after Tenet’s lackluster release, Disney moved major films like Black Widow and Steven Spielberg’s West Side Story to 2021. Universal pushed Candyman from October and No Time to Die to April of next year. Even Warner Bros. shifted Wonder Woman 1984 to a Christmas date, and punted Dune to 2021. There’s currently no wide release from a major studio scheduled until Pixar’s Soul on Thanksgiving weekend.

“It’s a darker time now than when theaters were initially closed,” contends Jeff Bock, senior media analyst for Exhibitor Relations.

The Future of Indie Theaters vs. Regional Chains vs. National Chains

Many regional and independent theater owners who spoke to Vulture believed that if they reopened in late summer and remained open, they could endeavor to break even each day — even if attendance was capped at 25 percent — a strategy that would, at the very least, keep them operating. But there was one major problem: As new movie releases dwindled, the possibility of reaching even a quarter of capacity diminished, too. Dale Coleman, owner of the regional Stone Theaters chain in the Carolinas, said his venues were only averaging five tickets per showing since their August 28 grand reopenings. “That’s why we made the decision [to close] last week, at least until we felt we had meaningful product where our customers would come back and join us.”

Smitty Cinema’s Waitt opted to close his Maine theaters on Mondays through Wednesdays, redirecting guests to weekend showings, but even with that change, screenings still aren’t hitting the 25 percent cap.

National chains with more significant overhead face a similar conundrum. In a September 24 SEC filing, AMC Theatres (America’s largest theater chain, with over 650 locations nationwide) said attendance at its locations would need to reach approximately 75 percent of normalized levels or it would require “additional sources” of cash. Cineworld, which operates Regal Cinemas in the U.S., reported a loss of $1.6 billion since April 1, conceding that there is “no certainty” about its future; this week, the chain announced it would be suspending all U.S. operations. Alamo Drafthouse, which operates six locations in the Dallas metro area alone, reclosed four of them and said in a statement, “[We] look forward to reemerging with our other locations once major new releases resume.”

In total, the research and accounting firm PricewaterhouseCoopers projects a 65.7 percent decline in U.S. cinema revenue, from $11.4 billion in 2019 to $3.9 billion this year. Other industry groups estimate that 93 percent of exhibitors saw revenue drop by 75 percent or more in the second quarter of 2020, compared to the same period last year.

Analyst Bock speculates that local, independent theaters might have an easier path forward in these atypical conditions, noting their ability to appeal directly to an invested client base. “The regional and national chains are seen as corporate entities, versus the neighborhood cinemas that have the support of their community,” he says. Indeed, before it opted to reclose, the Logan Theatre began offering curbside pickup of fresh popcorn, popular movie candies, and even beer and wine. Jennifer Zacarias, the Logan Theatre’s marketing manager, said the program had a “tremendous amount of support,” but acknowledged that “once the city hit the next phase and more options for food and beverage became available, our sales decreased substantially.”

But box-office observer James Shapiro contends that smaller, art-house theaters — whose primary content is niche, independent fare — face just as many obstacles in the long run: “I think those theaters are the most vulnerable right now unfortunately,” he notes, foreseeing an exhibition space increasingly attached to blockbuster films that can attract the kind of audience numbers needed to keep theaters afloat.

Can Alternative Pandemic-Survival Tactics Work?

Ultimately, independent, regional, and national chains are all struggling, and there’s not much in the way of relief on the horizon. Insurers are unwilling and unable to provide assistance to an industry that employs roughly 150,000 people, instead pointing the finger at the federal government, which has yet to provide any significant bailout money. The National Organization of Theatre Owners (NATO) sent a letter to Congress urging the government to “redirect unallocated funds from the CARES Act to proposals that help [movie theaters] … Absent a solution, theaters may not survive the impact of the pandemic.” However, only 16 percent of consumer respondents to a recent Performance Research survey were “very supportive” of federal bailout initiatives for the exhibition industry.

In the meantime, several exhibitors say they will continue to lean on dependable repertory titles like Goonies, Jurassic Park, and this Halloween season, Halloween. In fact, the No. 2 movie at the box office during the first weekend of October was the 1993 title Hocus Pocus. Even Disney, which has traditionally been loath to allow its classic titles to be shown theatrically, has allowed screenings of The Empire Strikes Back to commemorate the film’s 40th anniversary.

Some theaters have tried their hand at “virtual cinema” and video-on-demand rentals, offering 24-hour viewing windows for both studio titles like Bill & Ted Face the Music and independent fare like a 4K restoration of Claire Denis’s Beau Travail. While numbers for these rentals aren’t publicly reported, one executive at a major national chain, who spoke on condition of anonymity, categorized the cinema-at-home strategy as a success for their business on a customer-satisfaction level. But as it’s yielded only an average of $30,000 in monthly ticket sales (compared to the estimated $50 million in average monthly ticket sales a chain could make in August of 2019, according to Comscore), it’s still far from a solution.

Other theater owners have opted to turn their facilities, big and small, into venues for other types of public gatherings. Cinemark, the third biggest national chain, charges $99 for two hours of video-game time on its big screens (you provide the console and the games). The IFC Center in New York City is offering online classes about documentary filmmaking and has posted a selection of short films created by theater staff on its website. Nitehawk Cinema in Brooklyn provides both curbside pickup and outdoor table service for its expansive menu of food and drinks. “That’s going really well and people are stopping by, saying hello, and supporting us,” says Nitehawk owner Matthew Viragh. “It’s at least driven enough revenue where we can continue to pay our bills.”

Smitty’s Cinema has even tried indoor cornhole tournaments. “We’re going to try everything at our disposal to stay afloat until some of these movies do come out,” Waitt said. “We just want to be able to survive 2020.”

So, How Long Can the Movie Theaters Last?

When exactly those movies will come out is a question experts are less sure of how to answer. Bock admits that “studios, like the rest of us, don’t really have any idea” when the box office will return to anywhere near normal. “You might as well ask a Magic 8-Ball at this point.”

Studios are particularly reluctant to take risks with their tentpole films when American movie theaters are still shuttered in the three markets (New York, Los Angeles, and San Francisco) that accounted for 18 percent of total box-office grosses in 2019 (just shy of $2 billion). Local legislators remain unclear as to when their public-gathering restrictions will be lifted in New York City and Los Angeles (San Francisco recently announced a reopening date of October 7). In his latest comments regarding movie theaters on September 16, New York’s Governor Andrew Cuomo said, “Movie theaters want to open … I understand, but we’re not yet at a point where we can get back to normal life.” Indoor dining is set to resume in New York City on September 30, but there is still no update on movie theaters and live-event venues.

It’s a frustratingly vague stance that has had far-reaching implications. “It’s very simple: Unless there is action out of New York City, there will absolutely be more movies dropping off the release calendar,” says Joe Masher, head of the National Association of Theatre Owners’ New York office. Viragh is more direct: “They’re killing the industry. Distributors are not going to be releasing films without New York and L.A. It’s just not going to happen.”

Yet, even if theaters in those major market cities are permitted to open sometime this fall, it still may not be enough. A recent study by NRG revealed that 49 percent of moviegoers are still uncomfortable with the idea of returning to the movies, and only 41 percent of all potential moviegoers are even aware that their local theater is open.

The uncertainty weighs heavily on theater employees. An assistant manager at Marcus Theatres in Texas said she was finally rehired after a four-month furlough only to have her hours cut after one week. Two weeks later, they were cut even further. Now she’s making less than she was on unemployment benefits.

Another worker for a national chain was already struggling after being furloughed in March, only to contract COVID-19 at a mandatory COVID-training safety session once she was finally hired back for the reopening. Her only income now is a benefit of sick leave, at a reduced rate of pay, via the Federal Medical Leave Act. “I have to spend the little money I’m getting on doctor visits with no clear outcome in sight. And the prospect of going back to work isn’t very good either.” A longtime employee, who had worked her way up to a supervisory position, she put her health on the line for a job she loved, but now admits to feeling “a real sense of being expendable in a way I had never felt before.”

There’s currently no wide-release film from a major studio scheduled until Pixar’s Soul on Thanksgiving weekend. Photo: YouTube

So what are the theaters to do? NATO’s Masher puts it bluntly: “Repertory product is not the answer. We really need to look to Hollywood to help us get through this.”

Bock agrees, asserting that blockbusters are the lifeblood of the exhibition industry. But how much can Hollywood really do amid an unrelenting pandemic, particularly when the talent behind its major projects are actively lobbying against the release of their films? Producer Jordan Peele privately requested Universal delay Candyman out of health concerns for audiences, and after his big superhero movie The Eternals was pushed back to November 2021 by Marvel Studios, star Kumail Nanjiani tweeted, “Nothing is more important than health & lives. I can’t tell [people] to go to a movie theater until I feel safe going to one.” More recently, over 70 directors, writers, and producers signed a letter asking Congress to provide financial assistance to the industry, claiming that 69 percent of “small and mid-sized movie theater companies” will face bankruptcy without aid.

According to Shapiro, this prevailing sentiment could mean that studios won’t move to release any blockbusters until a vaccine is widely available, and even then, it’s difficult to predict whether or not an expedited paradigm shift toward streaming films will cement studio’s willingness to circumvent theaters altogether. “If there’s not an effective vaccine by first quarter of 2021,” he explains, “then the industry is in big trouble.”

In this volatile climate, if theater chains do eventually file for bankruptcy, it likely wouldn’t mark the final chapter for companies like AMC or Regal; in fact, it could actually position them to come out of the pandemic stronger. Yes, a filing might amount to new ownership, and some individual venues could close, with jobs lost in the process, explains Shapiro, but “bankruptcy would allow them to restructure their business in ways that make profitability more obtainable” in the future. And while Netflix recently brushed off the idea of acquiring any theater chains, Amazon has reportedly been exploring a potential acquisition of AMC since mid-May.

In the end, Bock says the prospect of major movies releasing during the holiday season “seems like a pipe dream at this point. Maybe [theatrical blockbusters will return] next summer. All we can do is wait and see.”

“I do think it’s going to be a long time until we’re back to 100 percent capacity,” Nitehawk’s Viragh adds. “That could be deep into 2021. That’s what we’re looking at in terms of how long the road to recovery will be.”

The Fate of American Movie Theaters Looks Terribly Bleak