UK newspaper: "Cineworld forced into crisis talks by lack of Hollywood blockbusters"

[Martin Brooks]

While over here in the USA we claIm to have had a very strong June and the movie chains here feel positive about things... So what's up in the UK that makes things so bad?

Except in the U.S., it's mostly hype. Year-to-date, U.S. and Canadian theaters are running 29% behind 2019 year-to-date and 2019 wasn't exactly a great year. Theaters might have done well with Top Gun, but one film is never enough, especially today when most people see a film in the first two weeks. In pre-pandemic 2019, AMC had average ticket sales of 94 per day, per screen. Even that was not viable. In Q2 of this year, it was 64. (In Q1, it was just 41). Even at 2019 levels, that's not sustainable.
In Q2, AMC was profitable from an EBIDTA standpoint. But net earnings were a negative $121.6 million. And AMC has lost $4.466 billion since 2015. The only profitable years were 2016 and 2018 and they were mildly profitable (bank interest would have paid more). And with Cineworld with $8.4bn of debt, even if they get refinancing, I don't see how you climb out of that. One question is whether they owe the studios a big chunk of money because if they do, the studios are probably going to get hurt as well.

There are many factors that we all know about: short exclusive windows, a dearth of product, intelligent adult films no longer doing business, the dumbing down of the audience, studios only interested in the biggest, highest-grossing popcorn movies; the perception that theaters are too expensive and/or are dirty or have unruly audiences; a lack of showmanship, streaming, 500 cable channels, the willingness of young people to watch movies on small screens, a young culture that's about "hooking-up" instead of dating, consumers being out of the habit of going to the movies, a lack of marketing by movie theaters, the decline of malls, etc. This all adds up to a perfect storm.

In addition to all those factors, theaters are being hit with much higher food and energy costs.

I'm frequently accused of being too pessimistic, but I think we lose half the theaters over the next 5-10 years and maybe even sooner. I think the theatrical market will be more like the legit theater market. Outside of cities like NYC, they'll just be one or two multiplexes per city. Suburbia and definitely more rural areas will wind up under screened.

Or, I'm wrong and films like MI7: Stunt Man, Black Panther Even Though I'm Not in the Movie, Ant-Man and the Wasp Again, Aquaman in the Water, Guardians of the Galaxy Racoon, Spider Man 117, Indiana Jones on Social Security, The Marvelous Marvels but not Ms. Marvel and the next Star Wars Prequel Prequel saves the theaters. My concern is that at some point, the audience finally tires of all these comic book movies and reboots the same way as in the late 60's and 70's, Hollywood was still focused (sic) on making bad musicals that no one really wanted to see.

[Martin Brooks]

Also, how come the theater chains don't have their own.streaming channels. Seems they missed the boat on that.

They can't because they don't own those rights to the movies and the studios are highly unlikely to license those rights to them because they have their own streaming channels. Even though someone wrote recently that Disney+ is not yet profitable, they have 130 million subscribers, which generates about $11 billion, which doesn't have to be shared with theaters or international distributors. That $11 billion (which is worldwide streaming revenue) is larger than the entire North American theatrical box-office for the current full year. So they're not also going to license those rights to a theater chain's own streaming platform.

If a theatre chain wanted to have a streaming platform, they'd have to start producing their own movies.

The exception is Netflix, which owns a few theaters now, because they do produce their own films.

[Mark Gulbrandsen]

They can't because they don't own those rights to the movies and the studios are highly unlikely to license those rights to them because they have their own streaming channels. Even though someone wrote recently that Disney+ is not yet profitable, they have 130 million subscribers, which generates about $11 billion, which doesn't have to be shared with theaters or international distributors. That $11 billion (which is worldwide streaming revenue) is larger than the entire North American theatrical box-office for the current full year. So they're not also going to license those rights to a theater chain's own streaming platform.

If a theatre chain wanted to have a streaming platform, they'd have to start producing their own movies.

The exception is Netflix, which owns a few theaters now, because they do produce their own films.

Martin, they would make their own and license others, just like everyone else does.

[Leo Enticknap]

A combination of not wanting to be in the maritime business in the first place, and then realizing that they'd missed the boat once it became clear that they needed to get on it to survive.

Netflix started life as an alternative to Blockbuster, based on physical media. They changed the traditional video store's business model in two ways: order online and receive your DVDs in the mail (which the small, light form factor of the DVD made viable), thereby doing away with bricks-and-mortar stores; and a subscription-based, rather than a per rental based, pricing structure. So the movie theater industry likely looked at them and thought they were only interested in the home viewing market, and therefore not a threat. They didn't anticipate that market growing and taking market share away from the theaters, let alone getting into actual content production. While it was clear to everyone that streaming would replace DVDs in the mail once technology and Internet infrastructure evolved to be able to do that, prying market share for movie entertainment consumption away from theaters was not something anyone saw coming until a year or two before the pandemic.

In previous recessions, there is at least limited evidence to suggest that people who previously attended more expensive forms of live entertainment (e.g. music, actors-on-stage theater, and sports events) looked to cinema as a cheaper alternative, with the result that movie theaters weathered the storm better than some other sectors of the entertainment industry. The multiplex building boom carried on more or less uninterrupted during the late '80s to early '90s recession, for example, and I wasn't aware of significant closures in the 2008-11 one.

The unique factor this time is the pandemic, and the long term cultural effect of a year to 18 months in which people who had previously got out of the house for some of their leisure time stopped doing that. Netflix benefited from that, big time. Now we appear to be at the start of a serious recession, caused in part by the response of western governments to the pandemic (massive government money printing, borrowing, and spending, basically), and in part by other economic stressors (e.g. Ukraine, and the emergence of a new cold war between the west and China). And on top of that, the production sector has changed dramatically, with the streamers producing major content themselves, and the traditional studios not being willing to prioritize the theatrical release in ways that they previously were. This is a triple whammy of the sort that the cinema business hasn't faced since the time when it didn't have any competition from home viewing, i.e. WWII. I think, and obviously hope, it'll survive, but the next year or two will be interesting, to put it mildly.