By Daniel Tortis
COVID-19 has changed the landscape of society as we know it. Not only have the lives of many been permanently altered as a result of the virus, but many industries are on the brink of financial collapse. Movie theatres have been especially hit hard with companies such as AMC in the U.S and Cineplex in Canada having revenue drops greater than 95 percent. Right now, the stock of AMC is down 38% and the Cineplex stock has fallen a whopping 78% on the year.
With social distancing protocols and gathering limits in place across North America, movie theatres have either strict occupancy limits in place or are closed all together. This has resulted in companies taking huge losses and bleeding through their cash reserves. The question now is how long will theatres be able to take these sustained losses before they go bankrupt? Perhaps a further inevitable question one must ask is: are theatres are on the brink of being a relic of the past?
Very few blockbusters have been released in the last six months. Blockbusters normally generate a considerable amount of revenue. This trend is likely to continue with some companies such as Sony Pictures saying they will not release any new blockbusters until the pandemic is over. However, it may take years before a new vaccine is introduced and the pandemic is deemed over.
Assuming that the movie theatres are able to stay open during this second wave of the virus, the issue remains about whether people are ready to go back due to safety concerns and fear over contracting the virus. A new survey by Market Watch says 70% of people would rather watch movies at home than go to the theatre. This not only presents a dilemma in regards to people going back to the movies but it also means that the movie industry faces a new form of competition.
Direct to video and streaming services have already taken a substantial amount of revenue away from theatres even in the pre-coronavirus era. The global video streaming market size was valued at USD 42.60 billion in 2019 and is projected to grow at a compound annual growth rate (CAGR) of 20.4% from 2020 to 2027. Disney has already placed its latest blockbuster “Mulan” on its streaming service and may do the same for some other Marvel movies that are set to be released in the coming months.
There is, however, some optimism for avid movie goers. Cinemark, a rival theater group in the U.S has said that it can turn a profit even if attendance is as low as 10%. After all, outside of the weekend, occupancy levels in its theaters range from 20% to 30%. This means that if cinemas manage their money well and find ways to remain profitable while having lowered rates of occupancy, then they will be able to survive the pandemic.
Just two days ago, Oscar-winning film directors Martin Scorsese, James Cameron, and Clint Eastwood joined forces with movie theatre owners to request financial aid from the American government.
In a letter to the leaders of the US Senate and the House of Representatives, the directors said, “the coronavirus pandemic had dealt a devastating blow to movie theatres and that without funds cinemas may not survive the impact of the pandemic”.
For now until at least 2021, consumers will be watching most of their movies at home. Hopefully, this is only a temporary measure, but if the theatre companies go bankrupt, viewing movies in front of the big screen may be a thing of the past.