Cinema Industry Facing “Substantial Restructuring” as Shifting Release Dates, Windows Dominate Covid-19 Recovery

Photo by Denise Jans on Unsplash

It has been a brutal six weeks for theatrical exhibition since the release of Christopher Nolan’s Tenet. The cinema sector had pinned their hopes for a recovery on the theatrical roll-out of the Warner Bros. tentpole, the first major film to receive a global wide-release since the onset of the Covid-19 pandemic. Despite positive results overseas, Tenet failed to re-energize the moviegoing public in the United States––instead leading to additional release delays in its wake

Without a dependable timeframe on upcoming studio releases, some cinema chains have begun operating with decreased hours or suspending operations altogether. Moreover, a lack of guidance from the state of New York, which hosts the largest DMA in North America, has complicated matters even further for an industry facing the biggest crisis in its history.

“We spent years dealing with things that we thought were existential:  government regulation, relationships with the studios, and technology definition,” said NATO president & CEO John Fithian at a recent industry webinar hosted by Celluloid Junkie. “Until running into this pandemic in March, we had no idea what existential truly meant.”

The closures began in China in the month of January, on the eve of the country’s Lunar New Year holiday. Screens went dark as the virus spread––Italy, South Korea, followed by most of western Europe and the United States. By the end of March, nearly every cinema around the world was closed indefinitely. 

That’s when the task to reopen cinemas began, with industry trade groups and circuits collaborating on a series of health and safety protocols. Each country, operating under unique timeframes and levels of government assistance, arrived at a different reopening date. By and large, measures such as decreased admissions capacity to facilitate social distancing and the observation of face-covering protocols, became commonplace in the global reopening. 

In the United States, those measures were introduced as an industry-wide certification program known as CinemaSafe, launched in September. The timing of the launch coincided with Tenet’s domestic roll-out but was constrained in its scope to entice moviegoers to return to cinemas by focusing solely on health concerns. In fact, Tenet’s release in the United States received scant promotional support from leading industry figures––save for a rare cross-studio promotional video by Tom Cruise

“Our decision in the United States was to bifurcate our outreach, doing safety protocols first and the comeback campaign later. The studios are very much involved with us in that second campaign, but they don’t want to launch it until things stabilize a little bit more in the United States: until we definitely have movies on the slate and more people coming back into the cinema,” explained Fithian, citing the poor government response to contain the virus in the United States as a factor in that strategy. “We felt like we needed to promote safety in going back to cinemas first before we get to the broader marketing campaign of getting people back to cinemas.”

Communicating the enhanced health and safety measures, however, is only part of the equation for the industry’s revival. With the implementation of CinemaSafe, Fithian noted additional steps necessary for the cinema sector to survive the crisis. “We’re fighting to open cinemas in the US safely with the right protocols; we are working with our governments for aid and assistance; and we’re dealing with studios on the film slate. If those three things all don’t happen together, the crisis is existential.”

The sentiment was echoed by Tim Richards, founder and CEO of Vue International, one of the UK’s leading circuits. Speaking days after one of its chief competitors, Cineworld, announced it would be suspending operations in the UK and US due to a lack of available studio titles, Richards stressed the importance of having a stable slate of films cinemas can rely on.  

“We’re all tired of all these false starts,” said Richards. “We need to find the time and work collectively with the studios to get a release schedule that we can rely on, that we can bank on. We need to know what’s going to happen. As an industry, the studios have to play their part and commit to something.” 

Looming in the background are ongoing conversations around the theatrical exclusivity window, a long-running source of tension in studio-exhibitor relations. When announcing it would suspend operations in its two major markets, Cineworld specifically cited Universal’s decision to delay the release of James Bond title No Time to Die to April 2021

Earlier this year, Universal entered into an exclusive agreement with AMC Theatres––Cineworld’s top competitor globally and in the US & UK markets, individually––whereby the studio’s titles would run under a 17-day minimum exclusivity window before being made available online. In agreeing to the shortened window, AMC would in turn receive a portion of the film’s digital rentals

Cineworld leadership has been vocally opposed to a shortened theatrical window, repeatedly expressing it would not book any titles that do not observe existing exclusivity arrangements. Reactions to the AMC deal have been similarly mixed across the industry, but comments made by top executives at the webinar suggest preliminary discussions are currently taking place. 

“I think as an industry, we probably have been guilty of being overly rigid with windows,” said Vue International’s Tim Richards. “I’ve sat on three or four working groups in the UK trying to find a solution to windows. It’s incredibly complicated. I can say for us as a company, we’re looking at this. This is one ecosystem. We’re all in this together. We’re going to be showing an element of flexibility going forward, and that doesn’t mean we’re panicking––it won’t suddenly be that day is night––but we’re tweaking around the edges. I think it’s healthy to have that discussion as an industry.”

Newly-elected NATO chairman Rolando Rodriguez, president and CEO of Marcus Theatres, the fifth-largest circuit in North America, struck a similar tone when addressing the topic. 

“We were a $42 billion-plus industry worldwide last year. How do you replace that? If you’re not careful, you could, in essence, try to replace that into other channels that, at least so far, haven’t proven to be the case, even in a time period where the theaters have been shut down. The economics really haven’t shown yet that it’s necessarily the way to go,” he said. “Should that window be looked at differently? Absolutely. Is there flexibility in talking about what that could look like? Sure. What that should be is the discussion that is currently taking place and will continue to take place in the coming months.”

Nevertheless, Rodriguez doesn’t believe the theatrical window is at the core of current priorities for exhibitors reeling from the Covid-19 crisis. Along with NATO, Rodriguez believes that safely reopening all US cinemas, along with securing government aid for the sector, are among the industry’s main concerns. To date, cinemas are open in 48 of 50 states, New Mexico and New York being the sole holdouts.   

“We are trying desperately to get New York state to allow cinemas to open,” said Fithian. “New York is a very important market. On a global basis, it’s not a gigantic box office market, but it is important for many other reasons. Journalists work there, Wall Street analysts work there, film critics work there, and having cinemas closed in New York is really hurting our ability to keep films on the slate. Every single studio I talked to about releasing movies yet this calendar year says, ‘When is New York going to open?’”

Citing a recent member survey, Rodriguez mentioned that 69 percent of independent and mid-sized circuits surveyed currently have liquidity issues stemming from the impact of government restrictions. That number is expected to become more drastic by the end of the year, according to the NATO chairman. 

The trade group is currently focusing its efforts on lobbying for much-needed financial assistance. That campaign, however, has been frustrated and stymied by the current state of affairs in Washington DC. “The question is whether or not President Trump and Congress can come together on a broad-based agreement or whether they’ll just single out an industry, like the airlines, for assistance,” said Fithian. 

Regardless of government support, Fithian believes the exhibition sector will undergo “substantial restructuring” over the next year because of the pandemic. Consolidation, whether from existing players or new ownership groups, is looking increasingly inevitable as the months go by without an end to the crisis in sight. 

As damaging as the continuously shifting release dates have been for exhibitors, with major titles rescheduled or abandoning theatrical altogether with little-to-no warning, Fithian does believe the industry will eventually bounce back to prominence. 

“80 percent of the movies that were scheduled during the pandemic have been postponed for later theatrical release and not taken into the home,” he said. “We know on the other side it’s going to be fine and we can perhaps return to record-breaking numbers again––we just need to get there.”

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