NATO: A Year of Pandemic, Pain, Patience, and Perseverance

By Patrick Corcoran Vice President & Chief Communications Officer, NATO

Bits of news had been trickling out of China about a new and contagious respiratory virus at the very end of 2019. On January 23, 2020, China announced it was closing all 70,000 cinema screens as part of its efforts to control the virus. On January 31, NATO distributed an updated and revised “Preparing for a Flu Pandemic,” originally prepared in 2009, as well as its “Crisis Management Handbook.” That same day, travel restrictions for non-U.S. citizens from China went into effect.

Preparations for the 10th-annual edition of CinemaCon, scheduled for March 30–April 2, continued, with a wary eye on worsening case numbers of the novel coronavirus, now known as Covid-19. On March 11, the World Health Organization (WHO) declared the outbreak a pandemic, and NATO canceled CinemaCon that same day. NATO, unlike many organizations and event planners, had pandemic insurance, meaning that the organization would incur no losses as a result of canceling the show.

Within a week, movie theaters across the country began to close, as audiences began staying away from public places and the industry anticipated state-mandated closures. Most observers at the time anticipated no longer than a six-week- to three-month-long period of closures. As we all know now, they were wrong.

For NATO and its members, the pandemic has meant an ever-changing mixture of crisis response, managing expectations, and drawing on deep wells of experience and relationships developed over years. 

NATO’s Executive Board began meeting weekly two days after the WHO’s declaration and before U.S. movie theaters began to shut down. First priorities were to understand the extent of the crisis, state and local mandates, and how to plan as an industry for what was expected to be a not-far-off reopening. The theater industry would make it known that we would behave as responsible citizens, that the health and safety of our patrons and employees were our highest concerns, and that we would be back.

We called upon industry allies and they called on us. Christopher Nolan asked what he could do. Within three days of U.S. theaters closing, we helped him place his piece, “Movie theaters are a vital part of American social life. They will need our help.” in The Washington Post.

NATO contributed $1 million to a seed fund for the Will Rogers Motion Picture Pioneers to provide assistance for movie theater employees affected by the closure of movie theaters due to the pandemic.

NATO lobbying was in full swing as discussions began in Washington over a potential aid package for businesses and individuals affected by the pandemic. NATO coordinated with its regional affiliates on outreach to local health officials on how to sensibly and safely reopen. 

We began weekly State of the Industry webinars on April 23 to keep members informed and to learn their concerns. We are preparing for our 35th such webinar as this article is written. There have also been stand-alone webinars on various provisions of federal aid packages, as well as operational, marketing, and other issues.

There has been constant communication with the studios, large and small, on the complexities and challenges of the pandemic release calendar. While there have been disappointments in movies going straight to the home, or in hybrid home and theatrical “pandemic release windows,” the vast majority of major titles have chosen to delay their release in theaters, rather than abandon it. 

The first stimulus package, known as the CARES Act, provided direct aid to individuals and enhanced and extended unemployment relief. The CARES Act also provided two new loan programs: the Paycheck Protection Program, which granted partially forgivable loans to small businesses, and the Main Street Lending Program, which made loans available to companies with up to 15,000 employees and $5 billion in revenue. The CARES Act also provided tax relief to business of all sizes, through payroll tax deferral; the long-sought QIP fix, which corrected an error that extended capital improvement expense depreciation to 39 years and allowed businesses to amend those items in 2018 and 2019 returns; and the net operating loss carryback provision, which allowed businesses and individuals to use net operating losses against taxes incurred up to five years before, yielding hundreds of millions in tax refunds for exhibitors.

As the late spring and summer stumbled forward in fits and starts of reopenings and closures, it became clear that individual company health and safety protocols were not effective at convincing local officials to consider allowing theaters to reopen or to lift restrictions on capacity, nor were consumers clear on just what movie theaters were doing to help keep them safe. Both problems were also making studios wary about releasing movies with large box office potential. A national movie theater health and safety protocol was necessary.

NATO staff and member volunteers worked throughout the summer with epidemiologists and state boards of health to develop voluntary health and safety protocols. Unanimously adopted by NATO’s Executive Board, CinemaSafe was rolled out to members and non-members alike, with a national press conference and website and multimillion-dollar marketing effort in time for the release of Chris Nolan’s Tenet, in late August. In-theater graphics and a consumer-friendly video was made available to the historic group of 420 companies, 3,150 locations, and more than 33,000 screens nationwide. Health officials in multiple countries adopted CinemaSafe as their standard for movie theater reopening protocols.

CinemaSafe became a useful tool in convincing health officials across the country of the seriousness with which movie theater owners took their responsibilities and formed a framework for their reopening policies.

This was not effective in all jurisdictions, as NATO and NATO of New Jersey sued the state of New Jersey in U.S. District Court to allow movie theaters to reopen at the same time the state allowed religious institutions and other similarly situated business and institutions to open. NATO did not prevail in that suit, but the pressure undoubtedly prompted New Jersey to reopen movie theaters weeks before they had originally planned and accelerated the opening of theaters in adjacent New York State.

But the pandemic will have its way. A second wave of the virus hit the U.S. in late summer, and Europe, where the response had been far more promising and theaters had been allowed to open broadly, in the fall. Throughout this time, NATO continued to lobby on a badly stalled second pandemic stimulus program. 

As it became clear leading up to elections in November, that negotiations on a new relief package were serious, NATO engaged its grassroots and industry allies to lobby key administration and congressional leaders to include movie theaters in their plans. NATO, through its relationship with a new association—NIVA (National Independent Venue Association)—lobbied for the Save Our Stages Act. Initially intended for live music venues, SOS had multiple Congressional sponsors and a real path to enactment. NIVA agreed that movie theaters should be included, if we could convince the sponsors to agree to add $5 billion to the initial $10 billion allocated for the provision. NATO succeeded in this, and through intense lobbying, including thousands of contacts from NATO members, SOS, now known as the Shuttered Venue Operators Grant, passed Congress and was signed into law by the president.

The grants, much discussed in yet more NATO webinars, provide a lifeline that will help small and mid-size theater companies make it until vaccines are widely available and business can return to normal. 

Meanwhile, working off a template developed by NATO of Wisconsin and Upper Michigan to establish state-based grants to movie theater operators, multiple states have provided more money to movie theaters across the country.

And in an extra bonus, a long-term NATO policy goal and lobbying focus, the maintenance of the ASCAP/BMI music licensing consent decree, was left in place by the outgoing head of the Department of Justice’s Antitrust Division. The decision means that U.S. movie theater companies will not have to pay hundreds of millions annually to license the music that is in movies they play, unlike our counterparts around the world.

In these difficult times, NATO has also experienced something unusual for an industry in crisis. We have grown. In February 2020, NATO had 676 members (590 Domestic, 3 from U.S. Territories, 21 from Canada, and 62 international), comprising 66,014 screens at 7,425 locations worldwide; 34,171 screens at 3,389 locations domestic.

In January 2021, NATO membership totaled 1,018 companies with 70,222 screens at 8,320 locations worldwide. 904 of those members were domestic, with 35,854 screens at 3,828 locations.

Through careful financial management and the huge success of CinemaCon over a decade, NATO had accumulated a reserve fund that was quite large for an organization of its size. As a benefit to members and to attract new members, NATO announced, pre-pandemic, that it would suspend dues payments for fiscal year 2020–21. A pretty nice deal, but the deal has not been the driver. The vast bulk of new membership has come as a result of the pandemic and NATO’s response to it.

And NATO’s response to the pandemic and all its attendant issues was not possible without that robust financial reserve, without the active engagement of a large, diverse, unified membership. Theater owners’ stories, told in hundreds of media interviews month after month, making personal their plight, and their value to their communities, and told to congressional staff in districts across the country, helped make those various relief measures a possibility. Members embracing the CinemaSafe protocols, members working with the NATO regional associations, got theaters reopened and lifted onerous restrictions and got grants to keep going.

We’re not done. We will continue to lobby the Small Business Administration to make sure the Shuttered Venue Operators Grants are administered fairly; we will continue to lobby states and localities to allow theaters to reopen when it is safe to do so, without discriminatory provisions or unreasonable capacity caps; we will continue to lobby the studios to provide movie product and to return to pre-pandemic windowing models when the business returns to normal.

We will continue to do this and more for you. But we can’t do it without you.

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