Are summer blockbusters a thing of the past? A few short months ago people might have scoffed at the question. Today, however, the COVID-19 pandemic and subsequent economic devastation are forcing consumers to seriously reconsider their recreational activities.
Last week, news broke that AMC Theatres, the world’s largest cinema chain, was on the brink of collapse. The Real Deal, a magazine that covers the commercial and residential real estate sectors, asked in a recent headline: “Is it The End for AMC Theaters?” The movie theater chain, which has been forced to shut down due to public health concerns during the pandemic, projected losses up to $2.4 billion in the first quarter alone.
AMC CEO Adam Aron didn’t mince words on CNN when he said, “We do have fixed expenses, you can be sure we are trying to lower those fixed expenses, but literally we don’t have a penny of revenue coming in the door. Three weeks ago, AMC was a healthy company… What we need is liquidity, and only the government is going to be able to provide that.”
Because movie consumption “tends not to flex” (i.e. consumption tends not to increase with the number of movies released), the revenue being lost now is more or less lost forever. Pushing movies that would have been theatrically released in 2020 to 2021 will not regain the revenue lost from a sudden pause in movie viewership in 2020 – it will more than likely cannibalize profits from the regular slate of releases planned for 2021. Like industries across the board, movie theaters will be digging themselves out of a deep hole for years, and many independent theaters and even large chains like AMC are going to suffer severe losses.
This means a few things. Practically, it means moviegoers are likely going to need to travel further to watch a movie – which will likely dampen the desire of some and lead to further diminished audiences, creating a permanent and long-term reduction of revenues. This, of course, is bad for employees (loss of income and benefits) and communities (smaller tax bases and fewer opportunities to experience culture).
The future does not look bright for the silver screen in America, and up to this point, we have only focused on the implications of continuing to meet fixed costs with reduced revenue. We have not even touched on the potential need for renovation of cinema auditoriums or the extra labor, equipment, and supply costs that will become commonplace for theaters now that we are living in the COVID-19 era.
In California, for example, Governor Gavin Newsom has announced movie theaters can begin reopening today – but only if they operate at “25% of theater capacity or a maximum of 100 attendees per theater — whichever is lower” and meet other public health requirements (like mandating masks). But what good are open theaters if would-be customers are unsure about returning to public spaces this soon? A recent study suggests 70 percent of consumers would rather watch movies from home.
Movie theaters – from independent movie houses to national chains – need America’s Recovery Fund to acquire the liquidity they need to reopen safely, retain employees, and keep the magic of watching movies on the big screen alive. Without help from Congress, we may all be watching American cinema’s final curtain.