With moviegoing in limbo in key markets like New York and LA, a trio of movie theater boosters see the COVID-19 operating environment staying murky for at least a few more weeks. They also see exhibitors as more likely to try to play the long game than execute a quick strategic pivot.
“We’re not very good, or at least don’t have a lot of practice, at being nimble and coming up with a completely new model after all of these years,” former Imax exec Greg Foster said of stakeholders in the theatrical business.
Foster, now a consultant for Apple, Parasite producer CJ and others, joined Patrick Corcoran and Phil Contrino from the National Association of Theatre Owners on a virtual panel at Goldman Sachs Communacopia.
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Contrino, director of media and research for NATO, said “maybe about 10” major releases have gone out as premium video on demand (PVOD) titles. More than 40 films that were either completed or near completion elected to delay their 2020 releases into 2021 or beyond, “a clear signal from the industry that this ecosystem does not exist without theatrical.”
Foster conceded a bias that runs in the family — his father, David Foster, was an Oscar-nominated producer of films like McCabe and Mrs. Miller. He described PVOD as a “work in progress” and stopped a bit short of comments Wednesday at the same conference by former colleague Rich Gelfond, CEO of Imax, who ripped the release method as a “failed experiment.”
The 17-day window allowed under a deal between Universal and AMC “is too soon,” Foster said. “On the other hand, practically and pragmatically, in the world we live in, 70 days” — a common interval for many releases — “is too long.” As to how things get hashed out, Foster saluted a Deadline article Wednesday by Anthony D’Alessandro, who argued that close collaboration between studios and theaters is the only way for them to make it to the other side.
Corcoran, chief communications officer at NATO, said “some consolidation” and “changes” are likely after the pandemic eases, but said there are not too many screens or seats in the U.S.
The lobbying group, Corcoran added, has not heard from other exhibitors or studios wishing to emulate the AMC-Universal agreement. Moreover, debate about PVOD and windows is “a distraction,” he said. “If you look at the way the whole market is going, the way consumers are telling you they want their content and how they want to pay for it, SVOD is absolutely the key.”
Transactional home video sales reached their peak in 2004 amid the DVD boom, Corcoran noted, totaling just shy of $25 billion. In 2019, they were $9.3 billion. Theatrical box office in the U.S. went from about $9.2 billion to $11.5 billion in that same 15-year span.
The idea of studios feeding more fresh product into PVOD is akin to “propping up a segment that is in secular decline,” Corcoran said. “I don’t understand the rush to do it.”
While he didn’t single out any particular subscription streaming player, he said theaters are poised to help mid-budget movies. The “$50 million romantic comedies,” he said by way of example, thrived 15 years ago and then largely were squeezed out as financial models shifted. Theaters can “help build up some equity and value in that brand before it goes into a home and streams.”
That setup describes many Netflix releases, which have generated major friction with top exhibitors, but Corcoran was not pressed about the state of talks with the dominant force in streaming. AMC, Regal, Carmike and other circuits refused to play The Irishman and other more recent films. Netflix has thrived during the pandemic, meaning theaters are likely to have less leverage once they are fully up and running.
Contrino said the global picture — notably the recent success of movies in China, Spain and South Korea — should offer a degree of reassurance to the rattled U.S. sector. “As the virus ebbs and flows around the world, you’re going to see demand increase and decrease just as fast,” he said. “In territories where the pandemic was handled quicker and they got their cases down, blockbusters exist again.”
Stateside, it is key “to get more momentum going and have more than just one major movie come out” besides just Tenet. “There has to be a building” so that moviegoers become more reassured with the environment of megaplexes and tell their friends.
LA County theaters’ reopening could be “a few weeks away,” Corcoran said, while New York remains tied up with health inspectors’ scrutiny of air filtration. He offered no forecast.
Foster said the uncertainty is “new to Hollywood. Hollywood is used to taking everything and throwing it against the wall.” During the emergence from the pandemic, “It’s clear that there’s still a big group of people who are unsure about what they’re going to do. ‘Do we go to a movie or do we wait?'”
For both studios and exhibitors, he said, “There’s a contract with the customer, and that is that you’re going to have an escapist experience for the next two, two-and-a-half hours. In some markets, and with some people, that’s working. And in others, they’re not feeling safe leaving the real world at the door.”
Trading in exhibition stocks Thursday reflected the ongoing sector uncertainty, highlighted by a whopping 34% plunge in shares of Marcus Corp., one of the nation’s largest chains. The company has been hit by a double whammy – it also owns a group of resorts and hotels.
Earlier in the day, Marcus announced an $87 million bond sale, which appeared to set off alarm bells for investors. Companies of all stripes have been raising cash through debt offerings with regularity to provide a cushion during COVID-19. But the sales boost debt and this was considered a hefty amount for a company with a market cap of just $280 million – meaning Marcus really needs the money.
Cinemark fell more than 4%, Imax dipped 2% and in-theater ad firm National CineMedia declined 6%.
Jill Goldsmith contributed to this report.
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