We are hearing from U.S. industry sources as well as those on the ground in the PRC that the offices of China Film Group in Shanghai and those of China’s Film Bureau are re-opened for business — a sign that the country’s exhibition business is on its way to a gradual recovery after being shuttered since the Lunar New Year due to the coronavirus outbreak. It’s a respite that has cost China’s box office at least $2 billion or more.
“They’re starting to lay out a plan for the re-opening of cinema in China,” Imax CEO Richard Gelfond told Deadline today about the news of China Film Group’s re-opening, “They’re starting to assess what movies are available, in what time periods and how they want to manage the re-opening.”
China Film Group, in addition to producing and co-financing local PRC movies, is involved in the clearance of titles, dating movies and the KDMs — the actual discs that play the movies in cinemas.
The news of China Film Group’s re-opening arrives at time when new coronavirus cases are nearing zero in the PRC, and hospitals that housed the infected are now closing. Not only have companies seen their employees return to work in recent weeks and in rotating shifts that comply with local government safety guidelines, like Imax in Shanghai, but some tourist attractions also have thrown their doors open again recently. According to local media, for example, the Shanghai Ocean Aquarium is now in full operation, though with visitor capacities at under 50%. In Hubei Province, there were no new suspected coronavirus cases for two consecutive days, the health commission said Wednesday, according to Xinhua.
However, as China reopens, it’s not going to be with big product, nor will it spur immediately the same enormous box office results we’ve become accustomed to for the country. It’s going to take a bit of patience and time, and it’s a potential lesson that domestic exhibition can learn from whenever they opt to re-open down the road. Essentially by the end of March, we could see Chinese theaters ‘toe-dipping’ in areas where there haven’t been any coronavirus outbreaks. The hope is by May 1, the PRC’s exhibition infrastructure is back in full swing, that is if there aren’t any medical setbacks.
A recent Maoyan survey said 68% respondents cited that going to the cinemas is their top choice for entertainment once the epidemic ends, while a 30% said they would return to theaters as soon as they reopen, followed by 33% who said they would wait for the official announcement that COVID-19 is completely contained. A further 29% said they would “wait for a while” after the official announcement before heading back to movie theaters. Staggered seating and rows will be the new norm for a while until China adjusts.
China’s theatrical re-opening will come in waves, the first being the re-release of older local catalog titles, i.e. Monster Hunt, Wolf Warrior 2, The Wandering Earth and animated feature Ne Zha. We understand that Chinese exhibitors will keep 100% of the box office on those re-releases. There’s apparently a deal in the wings with U.S. studios for catalog titles such as the Avengers movies, Interstellar, Inception, etc, but that’s still being hammered out. Typically, the major studios reap 25%-27% of the Chinese box office for their newer titles.
The second wave of titles will occur in mid-to-late-April and that will be the U.S. pics that have already been cleared and awaiting release, i.e. 1917, Dolittle, Ford v. Ferrari, Jojo Rabbit, Bad Boys for Life and Sonic the Hedgehog as well as new Chinese local fare like Detective Chinatown 3.
It’s still undetermined which movies open over the May 1 spring holiday. U.S. sources do not predict Disney’s Mulan getting an early jump in the PRC before the U.S. at least by a matter of weeks. Rather, some say it’s best to keep China’s release on the highly-anticipated tentpole, which stars Chinese local star Liu Yifei, close to domestic; the worst risk case scenario being that grosses underperform in mainland. In regards to when the new U.S. event titles will play in China, that’s anyone’s guess whether it’s May 1 or June. However, with China Film Group back open, we’ll know soon.
In regards to when U.S. movie theaters re-open, sources guess that we’ll have a better idea in three weeks after we see how severe the outbreak is following testing and near-nationwide quarantining. AMC announced that their venues are closed for six to 12 weeks, while for other chains, it’s a wait-and-see plan.
While U.S. exhibition stocks have been hammered in the wake of their announced closings due to safety concerns, Imax will be able to weather the storm, and in Asia, is doing quite well.
“We have virtually no debt and $100M in cash, we can operate for years with theaters closed and it wouldn’t endanger our financial stability,” Gelfond tells Deadline, “While it’s sad for the whole industry, we can ride through this.” Meanwhile, over on the Hong Kong exchange, Imax’s market cap is worth significantly more than their stateside $441.8M market cap. When China’s theaters come back online, it will provide some juice for the large format exhibitor while other auditoriums in the world are down. Imax derives about a third of their income from China where they’re installed at 750 of the nation’s 70K screens.
Imax currently has 197 out of their 1,529 commercial theaters opened globally amid the COVID-19 pandemic: 19 domestic, 78 in Asia/Pacific, 72 in Europe/Middle East/Africa and 28 in Latin America.
In regards to how much the U.S. and China bounce back at their respective box offices, Gelfond points to such factors as the degree to which audiences feel safe, and whether there’s a vaccine for COVID-19.
Says Gelfond, “When you look at other shocks that occurred whether it was World War II or 9/11 or the crash, people come back to the cinema sooner than you think. In Hong Kong after the SARS epidemic hit them, the second half of the year’s box office there was up 18%. I’m not predicting that, but when you’re in the middle of an emergency situation, it’s very difficult to predict what happens on the other side. I’m not a negative person. It’s possible the box office rebounds quite nicely.”