Mark Zoradi, CEO of major exhibitor Cinemark and a former longtime Disney executive, sees some familiar elements on the summer release calendar, which he sees as a potential Covid-19 recovery turning point.
“The last weekend in May, in that traditional beginning of summer, you have Cruella from Disney and you have F9 from Universal and you have Infinite from Paramount,” he said. “So, you’ve got three big movies.” The July Fourth weekend, he added, has Minions: The Rise of Gru and Top Gun: Maverick.
Given those studio commitments, declining virus infection rates and ramped-up vaccinations, Zoradi said, “We’re optimistic that we’re going to be able to light up these theaters again come this summer.”
Zoradi and COO and CFO Sean Gamble offered their read of the market and detailed Cinemark’s “Project Phoenix” comeback effort during a conference call with Wall Street analysts this morning. One obvious key is more theaters reopening. New York City locations, dark for almost a year, will welcome patrons again next week, and Zoradi said he expects California to follow suit in the next two to four weeks. New York and LA together account for 15% of total domestic box office.
Before the call, the company reported fourth-quarter results that vividly illustrated the brutal toll of the pandemic. Total revenue came in at $98.2 million, down from $788.8 million in the same period a year earlier, and net losses reached $2.03 per share on a diluted basis, compared with a profit of 22 cents in the 2019 quarter.
A major topic during the call was a series of dramatic changes in theatrical release windows recently due to the industry’s increasing emphasis on streaming. Zoradi saluted Paramount’s commitment to theaters, which was reaffirmed during the ViacomCBS showcase this week for rebranded streaming service Paramount+. Only briefly did the topic of Warner Bros putting its slate on HBO Max at the same time it hits theaters come up, but Zoradi didn’t dwell on the December bombshell, instead giving a shoutout to Tom & Jerry, which opens today.
Asked to project the impact of shifting windows on Cinemark’s results, the CEO largely demurred, saying it is too early to tell, especially during a pandemic environment. “We’re looking at this as a way for us to look at, ‘Do we want to open our theaters up to some of this different content with different, restructured deals depending on the length of the exclusive window?'” Zoradi said. “It potentially has some negative but it potentially has some positive.”
As other industry figures have done, Zoradi also pointed to robust box office in China, Japan and Australia (territories all mostly on the other side of the pandemic) as evidence that consumer habits are not likely to permanently change.
Asked about the viability of Cinemark booking films from non-traditional distributors like Netflix, Apple or Hulu, Zoradi said the company is in “active talks” with several of them. Even before the pandemic, there was a growing tension between the increasingly potent tech services and traditional exhibitors trying to hold the line on three-month exclusive windows. Now that the pandemic has forced a rethink across the industry, theater owners have gotten more creative. Cinemark, like AMC, has adopted a more flexible windows strategy and conducted tests last year with Netflix, booking films like The Christmas Chronicles 2 for abbreviated runs before they headed to streaming.
“We’re not talking about huge quantities,” Zoradi noted. “There’s a half a dozen pictures that are really important to some of the streaming services. They’re either big, important Academy movies or bigger, midsize commercial films that we would be interested in playing. We would be open to a shortened window, depending on the financial terms.”
For all of 2020, Cinemark’s total revenue plummeted to $686.3 million from a record of nearly $3.3 billion in 2019. Attendance for the full year was 54.3 million moviegoers, paying an average ticket price of $6.57 and spending an average of $4.26 on concessions.
The circuit ended 2020 with 75% of its North American locations open, which was much higher than the industrywide level of 45%.
Zoradi said private watch parties — which enable customers to rent out entire auditoriums — accounted for 24% of attendance and box office in the fourth quarter. More than half of the films watched in these rentals were library content (especially holiday staple Elf). These films “could have been enjoyed on the couch at home,” Zoradi pointed out, but the fact that people wanted to experience them on the big screen attests to pent-up demand.
Perhaps the most encouraging statistic in the quarterly report was per-capita spending on concessions, which totaled $5.42, which Zoradi said was on par with the same period in 2019.
In the quarter, Cinemark said it benefited from shutdowns of rivals like Regal Cinemas and others, growing its share of total North American box office to 20% from 13% in the same period in 2019. Zoradi said the company will be pushing to retain as much of the “share-shift” as possible once all theaters are back up and running.
Gamble said Cinemark had a cash balance of $655.3 million at the end of 2020, and its cash burn of $65 million a month came in below the company’s previous estimate of $75 million.