With theatrical admissions free-falling due to the lack of U.S. blockbusters, cash-strapped European exhibitors are up in arms about paying rent for the months they were dark due to COVID-19.
Apart from Denmark and Sweden, where governments have stepped up to pay full or partial rent, other European countries have deferred — but not waived — rent expectations during months-long shutdowns.
Exhibitors aren’t the only business owners to face off with landlords over rent, with shops and restaurants also in difficult positions; however, theaters haven’t been able to kickstart their activities since reopening last month. In addition to limits on seating capacity due to COVID-19, exhibitors have also seen ticket sales plummet by 80% or more in some countries because of the successive delays of U.S. releases such as “Tenet” (pictured) and “Mulan,” and a dearth of local pics.
While governments have become involved in generating insurance solutions for production restarts, authorities have remained mostly hands-off when it comes to rental dilemmas, letting cinemas exhibitors and landlords duke it out, even in countries like France, which boasts a highly subsidized film industry.
“The government can’t get involved because it’s a contractual issue, and forcing a landlord to waive a rent can be interpreted as a violation of the principle of the right to property,” said Erwan Escoubet at France’s National Federation of French Exhibitors (FNCF).
Equally, swooping in to pay the rent for exhibitors would probably be too costly for debt-ridden governments that have already injected millions in rescue packages.
While many of the smallest theaters are owned by their exhibitors, larger venues and multiplex chains almost always include theaters that are rentals — for instance, in shopping malls. It’s these bigger venues that are often left out of any government schemes, and are struggling to find arrangements with commercial real estate companies.
“The smallest business owners, including exhibitors, can access a solidarity fund set up in France to receive €1,500 ($1,750) per month and benefit from a deferral of rents, but the medium-sized and big theaters — representing about 200 cinemas across the country — are not eligible for this scheme and they are in the worst shape,” said Escoubet.
“Larger cinema chains, including UGC, Pathé-Gaumont and CGR, must negotiate on a case by case basis with landlords, and in many instances, it’s going to end up in court. Exhibitors will argue that they were forced to close due to a case of force majeure,” explained Escoubet, adding that exhibitors will also soon have to repay delayed charges.
France’s second biggest theater chain, CGR, owns most of its multiplexes but inherited a number of rentals from its acquisition of the Cap Ciné circuit. CGR’s managing director Jocelyn Bouyssy said the group was asking landlords to waive rents from March to the end of June or July but many are refusing to find a compromise. “Three of them have accepted to cancel rents between March and July,” said Bouyssy, adding that he was also asking for discounted rent for the coming months.
“We’re going to take every single landlord or real estate company who doesn’t play ball to court. There’s no reason why real estate companies who have invested millions in shopping malls and have loan repayment plans set over 30 years can’t make a gesture for us,” said Bouyssy.
Escoubet is chalking up rigidity among landlord to theaters often serving as loss leaders. “Landlords in suburbs or city centers know that renting to a supermarket would bring 20 times more money,” added Escoubet.
In Spain, a market heavily dependent on U.S. blockbusters, where ticket sales are currently about 12%-18% of the regular box office, exhibitors are able to delay rent payments over two years.
“But that’s not enough. The Spanish Government is not helping at all and has left exhibitors unprotected in front of landlords,” said Jaime Tarrazon, the delegate of Federación de Cines de España. “Before, we were worried about reopening, but now our big problem is being able to survive with no U.S. product on the horizon…We can’t be asked to pay past and current current rents; it’s going to kill the companies,” said Tarrazon.
Spain’s government granted a one-time €13.2 million ($15.5 million) contribution to be distributed among all the country’s cinemas to help them support costs created by the pandemic. Subsidies range from a minimum of €8,000 ($9,398) for a single screen to up to €30,000 ($35,245) for large multiplexes. “We haven’t seen the money yet and we hope to get it in the fall,” said Tarrazon.
In Italy, where theaters closed in early March, the government put in place a 60% tax credit rebate on rents for shops that were forced to close. But the tax credit only applies to cinema exhibition companies if their annual turnover is less than €5 million ($5.8 million), which represents 60% of the Italian market, said Mario Mazzetti, who runs local exhibitors org ANEC. Mazzetti said the org tried to get all cinemas covered by the scheme in April, but the application was struck down.
In Germany, where 60% of screens have reopened, exhibitors were allowed a rent freeze until June 30 but will have to repay those rents by June 2022, according to Sophie Deutschendorf at HDF Kino.
Exhibitors in Denmark, Sweden and Norway are ahead of the curve thanks to dedicated schemes. “For the second quarter, there was a deal offered where you could negotiate with the landlord and get a 25% discount on rent, then another 25% from the government, capped at €900,000 ($1 million) total a year for any tenant,” said Peter Fornstam, CEO of Svenska Bio, Sweden’s second biggest cinema chain, which also operates in Finland and Denmark. Fornstam said all but one landlord agreed to the scheme. The bulk of the chain is made up of rentals.
“Denmark and Norway have a pretty generous setup for every business, where they got reimbursed for 85% of fixed cost (by respective governments), and rent was one of them,” explained Fornstam.
But even exhibitors who own their theaters are currently in dire straits. “The whole exhibition industry will emerge from this pandemic weakened and impoverished if no one is making efforts to help sustain our business — beginning with distributors who need to start releasing their movies now,” said Yves Sutter, managing director of Cineville, a major cinema chain in France.