The road to recovery for much of Europe’s exhibition sector may still be an ambiguous prospect, but Vue International, one of the continent’s largest cinema chains, hopes to jumpstart business by mid-July.
The exhibitor, which operates close to 2,000 screens across 10 countries including the U.K., Italy, Germany, Denmark and Taiwan, has shuttered all 228 sites except for its sole, 20-screen Taiwanese cinema, but CEO Tim Richards is bullish that restrictions will be relaxed and “people will be more comfortable going out again” by summer.
“We know there’s going to be a pent-up demand for cinemas like never before, and we want to hit the ground running when that happens,” says the former Warner Bros. and Universal exec.
A mid-July date would see Vue follow the projected reopenings of U.S. chains such as AMC, which expects to open screens in early June, and Cinemark, which is eyeing July 1. Richards, whose Taiwanese business and its proximity to China has proven a valuable model for navigating COVID-19, admits to “a risk of opening too soon,” reflecting on China’s abrupt closure of cinemas just a week after reopening around 500 sites.
However, the Canada-born CEO highlights that, “We have the ability to control how many people go into our cinemas and where they sit. That’s what we’ve learned through how we’ve been operating in Taiwan.”
Richards speaks of a “new world” for cinemas that could look a lot like Taiwan, where temperature checks are executed across most premises and masks are standard fare. Meanwhile, Vue’s IT department is working up new operational protocols where, upon booking, families and couples can sit together and “automatic social distancing” is enforced.
“If that’s what it takes for customers to be confident that it’s a safe environment to go into, then we may be operating like that for a short period of time,” says Richards.
But what will audiences come to watch? Amid concerns out of the U.S. that exhibitors’ projections for reopening are premature, U.S. trade body National Association of Theatre Owners said Wednesday that “many theaters will not be able to feasibly open” due to a lack of wide-release product.
In Vue’s 2019 earnings, posted mid-February, Richards underlined the “box office momentum” leading the company into 2020, “particular the first half, with a phenomenal slate of films, including family favorites ‘Mulan’ and ‘Peter Rabbit 2,’ ‘Fast & Furious 9’ and (James Bond sequel) ‘No Time to Die.’”
Two months and a global pandemic later, Richards is more realistic — though still optimistic.
The executive says he is in constant dialogue with the studios, and is confident that films such as Christopher Nolan’s hotly anticipated “Tenet” — which theater chain Cinemark hopes will lure audiences in July — will sustain exhibitors eyeing summer reopenings. He’s also counting on studios avoiding cannibalization across fall release dates.
“Over the next 12 months, there are going to be slots that wouldn’t have been filled, but which are now going to be filled so that everyone gets breathing space for their films,” says Richards.
In addition, Vue plans to tap into a strong independent film supply out of Europe, particularly Poland, Germany and Italy. “We’re coordinating with a fairly wide band of interest,” says Richards.
Backed by Canadian funds Alberta Investment Management Corporation and pension fund Omers, Vue posted $1 billion in revenue for 2019, and 489 million admissions across Europe. Last year, there was speculation the company would be sold after JP Morgan was brought in 15 months ago to evaluate financing options.
However, it’s understood a formal sales process was never triggered and the business, in which Richards and other directors hold a 25.8% stake, will continue for the foreseeable future. Industry sources tell Variety the business was also in hot pursuit of Canadian theater chain Cineplex, which ultimately sold into competitor Mooky Greidinger’s Cineworld in a $2.1 billion deal.
Throughout the crisis, Vue has not laid off any of its 9,000 employees, instead furloughing the majority of its U.K. and head office staff and rolling out company-wide pay cuts ranging from 20-30%. “Our expectations today are that we’re going to be able to continue and keep everybody on board. We’ve invested very heavily in our employees,” says Richards.
The business has stayed afloat so far largely due to robust safety nets in Europe, such as government assistance and furlough programs that have helped “considerably,” says Richards.
“A lot of companies will not survive, but the strongest companies will survive, and we will survive. I’ve always run the company very conservatively…and those are the ones who will survive long term.”
However, one major cost area put in sharp relief by the crisis for Vue is property.
Vue has medium to long-term leases in all of its markets, says Richards, but has achieved “different levels of success with our landlords in trying to get concessions.” The U.K. is one of the most challenging markets, with the government yet to step up measures for tenants and developers. Vue is part of ongoing discussions hoping to bring about changes.
“It’s not right that 100% of rent and service charges are paid when cinemas are not able to operate because of government legislation. That can’t be allowed to continue,” says Richards.
Elsewhere, asked about any potential undercutting of the exhibition business by the studios’ experimentation with straight-to-VOD releases during COVID-19, such as Universal’s outing of “Trolls World Tour,” Richards suggests the number of successful PVOD releases is still negligible to warrant any real concern.
“’Trolls’ was a bit of an aberration,” Richards says plainly. “It was not a popular move, though a lot of the exhibitors understood why they did it. But it was an exception rather than the rule going forwards.”