News of a potential coronavirus vaccine sent shares of movie theater chains soaring on Monday. For the first time in a long time, it seems, cinema owners and investors see hope for a sector that has been decimated by the public health crisis.
“We have not heard good news for awhile, and this is unqualified good news,” says Rich Gelfond, CEO of Imax Entertainment. “This is potentially a game changer. It gives us greater clarity about when and how this pandemic may end.”
Buoyed by the announcement, AMC Theatres’ stock rose 51.4%, Cineworld shares jumped 40.25%, Cinemark stock climbed 45.17%, and Imax shares got an 18.61% boost. To be fair, the share prices were a fraction of what they were pre-pandemic. For instance, AMC closed the day at $3.77 a share, less than half of what shares were trading in February.
Despite Wall Street’s burst of optimism, the movie business still faces fierce headwinds. Box office revenues have plummeted since COVID-19 first started spreading in the United States last winter. While cinemas in 48 states have reopened, many are still digging out from a very deep hole after being closed for much of the spring and summer and theaters in Los Angeles and in New York City remain shut. Some are teetering on the verge of insolvency, with the National Association of Theatre Owners (NATO) predicting that as many as 70% of small to mid-sized theaters are facing bankruptcy by early next year without some kind of federal assistance. That kind of lifeline may be hard to secure given that stimulus talks have largely broken down and Congress is now entering a lame duck session when legislation tends to grind to a halt.
“If the vaccine news is on track, that’s very exciting and is a very bright light at the end of the tunnel, but it’s a long tunnel and many of our companies are barely breathing air right now in terms of their liquidity,” says John Fithian, CEO of NATO.
While Imax’s Gelfond speculated that a vaccine could be widely available by April, there are reasons to doubt that optimistic timetable. Pfizer, the drug company behind the vaccine, is basing the results on early data and is still in trials, although it has been shown to be 90% effective. It will likely be distributed first to healthcare and other essential workers, and the logistics of getting a vaccine to hundreds of millions of American are daunting.
“It’s a fantastic step in the right direction,” says Eric Handler, a media and entertainment analyst with MKM Partners. “The caveat is that it’s going to take time to fully distribute the vaccine. We don’t know when it will be available or how long it will take [to administer widely]. It will probably take a few quarters for that to play out.”
There are other hurdles for the exhibition industry related to the timing of a vaccine. Some studios, such as Warner Bros. which had planned to debut “Wonder Woman 1984” in December, may now be inclined to hold off on distributing the movie until a vaccine is in circulation. The logic is simple. Why risk losing tens, maybe even hundreds of millions of dollars, by unveiling a blockbuster while a pandemic is raging when by postponing a film’s debut by a few months, you could be looking at a very different public health situation?
“I think ‘Wonder Woman 1984’ should be a huge movie for us,” says Mooky Greidinger, CEO of Cineworld, which operates Regal in the U.S. After reopening theaters for a few weeks, Cineworld recently closed down again, citing the lack of major films. “We can’t open cinemas just for one movie, as big as ‘Wonder Woman’ will be. If you ask me if it’s good to open [‘Wonder Woman 1984’] in December, my answer is no. “If it goes in February [instead], I believe it could be a huge movie. We don’t want to open it and be disappointed. [By waiting,] the picture around vaccination will be clearer.”
Yet delaying “Wonder Woman 1984” again would cause problems for cinemas, which are already struggling to find enough movies to play on their screens. Right now, they’re trying to attract patrons with a hodgepodge of streaming service releases, indie fare, and moldy tentpoles such as Christopher Nolan’s “Tenet,” now in its third month in theaters.
“The clock is ticking on a lot of theater operators,” says Handler. “The hope is that they will be able to survive and find some bridge financing that will last them until we get fresh content and a majority of the population gets vaccinated.”
In the short term, however, the public health situation is dire. Coronavirus cases are surging in Europe, forcing countries like the U.K. and Italy to close theaters back down, and public health experts predict that the U.S. is about to be battered by another spike in infections. It’s hard to see studios launching major movies in that kind of atmosphere.
“It’s all about the control of coronavirus,” says Tim League, founder of Alamo Drafthouse Cinemas, in an interview before news of the potential vaccine was announced. “Not to be too political about it, but it’s going to be tough to have successful blockbusters until we, as a nation, are in better control of the spread of the virus.”
Most theaters are operating at losses that are rapidly becoming unsustainable. Not only are moviegoers wary of returning, but cinemas are only allowed to operate at limited capacity due to social distancing restrictions. They’ve also taken on added costs associated with keeping their venues free from COVID-19 — these include instituting extra cleanings, updating HVAC systems, and training their staff in new protocols.
“We’re talking about surviving in the space we’re in, not thriving as a business,” says Eric Kuiper, chief creative officer of Celebration Cinema, a regional theater chain based in Michigan. Kuiper, like League, spoke to Variety before reports of a potential vaccine hit, but the difficult financial situation that he and many other cinema operators face won’t be ameliorated just because of a positive vaccine trial.
Those companies that are able to weather the storm believe that moviegoing will rebound in a big way once the disease is under control. They point to the sheer number of major releases, from “Fast & Furious” sequel “F9” to Marvel’s “Black Widow” to Bond entry “No Time to Die,” that have moved into 2021. They also note that in countries such as Japan and China, where coronavirus is waning, movie theaters are doing robust business.
“Where people feel safe and where they are safe, they are coming back to the movies in record numbers,” says Gelfond.
Claudia Eller contributed to this report.