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Organizers of the upcoming Berlinale continue to plan for a physical festival under strict safety measures, but with the EFM already moved online due to rising COVID-19 cases, this year looks set to be another gloomy gathering, not only for Germany’s dispirited film sector, but also for Berlin businesses bracing for more lost revenue.

Local cinema operators and distributors have welcomed the move, but the condensed event and ongoing Omicron scare is likely to keep attendance on the low side.

“This is such an important signal for the entire culture and film industry,” says Christian Bräuer, chairman of independent cinema association AG Kino – Gilde and managing director of Berlin’s Yorck-Kino group. “Of course, as social venues, we are aware of our responsibility. Especially in the pandemic, however, the special value of cultural life and experience is evident.”

While city life has markedly improved since last year, when it had all but disappeared during the lockdown, the mood remains subdued. People visiting local establishments, whether eating out or going to the movies, have to show proof of vaccination or COVID recovery, a requirement known locally as the 2G rule: geimpft or genesen, German for “vaccinated” or “recovered.” Among local businesses, the new safety measures are often blamed for keeping customers away and hurting the bottom line.

Indeed, across Germany, the introduction of the 2G rule as well as the stricter 2G Plus, which requires an additional negative test, have been “catastrophic” for restaurants and hotels, according to the German Hotel and Restaurant Assn. In a recent survey of 4,800 establishments, the association found that the restrictions have led to revenue losses of more than 50%, and much higher in areas where 2G Plus is mandated. “Many businesses can no longer work profitably,” says association president Guido Zöllick.

Peter Adrian, head of the Assn. of German Chambers of Commerce and Industry, similarly says smaller retail and gastronomy businesses, in particular, are not only are seeing fewer customers due to 2G, but also experiencing problems in implementing the rules.

Other sectors have fared worse. Berlin’s beloved nightclubs finally reopened in September, only to close again in December after local authorities banned dancing due to rising coronavirus cases.

Theater operators in German states that introduced 2G Plus mandates in November have likewise reported dramatic drops in ticket sales. The tougher rules, in nearly half the country, have severely reduced audience numbers due to the lack of testing stations in many regions. The state of Saxony went even further, completely closing cinemas.

The situation has also become particularly difficult for indie distributors including Berlin-based Neue Visionen. The stricter regulations had a severe impact on its recent releases of Serbian director Srdjan Dragojevic’s “Heavens Above” and “Delicious” from French helmer Eric Besnard. The distrib’s recent acquisitions, including Jacques Audiard’s “Paris, 13th District” and Emmanuel Carrère’s “Between Two Worlds,” are on hold.

Neue Visionen managing director Torsten Frehse points out that in 2016, Neue Visionen had a major hit with Besnard’s “A Sense of Wonder,” which sold 700,000 admissions in Germany —– more than twice as many as in France. “Delicious,” however, has taken in just 55,000 admissions in Germany since its November release.

“It’s bitter,” says Frehse. “We went on tour with Eric. We planned everything well. It’s an extremely strong film. And then everything was taken away.

“It’s not just the amount of money or the economic impact. It’s also about all the hard work and time put in by the filmmakers. These films could have been brought out reasonably. There would have been fewer people in the cinemas, but at least some would have come — if political leaders had done their job.”

Frehse echoes the sentiment expressed by film theater association HDF Kino, which has called for uniform regulation across Germany and sharply criticized the unequal treatment of the exhibition sector compared to the gastronomy and hotel industries in a number of states.

Cinemas have demonstrated a great sense of responsibility in providing safe venues, the organization argues. “It is incomprehensible that in some states cinemas and cultural institutions, in particular, are only allowed to open under very strict conditions or are closed completely, while restaurants and hotels are excluded from lockdowns,” says HDF Kino head Christine Berg, who describes the 2G Plus rule as “a lockdown through the back door.”

Cinemas have nevertheless benefited from generous state and federal pandemic assistance that have allowed businesses to cover fixed costs and payroll. For film distributors, however, such support doesn’t cover the hefty P&A costs of movie releases.

“With distributors, the fixed costs are a minor component,” says Frehse. “Our work is a risk business: we have licenses and upfront costs for films. We have to pay immense sums for minimum guarantees and there’s no replacement for that.”

Despite a decline in revenue last year of more than 70%, Neue Visionen is stable due to strong financial reserves amassed over the past decade, Frehse says.

The situation could hit other distributors harder, however. “The crisis began for many of our colleagues with the reopening of cinemas, because that’s when the losses are realized.”

While industry watchers have warned that the situation could lead to an increase in bankruptcies in the sector, that hasn’t materialized — yet.

Berlin-based insolvency attorney and debt consultant Jan Heckmann notes that the number of insolvencies in the film industry and in the restaurant sector have actually decreased during the pandemic due to several factors: Government assistance as well as the year-long suspension of a rule requiring financially troubled firms to file for insolvency likely kept many companies and restaurants in business.

“It remains to be seen whether this development will continue in the future or whether a wave of bankruptcy filings by companies will follow in 2022,” Heckmann adds.

Indeed, HDF Kino warns that unless the government continues to provide aid, that is exactly what will happen.

“We continue to face the challenges of the pandemic unabated, but by now the reserves of cinemas have finally been used up,” says Berg. Additional funding is vital for cinemas this year due to the further restrictions, she adds. Without it, a “wave of bankruptcies and the loss of diversity in cinema and culture in Germany” could become a reality.

Although theaters in the country were closed for six months in 2021, the sector got a much-needed boost with the arrival of the latest James Bond and Spider-Man pics in the fall. Admissions rose 18% year on year to 40.4 million, HDF Kino reports. Compared to pre-pandemic 2019 figures, however, that’s still a 63% drop.

However limited the Berlin Film Festival turns out to be, it will certainly bring more movie lovers back into cinemas, and for the industry, that’s what it’s all about. Indeed, the festival’s Berlinale Goes Kiez, the popular programs that screens selected festival films in neighborhood arthouse cinemas, will run Feb. 12 -18.

“For us it’s very important that the Berlinale takes place, especially as a political signal, that it will go on — that’s really important,” says Frehse.