Monday, April 6, 2020

    NATO Movie Theaters And Covid-19

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    The Coronavirus has seemingly brought the world to a screeching halt. In particular, the Hollywood film industry has been all but entirely stopped in its tracks. The first movie to push back its release was No Time To Die, which shifted from April to November. After that, more and more movies were delayed, from the new Fast & Furious to Black Widow and pretty much every blockbuster from now until July. Depending on how long this crisis lasts, even more films could find themselves in search of new release dates.

    While movies themselves have been impacted by the Coronavirus, so too have the movie theaters where people go to see these films. In the past week, box office numbers have dropped to virtually zero as movie theaters across the United States have closed, with no immediate time frame for when they might reopen. The entire industry has effectively shut down, and thousands of employees have lost their livelihood through no fault of their own.

    Related: Christopher Nolan to Congress: Movie Theaters Need Our Help During Shutdowns

    The National Association of Theatre Owners, or NATO, has been working to keep these businesses alive through the current crisis by working to secure funding from Congress, in the form of guaranteed loans and SBA loans so that these businesses can pay their bills and their employees until they can reopen and return to business as usual. Without these loans, there’s a strong chance that many of these businesses will be unable to reopen once the time comes. Screen Rant spoke to Patrick Corcoran, NATO’s Chief Communications Officer, about how the theater industry is being impacted, how his group aims to keep the industry afloat during these uncertain times, and how the theaters plan to bounce back once this pandemic runs its course.

    Note: this interview was conducted on March 23, 2020.

    Coronavirus is having an impact on so many industries across the globe. We’re all aware of movies and productions being postponed indefinitely, but we don’t all necessarily understand the impact this has on movie theaters that are basically shut down right now. I mean, just this week, we’ve seen box office numbers that I can only describe as apocalyptic.

    Yeah. The basic thing is, we’re a public facing retail industry. We depend on our customers coming in, day after day, to provide revenue, so we can pay our employees and pay our bills. And right now, there’s zero customers and zero revenue. What we want in a relief package is to provide liquidity through guaranteed loans, or through SBA loans, and also direct aid to employees so we can all get through this period of time and get back to work. We’ve got nearly six thousand movie theaters all across the country. Very similar to restaurants and bars, they’re local business that drive a lot of local economic activity. People go out to the movies and they go to the bar, the restaurant, and everything else. This kind of thing is going to hit across the country and really effect local economies across the country. The sooner we can get back to normal – keep people and our employees together, body and soul, until we are ready to open again – the better. The damage that we’re seeing now could spread and go longer. That’s really dangerous.

    Is there a specific dollar amount that NATO is seeking?

    We’re not seeking a particular number. Essentially, at the moment, there’s talk about a $450 billion fund to guarantee loans. We’re not looking for direct money from the government, but we’re looking for guarantees that make it possible for our members to get loans from financial institutions so they can lend with confidence they’ll be paid back. Small Business Administration loans are similar, for our smaller and medium-sized members, to be able to have access to that capital. They have no revenue coming in. And the direct aid, that number keeps going up. It’s looking like it’s going to be solidifying unemployment insurance, but also direct payments that will be essentially an advance. Tax deductions, we don’t know what that number is going to be yet. That’s where negotiations are right now. Frankly, the bigger the better on all fronts. This is going to be a big problem that’s going to continue for a while. Speed is also important, so we want this settled soon. We can always go back again and add to it. We’re at round 3, as it is. I expect that will continue.

    There’s no estimate still, for how long we’re going to be knocked down by this, right? Could be weeks, could be months, could turn out to be many months, right?

    Right. The other part of it is, as part of this funding plan, we’re looking at ways to send resources to health providers. That’s the first thing, getting past this pandemic and getting back to normal. If that doesn’t happen, then all the other numbers go up. Yeah, there’s no way to predict exactly how long it will go. It will depend on how good we are at getting hold of it. Italy’s one case, China’s another. South Korea, Japan… They’ve all had different experiences because they’ve all had different approaches to it. We’re hoping for the best. You’re seeing in China, about two-and-a-half months after they closed theaters, they’re starting to reopen.

    Movie theaters aren’t like other stores. If a store locks itself down, it can still sell digital, it can still work with the post office to send things to consumers. Movie theaters don’t have that. It’s really gone from sixty to zero. Are any theaters making any secondary revenue right now?

    There’s a little. A couple of circuits will also sell video-on-demand, Cineplex Canada does that, AMC started that earlier in the year. But most are not. One of the things we’re seeing is people organizing to buy gift cards so there can be revenue coming in they can redeem later for tickets when we’re back open. It’s a terrific idea. But essentially, we do need the assistance of the federal government, the guaranteed loans, so we can get the liquidity.

    Without those loans, is there a fear that these theaters that are closing, many of them will not be able to reopen?

    Absolutely. That’s why we’ve been so aggressive on this. It looks like, right now, the arguments are over details and the size of the plan, and what restrictions there might be on people who receive the loans, or requirements of them. Those are going to be worked out. It certainly looks like the money is coming. It’s really a question of them hashing out the details right now.

    There’s always been some push and pull, some degree of rivalry between theaters and digital platforms. Is there a concern about the longterm implications of getting people to watch movies at home, maybe the idea that they might not go back to theaters afterwards?

    Not really. The long term business model still makes sense. People still need to get out of the house. The experience is different. You’re not exchanging one for the other. You can see the movie, but it’s not the same. It’s a different scale, it’s different in the social experience. The economics of the industry don’t make sense. You cannot make the same money back in the home that you make theatrically. It just doesn’t happen. Mainly because, what people do in the home is decide between inexpensive things they’ve already paid for. They’ve got streaming services, they’ve got cable, they may rent. If you look at that, you’re seeing behavior over the last 15 years, and you’re looking at home video, whether it’s sales or rentals: in 2004, it was $24.9 billion; last year, it was $9.3 billion. That’s a 62% decline. The reason is, people don’t want to pay for stuff in the home, because they’re already paying! They don’t want to buy things in the home. This idea that, “if we charge $18 and do it really early, people might do that,” and aside from whatever cannibalistic effect it might have on theaters, it just doesn’t make for the fact that there aren’t enough customers willing to do that.

    They’re already being gouged by the ISPs, but that’s a whole other conversation.

    Sure. And then you’re already paying for streaming services on top of the base pay for internet access. People budget that. They budget for what they’re going to pay in the home. Any other expense in there is not measured against what we’re paying outside; it’s measured against what you’re paying inside. And you have the budget for what you’re going to do for entertainment out of the house. That’s what we’re competing against. We’re competing against concerts and bowling and everything else you can do outside of the house. We’re not competing against the home experience.

    There’s no way I’m not seeing Star Wars on the biggest screen I can, and there’s also something about smaller movies getting that added legitimacy by that phrase, “Coming to a theater near you.”

    That’s part of it. Barclays did a study of Netflix and how it would benefit from having full theatrical releases, because it creates that aura for a title, people are more likely to watch it once it’s on the service, and they feel a greater sense of satisfaction. There’s a better return on investment for Netflix in that case. Additionally, people who stream a lot go to the movies a lot. The biggest streaming customers, those who do 15 hours or more a week are the people who go to the movies the most, about nine times a year. Additionally, one of the things is, we look at movies in the movie theater. People haven’t stopped seeing mid-range movies at the movie theater because they’re on streaming; they stopped because there aren’t enough of them at the theater. This is tied in with the decline of transcational home video. There was a heyday of that mid-range movie that was star-driven or story-driven. Comedies and dramas. Many of those performed very well in theaters, but even if they didn’t, there was a backstop of home video to bring in some more revenue. As that revenue declined in the home, the studios got out of the business of making those movies, so we have fewer of them.

    I see.

    It’s not that people aren’t going to the movies. For $100 million-plus titles, more people are going to them than 15 years ago. But from that $50-$100 million range, because there are fewer of those movies, we’re getting fewer admissions there. That’s where the whole difference for us, between last year and 2004. It’s entirely in that middle range. On streaming, there’s so much content, and so much competition for viewers, and so much competition for filmmakers, many of whom want their work to be seen in a movie theater. We think there’s going to be a reverse of the situation where you would make things for theaters and have a backstop in the home; we’re going to see things that are made for the streaming services that go to movie theaters as a backstop first, to bring in revenue, to bring attention, branding, to keep filmmakers happy. And then it goes to the streaming service where it’s differentiated from other content because it had a theatrical release.

    Theater workers really run the gamut across all demographics. You’ve got everyone from high school kids to real old timers working hourly. Do any of them have paid leave during this situation?

    Some do. It depends on the company and their particular financial situation on the day they had to close. And most were going to be getting their next paycheck around now, maybe sometime this week. And some were furloughed right away  because of the financial situation of the particular company they are connected with. Again, this is why, as part of this help we’re looking for from Congress, direct aid to workers is just critical. This is for businesses of every size, medium, small, and large. About 400 of our member companies are under ten screens. That gives you an idea of the way the industry is made up. There are lots and lots of small businesses that are movie theaters, and they need help. We’re not asking for direct money. We’re looking for loan guarantees that will be paid back. It’s not going to come out of the federal government, and it’s going to go back to the lenders, and it’s going to go into the community, paying off vendors and landlords and utilities and everything else.

    Do you know, off the top of your head, how many employees in total NATO represents?

    In the industry in the US, we have about 150,000 employees. The vast majority of them are hourly workers in the theaters themselves. But there’s also a percentage of that who work in headquarters and management. And in many cases, executives are taking zero pay, management is taking pay cuts, down to theater managers who are working at half pay. It’s a really tough situation across the board, and the basic goal here is to keep these companies in existence until the epidemic lifts.

    And then, hopefully, things can go back to normal.

    That’s the hope. We think it’s kind of a two-edged sword. Right now, our social nature is working against us, making us vulnerable to disease. And it’s really hard for people to stop doing that. You’re seeing it across the country, people going, “Ah, what’s the risk? I’m going out.” No. Stay home. We’ll get through this faster, and then that pent-up desire, we’ll have businesses in your local community ready to serve you again.

    Is there a concern, with productions being delayed, that there might be a dearth of content we might see a year or two years from now? Of, like, “We don’t have anything on the schedule!”

    It depends on how long this goes. If it goes by fairly quickly, I think we’ll have a backlog of content that will fill that space. If you look at the remainder of the year, we’ve already got a pretty dense schedule. Studios are going to be looking at that, trying to fill in some of these titles that they’ve delayed, and they’ll be looking at the beginning of next year for that. We should be able to fill that and avoid any actual gaps, but it really depends on how long this goes.

    We’re in a troubled time, and I really hope we don’t lose any theaters. But the box office started out strong this year, right?

    That was one of the things, yes, we were looking at the year-end and the beginning of 2020, and it was really strong. The end of 2019 compared to the end of 2018, we were up 20%, maybe more, from Thanksgiving to the end of the year. That continued over the first two months of the year, and things were looking pretty good, but… Here we are.

    It’s probably too early to ask this, but is there any plan for when theaters reopen, a way to ring the bell and announce to the country, “We’re back, baby!”

    We’re working on it. We are working on it. We’re looking at what’s been happening in China. In the provinces that were least affected, they’re starting to open their theaters, and they’re open for free to patrons to coax them back. The movies they’re showing are older ones. We will see… It’s going to depend. We’re both local and national markets, and our main distribution partners are very interested in national releases as opposed to local ones, so depending on how this virus goes, and whether it’s more severe in some places and lifts sooner or later, that’s all going to go into it. We’re looking at ways to reach out to our patrons and also to our studio partners about the best ways to message and roll things out once we’re back up and running.

    More: Every Movie Releasing On-Demand & To Streaming Early Due To Coronavirus

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