movie theaters

Has COVID-19 Killed Movie Theaters and the Cinema Experience?

Since the pandemic hit, streaming has caused some serious damage to cinemas — but are they gone for good?
January 12, 2021
10 mins read

Will the cinema-going experience survive the coronavirus pandemic?

According to experts, almost certainly. The cinema experience is nostalgic for many, and fans are eager to flood back to the movies as soon as it’s safe to do so, their emotional and sentimental attachment driving their desire.

However, as long as COVID-19 prevents gathering indoors in large numbers, the uncertainty surrounding the movie theater industry means an extended period of upheaval. There are some consequences to the lack of in-person entertainment.

“Cinemas are facing a ‘Mad Max’–style all-out war that is inflicting on them a dangerously high level of financial pain,” said Eric Schiffer, chief executive and chairman of Patriarch Organization and Reputation Management Consultants.

Likewise, that pain is reflected in the move to release films on streaming platforms as well as in theaters. Early December came with the news that AT&T Inc.’s Warner Bros. will release 17 films — including “Dune,” “The Matrix 4” and “The Suicide Squad” — to its HBO Max streaming service for 31 days the same day they debut on screen in 2021, breaking movie-release norms.

Cinema revenue is set to experience its sharpest decline in at least 21 years, according to PricewaterhouseCoopers.

“Cinema has taken a big hit this year, and we’re not forecasting revenues to recover to pre-pandemic levels until post-2024,” PwC principal CJ Bangah told MarketWatch. “The big theater experience, early access to blockbuster films and nostalgia have all played a role in getting us into seats. But that doesn’t mean cinema won’t face a new level of competition [from] in-home entertainment options. Innovations such as AR and VR plus the strong performance of some movies released direct-to-consumer have challenged common sentiments around how and when we want to engage with cinema content.”

There’s a lot at stake. PwC estimates the global entertainment and media business is a $2.1 trillion industry that will contract by 5.6% — or $117.6 billion — in 2020 alone. The revenue hit is expected to continue into 2021.

Additionally, companies that have had to endure months of closed theaters are feeling the pressure. AMC Entertainment Inc., the biggest cinema operator in the world, reported in a recent governmental filing that it may run out of cash by year-end or early in 2021. AMC is too big to qualify for bailout loans like those available under the Paycheck Protection Program, but has tapped capital markets, reorganized its debt and reached out to investor groups in an effort to bolster cash and stay afloat.

Then there’s Cineworld, the owner of the Regal chain and the second biggest cinema company in the world, which in early October temporarily closed all cinemas in the U.K. and U.S., putting 45,000 jobs at risk.

The Future of Cinema

Already, changes were occurring in the industry as cinema chains competed with streaming services and video games for consumer attention, and in many ways, the pandemic has simply accelerated those changes.

The rising popularity of Netflix and its resistance to release during the seasonal “theatrical window” — when films are normally available exclusively in theaters — was already pressuring the Hollywood executives. Moreover, studios had become more at risk about the type of films made, relying mostly on blockbusters and franchises followed by a predominantly teenage audience, who would go to the theaters in droves.

“Even pre-COVID, theaters had so many challenges to their business model, and industry folks believed they would have to bend in some significant manner,” said Marc Simon, a former filmmaker who is now a partner at Fox Rothschild and chairman of the firm’s entertainment law department. “Cinemas can introduce an experiential component that you don’t get with streaming, but especially in metro areas that won’t be enough for them to hold on.”

Cinema revenue fell slightly in 2019, with overall box-office receipts down 4.1% from 2018 at just below $10.4 billion. Attendance also fell by about 4.6%, though the decline was offset by higher ticket prices. Still, “the overall downward trend in attendance must be a concern for cinema owners,” said PwC. After rising in January and February, box-office receipts in March were cut short. Only three major films were released in 2020 ahead of the March lockdown.

As a result, the marketplace has also become increasingly concentrated. Even before the pandemic, smaller, independent films were increasingly being financed and shown on streaming services, and that trend is expected to continue.

“Do we need to see a 100-foot-tall Jennifer Aniston chasing a 100-foot-tall Gerard Butler?” asked Anthony Palomba, assistant professor of business administration at the University of Virginia’s Darden School of Business. “What’s the relationship between genre and platform? We’ve seen a lot more horror movies debuting on streaming services. Maybe in future they don’t need to be on a big screen. They cost less to make. But if you make a superhero movie, you need everyone to come. Marketing is the biggest cost a movie faces.”

What does this mean for future changes to the cinema experience? Palomba says movie theaters can improve their options to reach a more diverse audience, upgrade their menus and beverages offerings and make seating more comfortable.

“Binge watching TV is like binge watching long movies — why not offer the opportunity to see the TV series on the big screen with breaks and intermissions?” he asked. “Imagine paying $20 for the chance to see a favorite TV show in plush seating with breaks for food.”

Another idea that Palomba suggested was renting out locations for people to gather and watch major sporting events. Additionally, he said that they could offer more interactive experiences that made cult films like “The Rocky Horror Picture Show” a success and a late-night mainstay for years, opting for live operas or musicals.

“Increasingly, companies will have to focus on mastering the intricacies of consumer experience,” said the PwC report. “Providers have to continually figure out ways to delight consumers so they are willing to pay for the delivery of content and services, and must create differentiated experiences if they are to increase subscription charges over time. In many ways, the post–COVID-19 world is already here for [the entertainment and media industry]. The future has been pulled forward. It’s time to embrace it.”

Even so, not everyone expects the post-pandemic world to be so different.

Simon from Fox Rothschild is expecting the basic business to remain the same post-pandemic. The studios will continue to make big “event” films, and the remaining medium-budget films, the rom-coms, dramas and family fare will quite naturally gravitate to the streamers.

If the world returns to normalcy, the movie theater industry will continue, but the issues that were in place prior to the pandemic will be magnified — things like the position of streamers in the ecosystem and changing viewing habits now that many have gotten used to staying at home.

Does this mean the movie-theater experience will become an expensive luxury?

“It might. But people have been sounding the death knell for cinema for a long time, and cinema has always survived,” said Schiffer. “The communal experience of going with friends and loved ones to a dark room with a big screen and smell of popcorn is too powerful to die.”

Haven Worley, University of Rochester

Writer Profile

Haven Worley

University of Rochester
English and Film/Media Studies

Haven Worley is a storyteller, activist and author. If she’s not scheming her next plot, she’s with a cup tea watching her favorite latest film. Daydreaming is her favorite pastime.

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