Although they are not (yet) celebrating, cinema operators can be heard exhaling a collective sigh of relief at the moment. “The Super Mario Bros. Movie” outperformed everyone’s expectations, the success of “Air” has demonstrated that there is not just an appetite for adult drama at the multiplex, but that streamers like Amazon see value in a regular release window, while the likes of Apple are now committed to spend a cool billion dollars on films that will first head to cinemas. Meanwhile exhibitors ranging from Everyman to PVR-INOX are seeing attendance and/or revenue creeping up to pre-COVID levels.
Nobody has forgotten that Cineworld is still completing its bankruptcy reorganization, while US cinema advertiser NCM has a similar troubled path to read (more on this in a future CJ post and Marquee issue). But even here there is a silver lining that the Regal/Cineworld saga could be over by mid-year, with the company back in business under new ownership in the second half of the year. The slate of films for this summer is looking very strong and no doubt there will be even more shown at this month’s CinemaCon in Las Vegas. Reasons enough to be cheerful?
Current optimism, however, needs to be held in check by a healthy dose of caution. The spurt of good news should not obscure the fact that the cinema recovery is a marathon, not a sprint (expression © Rob Arthur). The reason so many cinemas survived the pandemic is because it is hard to close a shuttered cinema, particularly when the government is paying the wages of your staff, or in the case of France, paying the equivalent of a sold-out cinema house and giving you enough money to upgrade or even buy more cinemas. However, just like after any financial crisis, there are a number of “zombie” companies out there, stumbling along even long after they ought to have died.
This is not the same as the lazy journalist cinema-is-dying narratives or alarmist sub-editor headlines about your local multiplex being at the risk of closing. Cineworld was an outlier in terms of over-leveraging. The industry will survive its restructuring and even break-up. At most a handful of Cineworld sites will close. But what happens if AMC CEO Adam Aron stumbles during his financial balancing act and angers the apes. AMC becoming a meme stock was a Hail Mary save that is unlikely to be repeated. The optics of that would be worse than Cineworld/Regal’s Chapter 11, if that comes to pass.
Above all, the biggest restructuring of the global cinema industry still lies ahead. Cineworld could quite possibly be split up and nobody knows into how many component parts. India’s PVR and INOX have merged, suddenly creating a new global top 10 industry player. AMC is withdrawing in all-but-name from Saudi Arabia. China’s Wanda is again looking to sell Australian Hoyt’s, while fellow Aussies EVT (nee Event Cinemas) is very likely to put Germany’s CineStar back up for sale. France’s CGR could be close to having a buyer. There are other mid-size deals that will also come as a surprise.
The era of cheap money is over, so don’t expect any aggressive or ego-driven take-overs or mergers. But they will happen. Because in the age of the experience economy, cinema still represents a good long term investment. Despite the squeeze on consumer spending, everyone from airlines and hotels to restaurants and bars are still seeing significant recovery. Don’t lump cinemas in with streamers or other online platforms, not least as it is doing better than the social media giants hurt by the advertising downturn. Equally, don’t think that Web3 nonsense and ChatGPT somehow need to be shoehorned into the big screen experience. Think of cinema like the railway industry – something that’s been there for over 125 years, maybe not as sexy as it once was and definitely not the only choice for transport/entertainment, but reliable, ever-present and not going away.
When Warren Buffett and his right-hand man Charlie Munger spent USD $4.73 billion in 2007 to buy a 17.5% stake in Burlington Northern Santa Fe (BNSF, the largest US railway operator), they wrote in their letter to shareholders, “Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.” The cinema industry could do with more “boring” investors like Messrs Buffett and Munger. So for all the turbulence that still lies ahead for the cinema industry, remember that it is and remains a fundamentally dependable long-term business. This is the main reason to be cheerful about it.
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Celluloid Junkie is the leading online resource dedicated to the global film and cinema business. The Marquee is our newsletter focused on motion picture exhibition; keeping industry professionals informed of important news, the latest trends and insightful analysis