17 July 2022
It is no coincidence that Vue’s USD $550 million debt-for-equity deal and HG Entertainment’s USD $450 million consolidation move in the Chinese cinema market came to light the same week. The success of recent films such as “Top Gun: Maverick” and “Thor: Love and Thunder” has made us forget the “long COVID” that many cinema operators still struggle with. Instead it’s easy to proclaim that the “the big screen is back,” to marvel over the #GentleMinions craze and to even worry about the third quarter slate of releases.
Cinema survived the pandemic, but the long term implications are only starting to be felt. There is much more still to come, such as the much-anticipated sequel to Cineworld’s legal drama that could see it forced to pay CAD $1.23 billion (USD $957 million) in damages to Canada’s Cineplex for a cancelled acquisition deal. And there are unresolved payments, issues and conflicts still simmering away between cinema operators and landlords, before the added headwinds of inflation, soaring energy prices, staffing shortages and supply chain challenges.
In China it was recently revealed that there are over 4,000 theaters in the country that are not open, and the occupancy rate is predicted to drop to a record low of 6.5% in 2022. In some regards it is remarkable that more cinemas did not close as a result of the pandemic in Europe and North America. But just because there are no shutters on a closed cinema, does not mean that the cinema and/or the chain that it is part of is not under considerable stress.
We are likely to see many more deals and announcements about changes in cinema operator ownership, although it is reassuring to see that Wall St analysts still have faith in the cinema sector overall. But while we should hope for a strong box office recovery, it is best to expect a cautious return to form, with 2024 being more likely than 2023 as the year that the global cinema market returns to the all-time-high-watermark of 2019. And the cinema market could look quite different by then.
Patrick von Sychowski
, Editor, Celluloid Junkie
A major Wall Street analyst has issued a “Buy” notice for three major cinema companies, while two are “Neutral.” This despite the fact that the same analyst has revised down 2022 and 2023 box office projections, following a lower than expected first half of 2022. Overall the cinema market is seen as recovering, but more slowly than initially anticipated.
B. Riley Securities analyst Eric Wold has a “Buy” rating for Cinemark Holdings, Marcus Corp and Imax Corp, while “Neutral” on AMC and cinema advertiser NCM. The revised projection for box office outlook is because of “a domestic box office performance during the first half of the year that was lower than we originally projected, with our estimates for the second quarter being reduced accordingly.” 2022 is forecast to see a 28% decline compared to the box office year 2019, whereas earlier it was forecast to be 20%. 2023 is forecast to be seven per cent lower than 2019, while previously it was expected to be just three per cent below the last pre-pandemic year.
“With the heightened risk of a domestic recession in recent months, we continue to believe the exhibition group can be viewed as somewhat of a safe haven within the consumer and entertainment spending segments (and should not be experiencing the same stock pressures as other discretionary consumer sectors),”Eric Wold, Analyst, B. Riley Securities
Another analyst, MKM Partners’ Eric Handler, sees a brighter outlook for IMAX. This is because cinemas in China are reopening after a second quarter that saw renewed lockdown. However, he notes that “sentiment toward Imax remains overly bearish and not reflective of an attractive, dual-revenue stream, global, asset-light business model with a focus on blockbuster content.” He also believes that movie-going “will snap back relative fast” in China, just as it did in late 2020. Handler expects IMAX Q4 grosses to exceed USD $300 million for the first time since Q2 2019.
The Hollywood Reporter
A little over a year after the COVID pandemic forced Alamo Drafthouse Cinema into bankruptcy, the hip indie exhibitor is showing evidence that it can roar back to life. The latest signs of rejuvenation for the circuit came this week when it announced two new multiplex cinemas in major markets.
Alamo Drafthouse Boston Seaport will be a 10-screen theater with approximately 767 seats, the exhibitors first New England location. With an expected opening date in 2023, the cinema will be located in the South Boston Waterfront’s new Seaport Square development. Like many (if not all) Alamo locations, the Boston threatre will feature a full service bar named The Press Room, which doubles as a printing museum and functioning letterpress print shop with over 10,000 vintage movie ad plates from the 1930s through the 1980s on display.
Opening even sooner – at the end of July – the Austin exhibition chain will be cutting the ribbon on the Alamo Drafthouse Staten Island, its fourth New York-area location. The 9-screen, 893-seat theater will feature the Flying Guillotine, a kung fu-themed bar and museum all-in-one, that the company worked on in collaboration with Wu-Tang Clan founder RZA.
With a majority of cinema operators around the globe handicapped by a patchwork of pandemic cinema closures, China rose to become the biggest movie market in the world in 2020. That year the country took in USD $3.13 billion at movie theatres (down 68% from the previous year), topping North America’s COVID battered USD $2.25 billion box office.
Last year, China once again topped the industry with US $7.3 billion as the North American market began to recover, earning USD $4.5 billion. However, after the first six months of 2022, Chinese ticket sales have declined to USD $2.6.billion, a 38% year-over-year decline. The drop is due to China’s rigid “Zero COVID” policy which saw a wave of cinema closures in various parts of the country this spring.
On the other side of the world, North America regained its box office crown by raking in USD $3.7 billion in the same six month time frame, an increase from USD $1.11 billion over the same period in 2021. This was due in large part to blockbusters such as “Doctor Strange in the Multiverse of Madness” and “Top Gun: Maverick” outperforming expectations. Like many other Hollywood titles, these hits were not granted a Chinese release date by government authorities, further hampering the country’s exhibition market this year.
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