Driving cinema recovery on slate of winter blockbusters

Dwayne ‘The Rock’ Johnson is used to playing the role of savior: he saved his on-screen family from an earthquake in San Andreaspulled in loved ones from a tower inferno Skyscraper and rescued drowning swimmers in Baywatch.

Now the cinema industry itself hopes he will come to the rescue as it struggles to bounce back from the pandemic.

Johnson’s latest action movie Black Adam is one of the highly anticipated blockbusters that executives hope will help reverse several months of slow trading as it kicks off this month.

A lack of so-called tent-pole movies to draw audiences to the big screen means box office revenues are further from pre-pandemic levels than originally hoped.

“Cinema is a momentum business and things have been tough lately,” said Paul Dergarabedian, senior media analyst at Comscore. “We had a wealth of wealth earlier in the summer with… Top Gun and others . . . but we are stuck in a bit of a drought.”

This threatens to derail a full recovery of the sector this winter. Gower Street Analytics, a movie data company, recently cut its forecast for 2022 revenues in the US and international markets, excluding China, by nearly 10 percent to $21.8 billion — just two-thirds of 2019 revenue. Meanwhile, Cineworld gave , which is in the midst of Chapter 11 bankruptcy proceedings, allowed the recovery of sales to take at least two more years.

Industry observers believe competition from streaming services and a permanent shift in viewing habits, exacerbated by Covid lockdowns, will add further misery to some operators.

In the early 2000s, multiplexes revolutionized the film industry. Now there are signs of a “polarization of demand” around smaller, boutique screens and premium, large-format screens, similar to Imax, argues David Hancock, who leads cinema research at technology consultancy Omdia.

Dwayne Johnson in ‘Black Adam’ © Warner Bros.

“The middle ground — that standard 125-seat screen that has been the cinema for the past 25 years — has been squeezed because of that,” Hancock said. “That’s the kind of screen where someone might decide to just watch [the film] At home.”

Philip Knatchbull, chief executive of British arthouse cinema company Curzon, said he has long believed the world has been “overscreened” and that he expects bigger rivals will have to shut down “many cinemas that don’t really fit the new business model”.

The “16-screen, out-of-town multiplexes” will become less and less relevant as demand declines, he added.

Smaller chains seem to have escaped the worst of the industry pressure. Curzon posted a pre-tax loss of £4.7 million in 2021 when it was forced to close, according to recent filings from Companies House in the UK. It has gone black again and cinemas are expected to make £2.3m in pre-tax profits this year.

High-quality, large-format screens, with immersive sound or panoramic screens, are attracting more and more moviegoers worldwide. Their numbers nearly doubled to just over 7,000 screens in the past five years to 2021 — about 3.4 percent of the total, according to Omdia.

In the UK and US, high-end cinemas also recovered faster than their competitors. UK-based cinema brand Everyman, which offers plush seating and food and drink controls, has increased its market share to 4.5 percent, up from 3 percent in the first half of 2019.

Smaller chains like Curzon appear to have escaped some of the industry’s worst pressures © Mike Kemp/In Pictures via Getty Images

“Yes, Everyman is a cinema, but it is the sum of all its parts,” said Alex Scrimgeour, CEO of Everyman Media Group. “We like to think we’re inviting people over for an evening of hospitality, food and drink and it’s not just a movie, it’s more than that.”

He said this factor — coupled with the Everyman’s less reliance on blockbusters — explained why it “outperformed the market.” The pre-tax loss fell to £798,000 in the six months to June 30, from a hefty loss of £9.19 million in the same period a year earlier.

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Similarly, Texas-based Alamo Drafthouse Cinema, which serves full meals with screenings, is expanding to five new US locations over the next 18 months after it recovers from Chapter 11 bankruptcy.

“Dine-in cinema is above its weight class,” said Alamo CEO Shelli Taylor, noting that it is the fastest-growing type of movie theater in the US.

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But Tim Richards, chief executive of Vue, Europe’s largest private operator, which resorted to a debt-for-equity swap over the summer to survive, insists the more traditional film industry doesn’t need a “drastic overhaul.” but it’s in “wait mode” for a slew of new blockbusters.

This winter should be a turning point, said Comescore’s Dergarabedian. About 15 percent of this year’s revenue will ride on a winter movie from Black Adam, Black Panther: Wakanda Forever and Avatar: The way of the wateraccording to box office forecaster Cinemalytics.

The number of movies billed for release in more than 2,000 locations in the US next year is closer to 2019’s level of 112 wide releases, according to Comscore. There are currently 84 films scheduled for 2023, up from 73 this year, and the final figure is expected to be higher.

“This is a short-lived matter,” added Richards of Vue. He said the movie studios “without exception” had supported the traditional theatrical release window business model before moving movies to streaming platforms and that they “started greening a plethora of movies a year ago.” “The problems will subside,” he emphasized.

Black Panther: Wakanda Forever © Disney+

However, industry experts are more concerned about a lack of mid-budget films that keep a steady stream of audiences flocking to the cinemas. In recent months, operators had to buy movie rights from streaming services to fill the shortfall.

Shawn Robbins, chief analyst at Box Office Pro, predicted that it will be some time before the total annual releases, which reached 792 titles in North America in 2019, reach pre-pandemic levels. “We know the blockbusters — the cash cows of the industry — are coming, but there needs to be more of the low to mid-range releases, like adult-driven dramas, comedies and horror movies,” Robbins said. “We really need to start seeing more of it before the recovery is nearly complete.”

Operators, meanwhile, insist that they can’t afford to be complacent, even as film production picks up. “It’s about how we innovate, how we engage and how we entertain without stopping,” said Scrimgeour. Everyman has received a major boost in the cinema for live events in recent years, he added.

In 2019, admissions figures were largely flat compared to the early 2000s and instead, all the growth in the cinema industry was fueled by price inflation. Tobias Queisser, CEO and co-founder of Cinelytics, thinks that pre-pandemic revenues “take time to return,” and predicts it could take until 2025 at the earliest.

“Year-over-year gains at the box office have all been ticket price inflation, and after the pandemic, there’s even more of a distinction between what consumers want to see at the cinema versus at home,” Queisser said.

“The main competition from movie theaters isn’t Netflix, it’s other out-of-home options, and there’s a lot of things you can do these days, from laser tracking to golfing to escape rooms,” Omdia’s Hancock says. “You have to compete with that on price and experience.”

Jacky

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