Will Theater Pain Hurt National CineMedia Inc.?

If reality followed fiction, President Trump’s assertion that COVID-19 would magically disappear would come true at the waving of a wand. Unfortunately, magic doesn’t exist outside of the cinema and, lately, it doesn’t exist inside the cinema either.

The good news? Approximately 70% of US movie theaters are back open.

The bad news? They’re open in zombie form, key markets like NYC and LA remain shuttered, and theaters don’t exactly have a ton of inventory to exhibit. Those theaters that are open couldn’t max out revenue if they wanted to as safety restrictions include, among other things, staggered seating. And so you’ve got the same formula for theater operators as that afflicting gym operators: little-to-no revenue and increasing operating expense. AMC Entertainment Holdings, Inc. ($AMC), Cinemark Holdings, Inc. ($CNK), and Regal owner Cineworld Group plc ($CINE) are feeling it; they find themselves stuck between the government shutdowns, the COVID-19 induced movie delays and, to add insult to injury, the forced acceleration of "alternative delivery methods" that will compete on the supply side. Studios are leveraging studio weakness to better position themselves for the future too: Universal Pictures secured a smaller theatrical window so it could stream titles via its on-demand platforms earlier than they’ve historically been able to. All of this creates the perfect storm for theaters.  

Looking for a reprieve from the deluge of bad news, operators eagerly awaited the long-postponed US release of Christopher Nolan’s “Tenet.” Nolan is among, if not the, most popular directors in Hollywood today. Operators hoped that people looking to return to some form of normalcy would be jacked up to see his latest mind f*ck. Like Tom Cruise was. And Casey Neistat. And this guy who bought out an entire theater. Unfortunately, for the studio and for theaters, the film’s results were lukewarm at best. 

Hollywood execs are acting accordingly…

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