Will cinema survive the pandemic apocalypse?

The cinema industry faces a deeply uncertain future. Photo / Getty Images

All the best happy endings have a plot twist. So it is in the real-life film business.

Cinemas battered by forced closures, nervous consumers staying home, and Hollywood studios delaying the blockbuster releases they depend on, had hoped miracle drugs could save them from extinction. Good news on coronavirus vaccines recently sent shares soaring in debt-laden cinema groups such as AMC, Cineworld and Cinemark. But they plunged last week after Warner Bros said it would debut its films in the US next year simultaneously in cinemas and, for a month, on its HBO Max streaming service.

HBO goes direct

The Warner Bros move is the most dramatic yet by a Hollywood studio to break with the usual playbook for blockbuster releases and bring them more rapidly into living rooms. Cinema chains have spent years resisting studios' attempts to reduce the time they can offer new films exclusively — and fighting off demands from Netflix to stream them at the same time. It gives a boost to online viewing and dents cinemas' narrative that, once vaccine rollouts were well underway, audiences would rapidly rebound — enticed by a backlog of blockbusters such as the Bond movie No Time To Die, delayed from November to next April.

Warner Bros said its move was a one-year plan reflecting the likelihood cinemas would "operate at reduced capacity throughout 2021". It also seems designed to boost disappointing sign-up rates to HBO Max, which launched in May. Either way, it is a serious blow to film theatre chains. AMC, which also filed last week to raise up to $844m by selling stock to keep it afloat, said it would not allow Warner to boost HBO at the cinema group's expense.

Pessimism missplaced

If vaccines work out as hoped, Warner Bros' public pessimism on cinemas may prove misplaced. The rebound in audiences in China suggests film-goers are happy to return once they feel safe. Studios also have an interest in seeing them come back. Only cinema networks can generate the kind of revenues needed to make blockbusters costing hundreds of millions of dollars viable.

Hollywood arguably needs cinemas even more next year as it is sitting on a stockpile of big-ticket releases. Even in the age of high-definition TV, moreover, blockbusters are still made for the big screen, and best seen on them. Industry insiders speculate Warner Bros may reverse its HBO Max move — which angered some film-makers — if life returns to normal by summer.

There is strong reason, then, to assume film theatres will survive Covid-19 even if some indebted owners go bust. Buyers, likely to include private equity companies that are used to handling similar restructurings, will surely be found. But cinema numbers are set to fall, especially in the oversupplied US market. Though global box office revenues hit a record $42.5bn in 2019, this was mainly due to increasing ticket prices; audience numbers have largely fallen since a peak in 2002.

The balance of power between the studios, aggressively expanding their streaming services, and cinema operators will also continue to shift. The three big cinema groups have all recently agreed to shorten their fiercely guarded windows for showing films exclusively in cinemas. Even for blockbusters, the window may shrink from months to weeks. Warner Bros' HBO move is further muscle-flexing.

In the best traditions of the Hollywood disaster movie, cinemas find themselves facing a foe more devastating than any they have encountered before. Bruised and bloodied, and in reduced numbers, they will make it through to fight another day.

- Financial Times