When the third quarter began in July, movie theater auditoriums across the country were empty, shuttered by the coronavirus pandemic. Hope arrived a few weeks later as Warner Bros. announced plans to debut "Tenet" on Labor Day weekend.
The theater operators saw the release of Christopher Nolan's spy thriller as the beginning of their recovery. Fast forward to today, and the script didn't play out that way.
Instead, three publicly traded movie theater chains reported more than $1 billion in losses in the third quarter, and there doesn't appear to be an immediate end in sight.
Once again, the companies' fates rest in the hands of movie studios, which they hope will release new films, and in audiences, who they hope will come back even as Covid-19 cases begin to surge again. And even the welcome news of progress on a vaccine, which drove up the group's stocks Monday, won't bring instant relief.
A vaccine isn't likely to be widely available to the public until mid-2021, at best. So, while the news is promising, it does not fix the near-term issues that movie theaters are facing: A lack of revenue.
During the latest quarter, AMC, the largest cinema chain in the world, saw revenue during the three-month period ended Sept. 30 fall nearly 91%, while Cinemark, the third-largest cinema chain, saw a nearly 96% drop in revenue. Marcus Corporation, the fifth-largest movie theater owner — which also owns a number of hotels and restaurants — saw its revenue slip 84%.
While theaters have been able to drive some sales through special ticket deals and rereleases of classic movies, it hasn't been enough to put them in the black. The movie theaters need a steady stream of movie releases, and hopes for that ended after the poor showing of "Tenet" at the domestic box office.
"Attendance has been minimal, though, of course stemming from virus concerns but perhaps more importantly due to the fact that only two major new films have been released theatrically since mid-March," AMC CEO Adam Aron said.
The majority of AMC theaters are operating at between 40% and 50% capacity but seeing only 10% to 20% attendance. Aron said that in order to be profitable the company needs to see attendance consistently around 25%. Without new movies, that likely won't happen.
Overall, AMC's domestic attendance was down 97% from the same quarter last year, he said.
With movie theaters hauling in a fraction of the revenue they were generating last year, the companies are burning through cash. AMC and B&B Theatres, the sixth-largest cinema chain, have both warned that bankruptcy looms if these trends continue. Studio Movie Grill, a Dallas-based dine-in theater chain, filed for Chapter 11 bankruptcy protection last month.
To stave off bankruptcy, cinema chains have been renegotiating deals with lenders and landlords and fundraising to pad their cash reserves. The worry is that eventually banks and landlords won't be able or willing to continue giving these businesses so much slack. The majority of movie theaters are not paying rent and, instead, are offering up a portion of revenue as collateral.
The financial worries have weighed on the group's stock prices. Since January, movie theater stocks have plummeted. As of the close on Friday, Cinemark is down 74%, AMC is down 66%, and Marcus is down 75%.
Movie theater chains have had to be creative to keep revenue coming in. Some have transformed parking lots into concert venues, launched trivia nights and even negotiated deals with local colleges to rent out space for in-person learning.
Most major cinemas are now offering up cheaper private theater rentals as a way to entice reluctant moviegoers. These rentals allow customers to choose who is in the theater with them and can make them feel more comfortable venturing out to the theater.
Cinemark's U.S. admissions revenues reached $14.9 million during the third quarter. Around 17% of that was generated from the company's private watch parties.
"Since we launched private watch parties four months ago, we've already sold nearly 50,000 of these private events," Cinemark CEO Mark Zoradi said during an earnings call last week. "Notably, more than 600,000 people have attended a private watch party to date, with a significant portion reporting it was their first time back in the theater since the shutdown."
But movie studios may need more evidence that audiences will come before they release new films.
Theater owners are playing a waiting game, hoping that "Wonder Woman 1984" will remain on the calendar for Christmas. However, after Disney's "Free Guy" and "Death on the Nile" both absconded from their release dates, cinema owners are worried.
Warner Bros. has not signaled that the film will move, but news of its departure would come this week if that decision is made. Studios begin their heavy marketing between eight and 10 weeks prior to a movie release, and that timeline is imminent.
However, the number of new Covid-19 cases is rising rapidly. On Sunday, the seven-day average of daily new infections exceeded 108,000. The nation has topped its prior-day high for at least 10 straight days, and Sunday's record is up 34% from a week ago. If studios get cold feet and pull new titles again, cinema chains will continue to suffer.