Fourth-generation movie theater operator says chain is months from bankruptcy
- B&B Theatres, the sixth largest cinema chain in the U.S., says it's a few months away from bankruptcy.
- Without new content or financial aid from the government the family-owned business may not survive the pandemic.
- The National Association of Theatre Owners estimates that if revenue declines continue, 69% of small and midsized cinema companies would be forced to file for bankruptcy or close permanently.
B&B Theatres, the sixth-largest cinema chain in the U.S., has been operating for nearly 100 years. Its owners now say it is months away from filing for bankruptcy protection.
The family-owned business has 48 theaters in eight states and was forced to shutter all of those locations in March due to the coronavirus pandemic. A handful of the company's theaters were able to reopen to the public in June, but the majority didn't until August.
During that time, B&B Theatres was unable to pay full rent and had to spend hundreds of thousands of dollars to repair its projectors because the machinery had sat unused for so long. With Hollywood delaying the release of major blockbusters until next year, Brock Bagby, an executive vice president at B&B Theatres, said there's little hope the business can keep running.
"We are probably a few months out if nothing changes," he said. "If we run the course that we are running now, we are probably a few months out. It's bad."
Bagby is part of the fourth generation of his family to operate the theater chain. His father, Bob Bagby, is the CEO, and his siblings, Bobbie Bagby Ford and Brittanie Bagby Baker, also hold executive vice president roles.
Brock Bagby has been working with the National Association of Theatre Owners as well as with rival theater chains to get relief for cinemas. He said his sister Bobbie, who oversees the company's marketing, has made hundreds of calls to government officials lobbying for financial aid.
"The government shut us down, so we would hope they'd help us," Bagby said. "I mean, we didn't shut ourselves down. And that's the thing that's so hard, and I keep telling my dad, 'You didn't do anything wrong. This is not your fault.' But it doesn't help. It's still devastating."
In the second quarter, around 93% of movie theater companies reported revenue that was down by about 75% from a year ago, according to NATO. If that trend continues, the organization, which represents more than 33,000 screens in 50 states, said that 69% of small and mid-sized cinema companies would be forced to file for bankruptcy or close permanently.
"The stark reality is that many movie theaters will not be able to open again if they don't receive government help," Esther Baruh, director of government relations for NATO, said in a statement. "This is as urgent as it gets. The exhibition industry thrived before this pandemic and it will thrive again, but theaters and their employees need a bridge to get them to that point."
Bagby said his company has lost millions this year and the only hope for B&B Theatres is new content.
In the wake of weak ticket sales in September, "Wonder Woman 1984" was moved from its October release date to Christmas and "Black Widow" and "No Time to Die" were postponed to 2021.
The theatrical calendar became even more vacant this week after Cineworld, the second-largest theater chain in the world, shuttered all of its U.S. and U.K. locations, including more than 500 Regal cinemas domestically.
"Dune," which was supposed to come out in December, was postponed until next year after the Cineworld news was announced. Warner Bros. also delayed its new "Matrix" and "The Batman." "Black Adam" no longer has an official release date.
Now there are only four major films on the slate for the rest of the year: Universal's "The Croods: A New Age," 20th Century's "Free Guy," Paramount Pictures' "Coming 2 America" and "Wonder Woman 1984." And even those films' release dates could change.
Movie theater operators fear that studios will continue to withhold blockbusters until populous states such as California and New York reopen more theaters. The two states together account for 21.5% of the total U.S. box office receipts each year, according to data from Comscore. The states also help drive buzz for films, since both are entertainment industry hubs.
California has loosened restrictions on movie theaters, but only around 139 of the state's more than 500 cinemas are open. New York's guidelines have remained firmly against theaters reopening. As of last weekend, only two of New York's nearly 300 locations were open.
"New York State has been following the data and latest science on the virus to re-open our economy safely and we are doing the same when it comes to movie theaters," Jack Sterne, a spokesman for Gov. Andrew Cuomo's administration, said in a statement.
"Movie theaters and similar activities around the state remain closed, as they present the challenge of customers sitting for long periods in an enclosed space with the potential for activities such as eating and drinking that require a mask to be removed," he said. "In New York, we will continue to track the data and the science, and we will make a decision on re-opening them here when health experts determine it is safe to do so."
Cuomo's administration did not respond to CNBC's follow-up request for additional information about how it is tracking data and what would need to happen in order for the state to allow movie theaters to reopen.
Nearly 400 theater companies, including B&B Theatres, have adopted a new program called CinemaSafe, which was developed with the help of NATO and epidemiologists to make going to the movies as safe as possible during the pandemic.
The program calls for mandatory masks, social distancing, staggered showtimes and seating as well as increased disinfecting of auditoriums, concession areas and restrooms. Additionally, a number of these movie theater companies have invested a significant amount of money into new HVAC systems.
"Governor Cuomo seems to be in no rush for theaters to re-open in the New York Metropolitan area, especially since there are no specific metrics in place which would allow operators to move forward," Eric Handler, managing director of media and entertainment equity research at MKM Partners, wrote in a research note published Friday.
Both Bagby and Mooky Greidinger, the CEO of Cineworld, told CNBC that studios have told cinemas that they will not release major blockbusters until theaters in New York are permitted to reopen. That's why New York's reopening is something Bagby is watching closely even though he doesn't operate any theaters there.
For Greidinger's company, closing locations was a way to stem the "bleeding." He said that his business lost less money by not operating.
Bagby's company, however, found that it would lose more money by shuttering and would be hit even harder financially if it had to go through the process of reopening again.
"We've been around 96 years and never seen anything like this," Bagby said. "I'm sure my grandparents are rolling over in their graves."
Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.