Mark Zoradi, a former longtime Disney executive who is now CEO of major exhibitor Cinemark, believes business comparable with what existed prior to COVID-19 won’t return until at least 2022.
“The reality is I don’t think we’re going to be able to get into a full-on rhythm again of product cycles and all that we had prior to COVID-19 until 2022,” he said during a conference call with Wall Street analysts to discuss first-quarter results. “That’s more production-related than our operation-related because as studios have had to adapt to not being able to do filming and do post-production, they’ve had to move their schedules. Therefore, we’re going to adapt as well.”
Next year is shaping up to be a “nice recovery year” after the debacle of 2020, Zoradi said, but the recovery has a “long tail.” Zoradi and CFO Sean Gamble tackled a range of topics during the hour-plus call, including the “optimistic” outlook for Warner Bros.’ July 17 release of Tenet. The 74-day theatrical release window, which has been rethought by studios during COVID-19 closures, also appears to be under new scrutiny from Cinemark’s end based on comments during the call.
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Asked whether the box office potential of films like Tenet or Disney’s Mulan or other studio summer titles will be significantly curtailed, Zoradi said, “I don’t think there’s an absolute reason for that to happen. It all comes back to us creating a safe environment and the studios creating a very strong demand campaign.”
Without studio tracking research, “it’s hard to say what consumer demand is,” but Cinemark says its own research points to consumers being willing to return to theaters provided safety protocols are in place.
Reaction to Tenet‘s newest trailer last month suggests the younger demos will drive significant box office, Zoradi said. “That young male demo is going to be the first one wanting to come back,” he said.
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Even once theaters reopen on a large scale, the trajectory of films’ box office will be different in the near term, execs said. Gamble, who was previously CFO at Universal Pictures, said there is a “good chance that films could open a little lower but then run much longer” given the “new dynamics” of seating and opening weekends.
Cinemark has confirmed an official reopening on June 19 with library titles costing $5 for adults and $3 for children, with a phased reopening beginning in five theaters in the Dallas area. The circuit’s home state of Texas is currently allowing theaters to operate at 25% of normal capacity due to social distancing requirements. Zoradi said the company expects the limit to soon move to 50%. Unlike other top circuits AMC or Regal, Cinemark has many of its theaters in suburban or rural areas. Its top markets are Houston, Dallas and San Francisco.
Gamble said the business had been “tracking extremely well” as of the end of February, with revenue on pace to grow 5% over the prior-year period. Once COVID-19 took hold, the picture abruptly changed. Domestic theaters were closed March 17 in the U.S. and in Latin America on March 18.
As of the end of May, Cinemark had a cash balance of $640 million, Gamble said. It is burning about $45 million a month but has enough cash to last “well into 2021 even if our theaters were to remain closed,” Zoradi said.
Building on comments in April during an investor call, Zoradi said the company had implemented a step-by-step reopening but would remain flexible based on a host of variables. Exhibitors, like all business owners, are coping with a welter of daily information from government officials and health experts. Cinemark will require its employees to wear masks but will not force customers to do so. It does not plan to check customers’ temperatures. It will sell concessions but a more limited selection.
The reopening process has been aided, executives said, by the company’s decision to retain general managers and many of their lieutenants. More than 17,000 hourly theater workers were laid off as theaters shut down. The return to operating will be a gradual process, Zoradi cautioned.
“It’s not like we’re going to flip a switch and theaters will be full,” he said. “This has been planned so there’s a rolled ramp-up.”
Zoradi said the circuit has been in close contact with studios as well as the National Association of Theatre Owners about the best ways to reassure moviegoers. A “welcome back” marketing campaign, featuring movie stars extolling the joys of the theatrical experience, is in the plans for the coming weeks, Zoradi said.
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