- Movie theaters have been one of the hardest-hit sectors of the economy during COVID-19, with most venues closed for months with little revenue
- Streaming options could cut into theater revenues post-pandemic, but theater owners bank on continued appeal of the cinematic experience
- Shuttered Venue Operators Grant offers further assistance to qualifying theaters
For close to a year, going out for dinner and a movie has been a memory rather than a feasible option. Movie theaters were among the first venues to close during the COVID-19 pandemic; most are still awaiting the opportunity to reopen, as capacity limits or other factors make it an unprofitable proposition to hold regular screenings.
Movie ticket sales in 2020 were down a precipitous 80 percent compared to 2019. There are also fears that there will be a smaller but more permanent drop in audiences after the pandemic passes.
One reason for this expectation is a decision by major movie studios to begin offering film for home streaming at the same time the features are showing in theaters – a departure from previous arrangements where theaters received exclusive screening rights for at least three months before a film was available for home release. With audiences able to queue up a movie from the comfort of their own home, the incentive to go to a theater may be diminished.
The dearth of screening options during 2020 has impacted both small theaters and major chains. Even when movies have been available for screening, audiences have shied away due to concerns about COVID-19. The Christopher Nolan film Tenet helped guide studio decisions on film releases when its summer debut in theaters earned less than expected, prompting studios to bump several theatrical releases into 2021.
Yet some theater owners are also showing hope for the future of the industry. They anticipate that audiences will continue to be drawn to the cinematic, big screen experience they cannot get by streaming a release at home. Going out to see a movie also offers an opportunity to return to a social activity that many people have been missing during the pandemic.
There are also signs that consumers will remain loyal to theaters even after home streaming becomes more widely available. A Harvard Business Review analysis found that when the exclusive theater release period was shortened in Korea, it didn’t significantly impact theater receipts. Previous analyses identified similar trends, such as how allowing the purchase of individual singles rather than full albums did not significantly impact the revenues of the music industry.
A more dramatic example of affection for theaters came recently when millions of small investors organized via Reddit to boost the stock of the battered theater chain AMC and undermine Wall Street short sellers. The surge in stock value allowed AMC to erase $600 million in debt and secure another $300 million in capital.
Smaller theaters also stand a good chance of weathering the pandemic. In addition to lower bills, they are also more likely to benefit from city or state assistance as well as closer landlord relationships that permit more leniency in making payments. The $15 billion Shuttered Venue Operators Grant program approved last month as part of a $900 billion economic stimulus package, is also directed at smaller venues.
Theaters may also continue with some of the pivots they have undertaken during the pandemic, as well as the potential for diversifying their offerings. These include virtual screenings, drive-in options, dining opportunities, and merchandising tie-ins.
