Cineworld’s woes point to an unhappy ending for cinema chains

Cineworld’s results look like the final scene from one of those action movies involving lots of explosions. Like their heroes, the business is still standing. But it has taken quite the beating. Will there be a sequel?

Having reported a $1.6bn (£1.3bn) pre-tax loss thanks to a pandemic-driven 67 per cent plunge in revenues during the first half of the year, we might have to wait for a definitive answer.

The world’s number two chain is trying to talk up its prospects. Some 561 out of its 778 sites were open as it released its numbers. “Steady” was the word the company chose to describe their performance, with a build up of admissions in the UK and US driven by the release of Christopher Nolan’s time-twisting, mind-bending thriller Tenet.

That movie’s dense plot has served Cineworld well: a second viewing is almost de rigueur if you want to get a proper handle on it.

CEO Mooky Greidinger, meanwhile, professed himself to be “excited by upcoming films for 2020, which include Wonder Woman 1984; Black Widow; the latest James Bond No Time To Die; Dune; West Side Story; Soul (the latest from Pixar) and Death on the Nile”.

The problem? The statement was already out of date by the time it hit the City’s trading screens. Shortly before its release, Disney reshuffled its schedule again, punting three of those (Black Widow, West Side Story and Death On the Nile) into 2021.

Soul is the lone exception, perhaps because it looks like one of the more challenging (and thus interesting) releases from Pixar. A November release into content-starved cinemas might serve as a way to get it before a wider audience.

There had been speculation that it, and maybe Black Widow, would be released on-demand via Disney Plus.

Disney’s problems with its live-action adaptation of Mulan may have put that on hold for now. It hasn’t shared any figures, but a revised estimate from Yahoo put domestic US rentals at $60m-$90m.

Disney gets to keep all the revenue and may have gained some new subscribers (customers had to sign up to the streaming service to be able to rent the film upon release at $29.99 in the US and £20 in the UK).But Mulan had a $200m budget and has struggled in China, where it received a theatrical release but had to compete with the home-produced Eight Hundred. It further suffered from a news blackout imposed by the authorities, stung by an outpouring of criticism thanks to Chinese agencies facing allegations of human rights abuses that appeared in the credits. The video-on-demand release also facilitated the flow of pirated copies into that market.

The problem for Cineworld? If the lesson to Disney was that big budget pictures need a theatrical release to cover their inflated production costs, it doesn’t appear to have persuaded the entertainment giant to support operators with content.

A steady supply of audience-exciting content, as well as the sustained return of consumer confidence, is what it will take for cinemas to properly recover. 

It doesn’t help Cineworld that the 200 shuttered US outlets are in big markets such as New York and California. Meanwhile, confidence in other territories may take a knock from the virus’s resurgence. 

Cinemas’ anti-viral efforts have been commendable. It’s a great pity that an industry that has got this right is suffering.

Cineworld’s finances are such that it is currently seeking waivers on the covenants attached to its loans. It badly needs its banks to be more supportive than the studios which supply the product it relies on.