The impact of COVID-19 on the global cinema business

The global outbreak of Coronavirus (COVID-19) will have a significant toll on cinemas worldwide, as highlighted by the postponement of the new James Bond title until November.  Unlike home-based media, which is likely to benefit from the possible spread of COVID-19 as people self-isolate and avoid social situations, the core of cinema is as a social medium and an integral part of the leisure sector.

In some countries, such as China, the government is involved in closing cinemas, and in others, it is an exhibitor decision. As the release of some titles is being delayed due to the lack of cinemas and audiences for them, this trend may reach wider than the current relatively restricted impact.

In the country at the centre of the outbreak, the impact is most severe. According to reported data, box office over the period of Chinese New Year (24 January to 23 February), a key period during the year, fell from $1.8bn to just $4m. According to Comscore, the global box office tracking company, box office revenues in China in the first two months of the year were $238 million, compared with $2.15bn in 2019 (and $2.38bn in 2018), which means the total loss during the period is now approaching $2bn. This is relative to an annual box office gross (in 2019) of $9.2bn. China is the world’s second largest box office market, and a major plank in international revenues earned by the studios (67% of the world’s box office is generated by the five film studios), and any reduction in Chinese box office for US tentpole titles will hit hard.

The Chinese government has ordered shut downs of cinemas and is also controlling other areas of the film industry. The government has also outlined the criteria that need to be met for opening cinemas when that time comes. Film shoots in Beijing now have strict guidelines in place for operating. Film crews of less than 50 people can still work, with masks and temperature checks, while productions with crews of over 50 have been shut down. In early March, Government confirmed that there were no thoughts of re-opening the cinema sector for business just yet.

In the theatrical distribution arena, Chinese distributors postponed several major domestic releases over the New Year, in the absence of cinemas in which to show them. One local distributor, Huanxi, distributor of the domestic tentpole Lost in Russia, announced that it would release the film online for free.

US studio Paramount has postponed the release of Sonic the Hedgehog in China, and has yet to fix a date for Japan. Disney has cancelled the Chinese release of Mulan, scheduled for 27 March in the US, a film with strong Chinese influences and shot partly in China. Eon Productions also cancelled the Chinese premiere of Bond’s latest outing No Time To Die, and on 4^th March the film’s release date globally was pushed back from April to November 2020, a move that has ramped up the stakes for the major content distributors.

Outside China, the effects are being felt in countries that were affected early. Cinemas have been closed in South Korea and Italy. At a public-sector level, on 4^th March the Italian government issued a draft decree that may well close cinemas in the country, as it seeks to reduce all social events where people are in close proximity. Cinemas in five northern regions of Italy (Lombardia, Liguria, Piemonte, Friuli Venezia Giulia, Emilia Romagna), were shut down after the weekend of 21 February, including the cities of Turin, Milan and Bologna. As of 9^th March, public events are banned in the whole country and of course this includes all cinemas. The Italian government and film industry are talking and monitoring closely where new cases of COVID-19 are dropping and cinemas can re-open. The Italian box office is down substantially on the same time last year, around 75% year on year for the current time period.

Italian film shoots have also been affected. Netflix is seeking an alternative location for the Italian part of Dwayne Johnson’s Red Notice, currently and mainly shooting in the USA. Paramount has also postponed the three-week production period of Mission Impossible: 7 which was to be shot in Venice.

Staying in Europe, certain areas of France that have been worst affected (Le Morbihan and Hauts de France) have also closed cinemas due to the outbreak.

In South Korea, according to the domestic film agency KOFIC, cinema attendance has declined significantly during the last few weeks, prompting several films to delay both promotional events and film openings, including the Oscar winning Parasite. Cinema admissions in February stood at 7.3m, the lowest number since 2004 which registered 3.1m (and a different time for the South Korean cinema sector). In February 2019, around 22.3 million tickets were sold across the nation. CGV, leading domestic circuit, has shut all nine of its sites in Daegu, the country’s fourth-largest city. Outside Daegu, CGV has cut back on daily screenings, in common with fellow exhibitors Lotte Cinema and Megabox. Cinemas are also reducing the physical presence of staff to reduce the risk of spreading the virus.

In Japan, while we have no data as yet, local distributors are offering refunds on tickets bought in advance if consumers have changed their mind. Local major Toho also postponed the March 6 release of its major title Doraemon the Movie: Nobita’s New Dinosaur.

Kuwait has also enforced a closure of all cinemas, theatres, wedding halls and hotel rooms until further notice. It is the first country in the Middle East to close cinemas.

Outside of the film sector, but relevant to studios, Disney has theme parks in Shanghai and Hong Kong, and these have both been shut down for the time being.  Disney has said that the park closures would cut $145 million from operating income, assuming the parks are closed for the two months of January and February. In Japan, Disneyland and the Universal Studios resort in Osaka are closed until at least March 15.

The industry is in uncharted territory here, with the possible breadth of the virus unknown. The mood at present is one of a holding pattern until the situation becomes clearer. The response will change frequently depending on new information. Trying to find a potential upside, among many downsides in the short term, once this global threat is passed it is likely that there will be pent up demand for anticipated titles and this could mitigate the clearly negative impacts right now. However, when cinemas do re-open, some films will be squeezed out of any theatrical release as screen space will be limited to those films deemed more likely to succeed. BCS Bureau