The Bulwark Presents
The Triad by JVL

Have You Gone to the Movies For the Last Time?

COVID-19 is killing movie theaters, too.
April 13, 2020
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(Lynn Goldsmith/Corbis/VCG via Getty Images)

1. Movies

The follow-on effects of the pandemic are going to be too large and too variegated to predict with total certainty. But some of them seem fairly likely.

For instance, masks are here to stay, at least in the medium-term. Expect them to be a semi-permanent facet of public life until there is a COVID-19 vaccine.

I also think it’s possible that stadium-level gatherings—sports, concerts, etc.—will be altered in large ways.

And then there’s this: It’s very possible that you have already seen your last movie in a theater.

The movie theater business has two halves: The studios, which make the movies, and the exhibitors, who own the theaters themselves.

In the years leading up to this moment, both sides of the business where under a great deal of economic stress.

The studios had gone from being stand-alone businesses to parts of other large conglomerates. And the exhibitors—who were always low-margin businesses to begin with—were facing new competition from home entertainments. Most especially, streaming video.

So even before the pandemic, there was growing pressure to kill the theatrical release of films and move the entire business to streaming platforms on the internet.

And now we are at a moment where the movie studios have seen the theatrical box office go to zero—which is very bad for them and for the expensive products they make.

And the exhibitors have seen their entire revenue base go to zero.

The studios are in a slightly stronger position, because they’re owned by large corporations and have other revenue streams.

But the theaters? They’ve been hit by an asteroid.

Understand that theater chains are small, undercapitalized businesses. The largest theater chain in America is AMC, and they have a total market cap around $300 million. That’s not a typo.

The vast majority of movie screens in the country are owned by just four companies—AMC, Regal, Cinemark, and Cineplex. Of those, AMC is, far and away, the healthiest and most forward-looking business. Since the outbreak, AMC has furloughed its entire staff–from the CEO down to the high school kids scanning your tickets.

It is entirely possible that they will be bankrupted by early summer.

And if AMC goes down, the other three large exhibitors will follow.

What then?

I find it difficult to believe that anyone would be willing to buy these assets out of distress. For one thing, they’re not really “assets.” The exhibitors don’t own much aside from popcorn poppers, rows of stadium seats, and projectors. There’s almost no inventory and for the most part, they don’t own the land or the structures they’re housed in.

The only thing they have going for them is a cultural habit of people going to see movies in large communal spaces.

And even after the theaters are allowed to reopen, how much is that habit going to decline over the course of, say, the next 18 months? 20 percent? 50 percent? 80 percent?

The only potential buyers would be companies with a vested interest in keeping the theatrical model going. By which I mean, the studios themselves.

That’s only a possibility because the Paramount Consent Decree was reversed just a few weeks ago. But here’s the thing: It’s not clear that any of the studios will be in a position to buy, since they’re going through their own armageddon.

So what happens is this: The theater chains go bankrupt. The studios, who need to have some way to monetize their products in the near term, push all film releases to streaming-on-demand. And by the time American society is recovered enough that (1) people are willing to go to theaters in large numbers again and (2) someone has the capital to start a new exhibition businesses comes around, the studios are no longer willing to give up their streaming model for exclusive theatrical runs.

Which, in turn, makes the theater business untenable. Even in a world where we have a coronavirus vaccine.

All of which is why I think it is very possible—let’s call it a 2-in-5 chance, or maybe 3-in-5—that most movie theaters never reopen and this wonderful experience that’s been part of our lives for the better part of a century—sitting in a dark auditorium with strangers, watching amazing stories told on a screen that’s 30 feet tall—simply goes away.

That would be a tragedy. Not 15,000-dead-Americans level of tragedy. But tragic none the less.