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Theaters gird for spotty summer slate amid financial woes, pandemic upheaval

Though theater operators are preparing to reopen U.S. locations, box office analysts say it will be a long time before the industry returns to pre-pandemic levels.

Each major U.S. exhibitor — AMC Entertainment Holdings Inc., Cinemark Holdings Inc. and Cineworld Group PLC's Regal Entertainment — will reopen theaters in the coming weeks, with most domestic locations set to open in time for The Walt Disney Co.'s release of "Mulan" on July 24.

However, significant hurdles lay ahead for the industry, complicating summer box office projections, according to analysts. Operators are reducing the number of available seats to maintain social distancing, and there is no guarantee that key movie-going demographics will return to multiplexes, even with new precautions.

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This is the first installment of a two-part series reviewing the outlook for the summer box office. The second part, focused on the impact of premium video-on-demand releases, can be found here.

"The movie industry will struggle mightily in 2020," said Jeff Bock, senior box office analyst at research firm Exhibitor Relations Co.

Lowered expectations

All told, analysts expect the 2020 U.S. box office to be down more than 50% year over year, with some like Wedbush Securities' Michael Pachter forecasting a drop of as much as 63%.

As of July 18, Kagan analyst Wade Holden forecasts 2020 U.S. box office of about $5.2 billion for the year, down 53% from 2019, but that is a "moving target," Holden said in an interview. He noted that if the transmission rate of COVID-19 accelerates, theaters could shut down again. Kagan is a media research group within S&P Global Market Intelligence.

The first big titles being released this summer are "Mulan" and AT&T Inc.'s "Tenet." Disney will be looking for much of "Mulan's" revenue to come out of China, but the Chinese government recently ordered that Beijing theaters remain closed due to new cases of COVID-19. "Tenet," opening July 31, had a $200 million-plus production budget, the largest of any film by director Christopher Nolan. The Warner Bros. title was supposed to debut July 17, but the studio postponed by two weeks, instead opting to re-release Nolan's "Inception" on July 17 for its 10-year anniversary.

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The slate gets a bit more modest after that, with the expected releases of "Bill and Ted Face the Music" from United Artists, fantasy film "Monster Hunter" from Sony Corp.'s Screen Gems, and horror franchise reboot "Candyman" from Comcast Corp.'s Universal Pictures filling out the weeks through the end of September. Regardless, the slate may not have much to do with the quality of business.

"The slate is really immaterial at this point," Bock said in an interview. "Sure, theaters need to have new product to entice audiences, but the specter of COVID-19 seems to be looming around every corner right now, which adds to the discomfort many folks have of being in an enclosed space with strangers for over two hours."

Under the surface

Exhibitors will be glad to have turnstiles spinning again, but operations will be visibly altered from the easygoing business of pre-pandemic cinema.

AMC will reopen 450 U.S. theater locations July 15, the company said June 19. The remaining locations, about 150, will open in time for the "Mulan" debut. Personal protective equipment for employees, intensive cleaning regimens, limited theater capacities and blocked seating will be the norm in all theaters, President and CEO Adam Aron said in AMC's June 9 earnings call.

To accommodate limited seating requirements, AMC will open films like "Tenet" and "Mulan" on two to four times the number of screens it would typically. The company will also use special vacuums and air filters in its theaters to maintain air quality, and the AMC app will allow guests to purchase tickets and concessions via contactless payment.

Originally, AMC said it would not require customers to wear face masks, but after "an intense and immediate outcry" from its customers, the exhibitor on July 19 reversed that decision.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Cineworld will reopen Regal theaters July 10 and, like AMC, will require moviegoers to wear masks. It will also implement a contactless payment system to purchase tickets and concessions through the Regal mobile app. Regal employees will undergo daily health screenings and wash their hands every 30 to 60 minutes. Arcade games, vending machines and water fountains will be closed.

For its part, Cinemark will sterilize all public surfaces every 30 minutes, disinfect each auditorium every morning, provide seat wipes and hand sanitizer, reduce hours and capacity to promote distancing, use air purification filters, encourage the use of face masks among its customers and implement contactless and cashless policies, the company said June 17.

At-risk populations

It is yet to be seen if these health and safety guidelines will ease consumers' minds about sitting in a public, indoor space for hours at a time. Analysts are especially cautious about the return of older moviegoers, which has become an increasingly important demographic at the multiplex.

" Regarding older audiences, we expect them to be among the later waves of returning moviegoers due to being considered most at risk and also because studios have delayed most of the new release product targeted toward them until later dates in response to the pandemic," Shawn Robbins, chief analyst at BoxOffice Pro, said in an interview.

Over the past decade, moviegoers aged 50 and older represented about 30% of ticketholders, MoffettNathanson Research analyst Robert Fishman said in a recent note on the future of the film industry, citing Motion Picture Association of America data.

"The 2019 age demo reaffirms an aging moviegoer trend, which would present both a longterm headwind facing the industry and also shorter-term challenges in the new COVID-19 world without a vaccine," Fishman said in the note.