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Theater owners warn cinemas 'may not survive' coronavirus pandemic

Theater owners and Hollywood elite are begging Congress for additional coronavirus relief, as the pandemic pushes cinemas to the brink of extinction. John Fithian, National Association of Theater Owners President & CEO joins Yahoo Finance’s Alexandra Canal and Zack Guzman to break down the details.

Video Transcript

ZACK GUZMAN: We've been chatting a lot about the coronavirus pandemic impacting a lot of sectors hard in 2020, but maybe none harder than theaters, many of which remain closed, as Hollywood opts out of debuting big blockbusters. Now, the industry group is pleading with Congress to do more to alleviate the pain. Or they say theaters could be hurt for good here.

And here with more on that in this week's "Fame of Fortune" is Yahoo Finance's Alexandra Canal. And Ali, I mean, this is something that we've seen play out for a few months now.

ALEXANDRA CANAL: Definitely, and on Wednesday, the National Association of Theater Owners, along with several entertainment guilds-- profiled directors, writers, producers-- wrote a letter to Congress begging them for more stimulus funding for theaters. Specifically what they're asking is that the government reallocate unused CARES Acts funds or enact new proposals such as the Restart Act.

Obviously, as you mentioned, this comes at a time where the industry is desperate for a lifeline. And according to this letter, things could get much, much worse. For example, 93% of theaters experienced losses of over 75% in the second quarter. Now, if that downward trend continues, that would mean around 69% of small to mid-sized theater chains could close for good or go bankrupt, which would result in the loss of jobs for about 66% of theater workers.

Now, keep in mind, the industry employs over 150,000 workers. A lot of these workers do come from underrepresented groups such as senior citizens, those with physical or mental disabilities. For some, that theater job is a very first job they've ever had. So not only would this devastate the box office ecosystem, the Hollywood ecosystem, but it could have serious ramifications for the US economy and the labor market at large. So the message of this letter very clear. If we don't get help now, we might not be able to survive this pandemic.

ZACK GUZMAN: Well, let's talk a little bit more about that letter here with the author and CEO here of the group behind it, the National Association of Theater Owners President and CEO John Fithian joins us now on the phone along with Alexandra Canal. And John, I mean, talk to me about this too, because we've seen a lot of sectors going through intense-- intense shortfalls here in drops in revenue.

But when you talk about what's going on in the theaters, I mean, I know some theaters received PPP funding. But how is that money been put to use? And how is it helping theaters weather the storm?

JOHN FITHIAN: Well, first, thank you for having me on. And second, I'd just like to point out that the movie theater industry had a record-breaking year in 2019 with $42 billion in global receipts. Then we came up to March and hit this pandemic head on and had to shut down our theaters everywhere. And in most places, they were shut down for six or seven months.

We're starting to open them back up now. We have about 47 states that are open partially or fully. We're waiting on New York. And we're trying to get more movies into those theaters. We know that we won't be hugely profitable this year. But we're trying to ramp back up and get back into business so that when we get to the other side of the pandemic on 2021, we could return to record-breaking form.

What we need between now and then, of course, is a bridge, right, to get between 2019 and 2021. And that's what we're asking Congress to do. And we were just very grateful that over 90 leading movie directors said, hey, help out these guys. We need these theaters to survive.

Your specific question about the PPP loan, yes, in the CARES Act, loans for small business and the so-called Payment Protection Program did help quite a few of our smaller members. But that was very constrained in terms of the size of the business that could use the loan. And it was also for a time certain.

We're still hurting, and we'll be ramping back up very slowly. So we need additional liquidity or grants from the next relief package to make it to the other side. What we're asking for is one of a couple different things. They could absolutely expand the PPP program and make it eligible to more companies in the movie theater business that would help. Or they could take money previously appropriated through the CARES Act and designate it for our industry.

There's also a third piece of legislation called the Restart Act sponsored by over 50 of the senators in United States Senate. And that would help with grant money as well. So whatever form it takes, we're just looking for liquidity to get through the other side.

ALEXANDRA CANAL: And John, we've seen some films bypass the theatrical experience entirely and go direct to a streamer or on demand. We saw that most recently with Disney's live action, "Mulan," "Trolls World Tour." The success of that actually leading to the historic deal between AMC and NBC Universal where a film would only have to be in the theater for 17 days before becoming available on demand.

So I'm curious to know what you're hearing from these theater owners. Is there any cause for concern here that this trend to continue even after the pandemic ends, because certainly right now, there's a big appetite for at home entertainment.

JOHN FITHIAN: Well, certainly, there's a big appetite for at-home entertainment when everybody is stuck in their homes, right? There's no other place to get those movies until you can get out of the pandemic. So we have looked at the release schedule for the movies over the course of the pandemic. We've talked extensively with our colleagues at the movie studios. And we know that the vast majority of the movies that were scheduled for release during the pandemic when were shut down have been rescheduled for release later in theaters.

In other words, movies, like "James Bond" and "Wonder Woman" that are scheduled to come out November, December were supposed to be released originally earlier in the year. A lot of other movies were pushed back into 2021, like "Fast and the Furious" and a host of other big titles. So I think what the movie studios are saying is that they want the theatrical release for their big movies. They want the theaters to survive and come back up at the end of this because that's how they make the most money on their movies is with a big theatrical release first and then a home release later.

The movies that went straight to the home during the pandemic, honestly, that's a pandemic business model, right? That's a need to monetize those particular titles quickly. And they just knew that they couldn't wait for all the theaters to get back up. But, again, the vast majority the movies were rescheduled. And we think that means that once we're strong and vibrant again, the movies will be coming to theaters. And people will be coming to theaters as well.

ALEXANDRA CANAL: And we did talk a lot about streaming services on this show. Of course, there's been rumors in the past that a big streaming giant, like a Netflix, could go out there and just buy out all of these struggling theater chains. Now, Netflix CEO Reed Hastings did shut down that rumor last month saying the company is not interested in doing that. But is that something worth exploring in terms of a strategic partnership similar to what we saw between NBC Universal and AMC, because during these uncertain time, streaming services have done very well.

JOHN FITHIAN: Well, several streaming services are interested in theatrical release of their movies. But Netflix seems to be the only one that wants to put movies in theaters at the same time they're putting on their streaming service all the time, right? So Amazon is in this business. Apple is getting into this business. And those streamers have a different philosophy as does Disney Plus and HBO Max and all the other companies that are online right now.

And that is that's for their significant movie titles, they want to see an exclusive theatrical release first, A, because that's where you get the most bang for your buck. You get a higher ticket price than you do eyeballs for streaming on a subscription service. And B, it's like a big promotional platform to establish the brand of the movie.

When a movie does well in theaters, everybody talks about it. And it then drives the ancillary markets later so you get a second and a third buyout of the Apple. And that's the traditional model. We believe that model will continue. We may adjust around the edges, what the release windows are, and how long each of these various platforms have access to the movie. But certainly the initial theatrical release remains fundamentally important to the movie distributors.

ZACK GUZMAN: Yeah, for sure. And obviously, you know, one of those areas that has a special place and a lot of hearts out there when we think about what we're looking for on the other side of this pandemic with John Fithian, National Association of Theater Owners president and CEO-- appreciate you taking the time to chat with us.

JOHN FITHIAN: Thanks for having me.