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Amid film delays and movie theater closings, can Hollywood be saved?

Almost 70 percent of small and midsize movie theater companies could be forced to file for bankruptcy protection or close permanently.
Workers remove a sign saying "Temporarily Closed" on the marquee at the Quarry Cinema in San Antonio on May 4.
Workers remove a sign saying "Temporarily Closed" on the marquee at the Quarry Cinema in San Antonio on May 4.Eric Gay / AP file

Hollywood is no stranger to telling stories about global pandemics, but it now finds itself in the midst of a nonfiction narrative that may forever alter the industry. The Covid-19 pandemic has halted or delayed production on highly anticipated films, forced companies to modify movie releases and led to theater closings.

As filming slowly resumes on sets in states where numbers of coronavirus cases are low, routine testing of actors and crew members has become the norm — yet there have still been delays because of Covid-19 cases, which was the case on the set of "The Batman" when star Robert Pattinson tested positive.

As production companies continue to suffer during the pandemic, the impact has rippled down to movie theaters, which depend on new content to attract viewers and compete with the plethora of streaming platforms, like Netflix, Amazon and Hulu.

"Movie theaters are in dire straits. ... Absent a solution designed for their circumstances, theaters may not survive the impact of the pandemic."

Among the highly anticipated movies that have yet to hit theaters are the newest James Bond movie, "No Time to Die," which is now scheduled to premiere in April, and "Dune," which is now set for October 2021.

Studios willing to release movies this year have taken two different approaches, both of which affect theaters.

Some have opted to bypass theaters entirely by releasing films on demand or directly to subscription video-on-demand services. That hurts cinemas, because while studios and theaters each typically get about half of a film's box office gross intake, studios get more from digital releases — about 80 percent.

Universal has done that with several of its movies this year, starting in April with "Trolls World Tour," which it released on demand on the same day the film was supposed to have been released in theaters. It has also moved films like "The Invisible Man" and "The Hunt" to on-demand platforms. (Comcast is the parent company of both Universal and NBC News.)

Disney followed suit with "Mulan" after having repeatedly pushed back its movie theater release. The entertainment giant released the film in Asia, but in the U.S. and Europe it is available only on the Disney+ subscription service.

Furthermore, "Mulan" didn't gross nearly as much as it had been expected to pre-Covid-19. For movie theaters, that means a smaller cut of a smaller pie.

"It doesn't work at a sufficient scale to replace the economics that they're used to on a feature film," said media analyst Rich Greenfield of LightShed Partners. "It can work for a smaller film like 'Trolls.' It's very hard for a more expensive movie like 'Mulan.'"

Full coverage of the coronavirus outbreak

Other studios have forged ahead and released movies internationally and in select U.S. markets, as was the case with Christopher Nolan's "Tenet," which was released in theaters internationally and in select U.S. markets. The film had middling success at the box office, earning $20 million when it premiered over Labor Day weekend.

"Tenet" has now topped $300 million globally, but its box office numbers highlight the other issue facing movie theaters: Audiences continue to be wary of returning to theaters as the number of Covid-19 cases continues to surge. President Donald Trump's positive test for Covid-19 highlights just how big a threat the virus continues to pose.

Theaters did come together to form CinemaSafe, an industry effort to adopt safety procedures developed by epidemiologists to protect theatergoers, but attendance remains low in spite of those efforts.

While theaters may be able to entice some people to return, they're bound by restrictions on capacity, and numerous states, including California, have allowed theaters to reopen only in certain regions. Three states, including New York, have yet to allow any cinemas to reopen.

That's especially problematic given how big the New York City and California markets are for theaters. The situation is so dire that Cineworld, the parent company of Regal cinemas, said Monday that it would temporarily close 536 of its U.S. locations.

"We are facing the situation where in a way it is better for the company to be closed than to be open. The U.S. market is the most important market in the world, and the two markets of New York and California are the most important markets in the U.S.," Cineworld CEO Mooky Greidinger told CNBC on Monday.

Greidinger said studios are hesitant to release movies because theaters in New York and California still aren't fully open. He said that the regulations in those states are essentially blocking new releases and that for it to make sense to keep theaters open, there must be a ready lineup of new movies.

"We are now like a grocery shop that has no food to sell," he said. "The cinemas are good. The cinemas are ready. We've implemented CinemaSafe very successfully ... but we don't get new movies."

Greenfield said the attendance levels show that consumers aren't ready to be in indoor movie theaters, which has forced Hollywood to realize that movie theaters "aren't viable as a monetization mechanism for their films" as the pandemic continues.

"Hollywood is essentially like a deer in headlights. They can't release their movies theatrically. They can't really sell them directly to the home, because they can't generate enough revenue and profit that way," Greenfield said. "There are two choices: You either follow Netflix, or you wait. Nearly every traditional Hollywood studio is choosing to wait."

The National Association of Theatre Owners, the Directors Guild of America, the Motion Picture Association and more than 70 directors, producers and writers sent a letter asking House and Senate leaders to extend relief to theaters.

"Movie theaters are in dire straits. ... Absent a solution designed for their circumstances, theaters may not survive the impact of the pandemic," the group wrote. "Theaters need specific relief targeted to their circumstances. We urge you to come together on a bipartisan solution that provides this relief."

The letter, which included the backing of famed directors Sofia Coppola, Lee Daniels and Clint Eastwood, noted that 93 percent of movie theater companies experienced financial losses of over 75 percent in the second quarter of 2020.

"If the status quo continues, 69 percent of small- and mid-sized movie theater companies will be forced to file for bankruptcy or to close permanently, and 66 percent of theater jobs will be lost," it said. "Our country cannot afford to lose the social, economic, and cultural value that theaters provide."

Greenfield said that the movie theater industry wasn't doing well before Covid-19 and that the pandemic now makes it hard to imagine that the industry can survive as it did.

"I think most of the movie theater chains will not survive in their current form. They're likely going to have to file for bankruptcy protection, and you're probably going to end up with a smaller footprint," Greenfield said.

He predicted that the moviegoing experience will change to become more of an event, similar to attending a concert or a sporting event. In this model, ticket prices would be higher, and the experience would likely include other perks to compete with at-home movie options.