Having James Bond drive his Aston Martin into 2021 is apparently the last straw for Regal Cinema parent Cineworld Group (CINE) (CNWGY). Variety reported over the weekend that Cineworld has decided to close down its 543 Regal theaters across the country, as well as all cinemas in the U.K. and Ireland.
Cineworld's move comes just after No Time to Die, the highly anticipated James Bond film, bumped its release from next month to the springtime of next year. With so many high-profile movies pushing out their theatrical releases, it's hard to justify staying open. Now all eyes turn to Regal rivals AMC Entertainment (AMC -3.25%) and Cinemark (CNK -0.67%). If Regal throws in the towel, will they shut down, too? If the major chains close their multiplexes, does the industry have a realistic shot at ever coming back?
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Screen test
Movie theaters don't have much of a chance at succeeding these days. There's only been one "tentpole" release through the first eight weekends since theaters reopened, and Tenet hasn't been enough to breathe life into exhibitors that had been shuttered since mid-March. AT&T's (T 1.88%) Tenet has been the top draw for six consecutive weekends, yet it has only raked in a little more than $45 million in domestic box office receipts. Put in a more sobering way, less than 1.5% of the country has seen Christopher Nolan's trippy thriller at a local movie theater.
You can't blame Tenet for the weak stateside performance. A healthy 71% of the film critics tracked by ratings aggregator Rotten Tomatoes recommend the film, and audiences are checking in with an even better 76% approval score. The film has grossed more than $307 million worldwide, so it's a hit in countries where consumers are comfortable in a movie theater.
AMC, Cineworld's Regal, and Cinemark are limiting attendance as a result of social distancing, capping guest counts as low as 30% of a screen's available seats in some markets. Mask requirements are also eating into the number of potential patrons.
I don't mind saying that I'm in the 1.5% club. I waited until my neighborhood AMC in Miami opened to catch Tenet. My wife and I were two of the 13 people in a 400-seat IMAX theater. How can an exhibitor stay in business this way? Things are particularly hairy in Miami, where folks can't currently enjoy concessions while seated, eating into the real profit center of multiplex operators.
Hollywood ending
Movie studios will be fine. They will lean more on digital distribution. AT&T will also be OK with Tenet, and not just because Ma Bell is a well-diversified telecom stock. Tenet is currently this year's third highest-grossing film worldwide, but the top moneymaker outside its home market. Any shortcoming AT&T faces now on Tenet will be more than made up when the digital window opens. After all, 98.5% of the country has yet to see the movie -- and that won't be the case a year from now.
Movie theaters won't be as lucky. The moment Cineworld makes it official that Regal is going dark, AMC and Cinemark will be tempted to follow suit. If this happens, you can kiss the multiplex industry goodbye. There won't be a turnaround, and you'll barely notice the turnover. They may be losing money now, but if the initial absence didn't make moviegoer hearts grow fonder, what will happen the next time around? Consumers will be more comfortable in their living rooms. Movie studios will be more comfortable reaching viewers directly. If Regal, AMC, and Cinemark close down now, they may as well close forever.
