When Cineworld reports its annual results this week, investors are in for a financial horror movie. An expected pre-tax loss of almost $700m (£500m) will be testament to a pandemic-racked year that may have forever changed cinemagoers’ habits.
The parlous financial state of the UK’s largest cinema chain – with 127 sites – stands in stark contrast to the recent success of the streaming services, which have benefited from prolonged theatre closures and a boom in demand for home entertainment. This state of affairs was underlined again last week when Netflix, which has passed 200 million global subscribers after enjoying its best-ever year of signups in 2020, received a record 35 Oscar nominations – more than any single Hollywood studio has managed in modern history.
Cineworld’s decision in October last year to indefinitely close all of its 660 movie theatres in the UK and US, immediately after the premiere of the next James Bond film was delayed yet again, has proved an additional financial burden on top of what has proved to be the worst year for cinemagoing on record. Analysts forecast that revenues will come in at about $900m, down four-fifths on a pre-pandemic $4.4bn in 2019, notched up in the best year ever seen at the global box office.
In November, Cineworld secured financial lifelines from lenders worth $750m (£550m) which it has said will allow it to weather the coronavirus pandemic until May.
While the company’s 5,500 UK staff remain out of work and furloughed, the pandemic has not stopped Cineworld’s bosses from introducing a new incentive scheme that could benefit top executives with more than £200m in shares. If the scheme hits its top target, chief executive Mooky Greidinger, and his brother and deputy, Israel, will receive awards worth £33m each. The maximum award will be triggered if Cineworld’s share price bounces back to 190p within three years, close to its pre-pandemic level of 197p, indicating that bosses believe a full recovery is possible. Cineworld’s shares are hovering around 120p currently.
Last week, AMC, the world’s largest cinema operator and the owner of Odeon in the UK, said it was in the process of reopening the last 10% of cinemas it still has closed in the US. The reopening plans – combined with the expectation that vaccination programmes will at last allow them to stay open – mean that Hollywood studios are once again firming up theatrical release dates for blockbusters, starting with Black Widow, Fast & Furious 9 and A Quiet Place Part II. “If these hold, Cineworld may well announce the reopening of cinemas at the full-year results,” said Alastair Reid, media analyst at the investment bank Investec.
There are at least 40 major movies held over from last year where studios have opted against a home-streaming release, in the hope that film enthusiasts will return en masse to the big screen.
With cinemas in England slated to be allowed to reopen from 17 May, Cineworld will be hoping that after more than a year of binge-watching at home, screen fatigue won’t push moviegoing down the list when social restrictions are finally lifted.