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JSO Commentary

This is such an important sector within the American psyche, that the most part these facilities go unnoticed.   But for almost a decade now they have been under extreme stress with low margins.   There have been many reincarnations of the cinema experience such as food service to seats, different types of sound and screens etc. But when it all boils down to brass tacks, what these buildings need is product.  The first article simply highlights the stress of what is occurring today in the middle of this pandemic.  

Theaters Vexed by Warner Bros.’ Straight-to-Streaming Move


By:  Kelly Gilblom                                                   December 3, 2020                           Bloomberg News

Theater chains such as AMC Entertainment Holdings Inc. and Cinemark Holdings Inc. are firing back at Warner Bros. after the studio overhauled its film-release strategy and sent their shares plummeting.

Adam Aron, chief executive officer of AMC, said he opened up an “immediate and urgent dialogue” with the studio, which announced plans to have all its major 2021 movies debut on HBO Max and in cinemas simultaneously. Shares of AMC and Cinemark, already battered in 2020, each plunged more than 16% apiece on Thursday.

Aron, who runs the largest theater chain, questioned why the studio would make such a decision when drug companies are on the verge of releasing a Covid-19 vaccine. Cinemark, meanwhile, said Warner Bros. hadn’t provided any details of its plan and signaled it might not show some of the studio’s films.

“In light of the current operating environment, we are making near-term booking decisions on a film-by-film basis,” Cinemark said.

The decision by AT&T Inc.’s WarnerMedia, which operates Warner Bros. and HBO Max, threatens to widen a rift in the movie business that opened up earlier this year. After theaters shut in March because of the Covid-19 pandemic, studios were forced to either delay their movies or debut them online.

Theater owners have generally expressed a desire for studios to withhold new movies until cinemas can broadly reopen, preserving a decades-old release model that gave them exclusive rights. Studios have already delayed many of their biggest films, but they are wary of allowing ready-made blockbusters to collect dust until the pandemic ends.

AT&T also is trying to bolster HBO Max, a streaming platform that launched in May. It had already planned to use the simultaneous-release strategy with “Wonder Woman 1984,” which debuts on Christmas Day.


Friend to Foe

Until this week, Warner Bros. has been one of the studios most closely aligned with movie exhibitors. It released the $200 million sci-fi thriller “Tenet” exclusively in cinemas in September, marking the only big-budget theatrical debut since the pandemic hobbled the industry.

After Thursday, the studio may be one of the most reviled.

“Clearly, WarnerMedia intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidize its HBO Max startup,” Aron said in an emailed statement. “As for AMC, we will do all in our power to ensure that Warner does not do so at our expense.”

But the disruption has already taken a toll. AMC shares fell 16% to $3.63 on Thursday, with Cinemark declining 22% to $13.30.

Even after Warner Bros.’ decision to release “Wonder Woman 1984” on HBO Max, the plan to adopt the same approach for the whole 2021 slate shocked the industry. In the case of “Wonder Woman,” the studio discussed the decision with theaters ahead of time and offered them a greater cut of ticket sales in exchange for scrapping a traditional release. Typically, cinemas have exclusive rights to new movies for about 90 days.

Now new terms will need to be hammered out in potentially heated negotiations.

Theater chains still plan to play the new “Wonder Woman” film. Cinemark advertised tickets for the movie on social media Thursday. AMC also noted it had carved out a special agreement with Warner Bros. to play the DC Comic film. However, it’s not clear whether they will show the studio’s 2021 slate, including a new “Matrix” movie and “The Suicide Squad.” The chains were counting on at least some of those films to draw in large crowds next year, helping them recover from the effects of the pandemic.


Giving Closed Movie Theaters a Second Act

As the pandemic keeps audiences away, developers could soon face an adaptive reuse dilemma: What can you do with dead megaplexes?


By:  Patrick Sisson                                                       November 23, 2020                       Bloomberg

When a tub of popcorn can run nearly $10, renting out an entire theater for $99 seems like a steal. For AMC Theatres, the mega-chain that recently introduced the private screening plan as a Covid-era concession to safety and shrinking audiences, it’s more a desperate ploy to keep the lights on as the American megaplexes face the prospect of a final showing. 

Recent coronavirus case spikes, new lockdowns and the expectation of minimal family outings during the holidays has turned a year of bad news for the country’s cinemas into an outlook that’s simply bleak. In early October, when Regal Cinemas shuttered all 500-plus locationsnationwide, that darkened more than 7,000 screens alone. The industry has already seen a cinema cull in the U.S., per the National Association of Theatre Owners, with the number of movie theaters shrinking from around 7,200 in 1996 to roughly 5,500 as of late 2019. But that may just be a preview. John Fithian, head of the National Association of Theatre Owners, told Variety that unless Congress passes the Save Our Stages Act, a bipartisan push to support concert venues and theaters that have seen their businesses decimated by Covid, “probably around 70% of our mid- and small-sized members will either confront bankruptcy reorganization or the likelihood of going out of business entirely by sometime in January.”

In past economic downturns, theater owners tried stunts like “dish nights” —  giving away different pieces of a table setting, such as a saucer or salad plate, to lure Great Depression patrons. That probably won’t work this time, leaving a lot of moviegoing real estate in need of a reboot. 

There’s a long tradition of adaptive reuse when it comes to the older generation of neighborhood moviehouses, many of which died off in the second half of the 20th century as new suburban multiplexes appeared. These smaller facilities often see a second life as community theaters, churchesgyms and bookstores. The electric vehicle startup Rivian recently announced plans to turn a 1930s-era Laguna Beach theater into an elegant showroom. 

But modern multiplexes can be poor candidates for adaptive reuse, theater owners and real-estate experts told the Wall Street Journal, because of their sloped floors and subdivided spaces. That’s especially true at a time when the malls they are often attached to are struggling reinvent themselves. Closed theaters may fare better on the real estate market as available land in need of a demolition; a shuttered Regal Theater in North Charleston, South Carolina, for example, was simply demolished, with plans to build an apartment building in its place. 


Some developers do see sequel potential in modern movie theaters, though. Last year, PMB, a development firm focused on the medical field, turned a 1980’s multiplex in Goodyear, Arizona, into a collection of medical offices. And Walter Crutchfield, co-founder and partner of the Arizona development firm Vintage Partners, turned a Flagstaff movie theater into perhaps the country’s most creative department of motor vehicles. 

The nine-screen theater, part of the Harkins chain, reopened in 2016 as a 72,000-square foot, two-story Arizona Department of Transportation headquarters and Motor Vehicles Division office. Reuse presented multiple challenges, such as cutting windows into the concrete walls to provide more natural light. But the end result, which split the high-ceilinged theaters into two stories with a mezzanine floor, speaks for itself, Crutchfield says.

“It was a great project because the poured-in-place cement building was designed for public access, so it gives you a pretty cool canvas,” he says. “There’s a huge four-story atrium. Now 200 workers, who used to be spread over six locations, can collaborate together in a brand-new office.” They even kept some neon lighting fixtures and the lobby popcorn machines for office snacks. 

He says that contemporary movie theaters offer plenty of valid reuse potential — prime locations with lots of empty square footage — if only developers get creative. 

“If you can make $5 million and do something that’s repeatable and easy, or make $1 million doing something that’s incredibly complicated, essentially building a battleship inside of a bottle, how many people are going to sign up for the later?” Crutchfield says.

On the south side of Pittsburgh, another theater-to-office space is in the works, set to open in May or June of 2021. New York City-based SomeraRoad Partners will turn a shuttered theater into a mixed-use development that includes retail, apartments and the aptly titled Box Office workspace.

“Does it make sense investing in what we think is a dying industry?

Ian Ross, a founder and principal at SomeraRoad, says the project started pre-Covid, when they looked at the potential of redeveloping SouthSide Works, a retail site close to the city’s growing tech scene. Ross and his partners looked at options for upgrading the SouthSide Works Cinema, and decided a new movie theater wasn’t “the highest and best use of the land.” 

“We could have invested $5 million in it, but does it make sense investing in what we think is a dying industry?” he says. “I wouldn’t say we called the current demise of movie theaters, but in retrospect, we sort of shut it down before it shut itself down.”

While the theater did get foot traffic on weekends, it doesn’t create the vibrancy possible from alternative uses. Ultimately, the developers settled on office space that will float above the rest of the development, designed by architecture firm HOK, with tech and creative tenants in mind. Ross would like to say this concept could be reused for all closed theaters, but he and his partners don’t think it’s that simple. He sees this example working because it was already a distressed property that was incredibly structurally unique, with a strong three-story steel podium that could be repurposed. 

Shuttered cinemas have similar reuse possibilities as the neighboring big box stores across the mall parking lot, says K.C. Conway, chief economist with the CCIM Institute, a professional accreditation group for commercial real estate executives. Hard hit by the rise of online retail, many of those spaces are finding use as e-commerce warehouses and fulfillment centers. 



The key is big and bulky items, Conway says: As online shopping continues to expand, last-mile delivery of oversized goods has become a tricky, and expensive, problem for retailers, especially home goods stores. Enter empty movie theaters: Their 24-foot-or-more ceiling heights offer more headroom than typical 18-foot-tall department stores, they’re often in dense suburbs near main commercial arteries, and they have upgraded HVAC and electrical systems. Those with flat floors and stadium seating can easily be gutted to make room for storage. Many even have special light industrial zoning, so unlike, say, a purely commercial property such a Best Buy, they don’t require time-consuming rezoning.

Big players in home goods and contracting are already looking at the potential of filling dead-mall megaplexes with pallets of lawnmowers and drywall, says Conway. The price is also right: New construction for last-mile warehouses can run between more than $140 a square foot in expensive markets. Theaters bought for a steal might go for $50 a square foot, and require just $25 a foot to retrofit for logistics, Conway estimates. 

“People have been slow to figure out the full potential of adaptive reuse,” says Conway. “Adaptive reuse helps by adding more affordable housing, reducing blight, gets old stores back on the property tax rolls, and it’s good for the environment. Lots of boxes get checked. Capital just needs to be less afraid, and the government needs to be more flexible.” 

 As the virus resurges and films get streaming-only premieres, the post-vaccine fate of the movie business remains murky; it may be months or years before moviegoers feel like packing into theaters for the latest blockbuster. Amazon was rumored to be looking at scooping up theaters earlier this year. Ross at SomeraRoad doesn’t think the industry is going to disappear, by any means, but it’s due for a correction; he thinks the bottom 20% of theaters — those already struggling — may go bankrupt and get repurposed post-pandemic.

Crutchfield predicts a higher percentage of cinemas will go dark than most other asset classes, such as offices, whether it’s the pandemic or streamers like Netflix that force them to close shop. And he’s confident that creative uses for these spaces will be found. 

“I just don’t know the life expectancy of the sit-down movie experience,” he says. “But the assets, and opportunities, are there.”

Regal Movie Chain Will Close All 536 U.S. Theaters On Thursday​

October 5, 2020                                                      NPR (National Public Radio)

More than 7,000 movie screens will be dark in the U.S. this weekend as the Regal theater chain said it will shut down all 536 locations on Thursday. The closure reflects "an increasingly challenging theatrical landscape" due to the COVID-19 pandemic and is temporary, the chain said.

Regal is shutting down theaters again less than two months after it started to reopen U.S. locations in late August. The decision was announced after the James Bond franchise's No Time to Die was shelved until 2021, further pushing back a release that had already been delayed.

Regal is the second-largest film exhibitor in the U.S., after AMC Theatres. It is a subsidiary of Cineworld Group, which is based in the U.K. – where the corporation is also closing more than 100 theaters.

Roughly 40,000 Regal employees across the U.S. now face a work furlough, the company told NPR. More than 5,000 employees in the U.K. will also be affected, the BBC reported.

"This is not a decision we made lightly, and we did everything in our power to support a safe and sustainable reopening in the U.S.," said Mooky Greidinger, CEO of Cineworld, noting the chain's safety precautions for staff and moviegoers.

In a statement, Greidinger emphasized that "there has been no evidence to date linking any COVID cases with cinemas." He also aired frustration that Regal can't yet operate in New York state, a key U.S. market, although some indoor venues such as bowling alleys and casinos have been allowed to resume business.

Movie studios have delayed dozens of big releases over the past six months as cinemas sat empty or showed films only to limited audiences.

The postponed titles include likely blockbusters such as the superhero movies Wonder Woman 1984 and Black Widow along with A Quiet Place Part II and Candyman. In addition, Disney shifted several high-profile releases to online-only, including Mulan.

"The prolonged closures have had a detrimental impact on the release slate for the rest of the year, and, in turn, our ability to supply our customers with the lineup of blockbusters they've come to expect from us," Greidinger said. "As such, it is simply impossible to continue operations in our primary markets."

While the company calls the closures temporary, it did not name a date for a possible resumption of business, saying it will "continue to monitor the situation closely."

The coronavirus has hammered Cineworld's stock price, which commanded around $275 one year ago. On Friday, the share price was hovering just below 40 British pounds (about $52) – but with the new closures, it plummeted below 17 pounds (about $22) on Monday before recovering some of those losses.

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