Each day brings reports of the growing impact of coronavirus and its impact on citizens’ daily lives. So far, that includes closing movie theaters in China and Italy, the near shutdown of film production in China, and suspension of shooting ”Mission: Impossible” in and around Venice. Now the (selfish) question becomes: What will happen to the film business when the virus makes its makes an impact on the U.S.?
“When” is now the operative word, according to Centers for Disease Control and Prevention officials who spoke at a media briefing February 25 and warned that Americans should prepare for the possibility of disruptions to their daily lives. When that happens, expect our theaters to be vulnerable. But — and this is the point lost in much of the international media coverage — no more than the rest of public activity.
Let’s look at the precedents elsewhere so far and the impact on the industry:
The world’s second-largest box office market has been shut down entirely for weeks, as have schools, most large factories, many businesses, and much of the interregional transportation system. This action took place swiftly, and with an authoritarian government, without choice or delay.
However, timing has muted the impact on American films so far. The early year is China’s holiday period in which the government (which controls the release schedule) bars foreign films from opening. That’s kept the brunt of early damage to local films, which view this period as the year’s most anticipated.
Government quotas keep non-Chinese films to around 35 a year, or about three a month, with an emphasis on blockbuster, action, and general-audience titles, along with top family films. So far, the films that missed their expected slots weren’t expected to be huge grossers, including “Dr. Dolittle,” “1917,” and “Little Women.” However, it might represent more of a loss for “Sonic the Hedgehog,” which was slated for Chinese release February 28.
The greater impact would come for films like “Mulan,” Bond installment “No Time to Die,” and “F9″ in the ”Fast/Furious” series, which are scheduled to open in late March, mid-April, and May, respectively. These films could survive on any release date — and will surely see play — but it’s likely that top local films will get priority when theaters reopen. Lesser titles, however, may find themselves squeezed out.
A silver lining, if you can call it that, is while the studios’ global box-office total could take a real hit without Chinese theaters, that doesn’t reflect bottom-line impact. In China, most films receive rentals of about 25%; those with Chinese-production participation, around 35%.
The disruption of local productions might elevate the need for Hollywood films in a year or so, but that’s impossible to know; studios might be as worried about bigger trade war issues ahead.
Warner Bros Pictures/Kobal/Shutterstock
What Could Happen in the U.S.?
Theaters would likely be affected parallel to the impact of other public spaces. If theaters shut down, then schools, most businesses, sporting events, and churches will be, too. In other words, that would be an unprecedented situation in which the film business would be a minor part of a much larger story.
Unlike China, of course, we don’t have a single federal authority capable of snapping fingers and closing them. Power to do so likely rests with varying federal, state, or local authorities, and might be challenged legally. (Grounds would include selective enforcement, and good luck ordering churches to shut down.)
Beyond weather-related disasters, there is virtually no precedent for theaters to close in the face of any event. When “blue laws” closed other businesses on Sundays, theaters were open. Some used to shut down either Christmas or Christmas Eve, but today that’s rare.
Theaters stay open in the face of public crises. During World War II, the film industry was considered an essential morale booster. Theaters stayed open the weekend of the Kennedy assassination, and were full. They stayed open on 9/11 (outside the area of immediate impact), with no impact on business. The show must go on.
Perhaps the strongest evidence of theatrical resilience came after the tragic Aurora, Colo. shooting on the opening night of “The Dark Knight Rises” in 2012. Other than the theater itself, virtually no others closed or even stopped showing the film. It had a tiny affect on opening weekend (adjusted, around $180 million) or its eventual near $500 million domestic total.
Those precedents may be rendered moot in the face of a pandemic, but it would take something on that level. And, since America is less densely populated, and regulated, closures might not be enforced as quickly. Still, studios could adjust their calendars for some titles as a measure of protection.
According to one exhibition source with an international footprint, all countries are on alert for what makes sense locally, with little impact as of yet. The expectation is they will follow the leads of the Center for Disease Control and the World Health Organization.
Streaming, the Existential Threat
China is dealing with its school shutdown by teaching students online, if possible. The few companies not suffering big stock losses in the last couple days are those that specialize in work-from-home applications. And ultimately, that also represents’ theaters’ biggest fear: In the face of public health concerns, studios could choose to stream first-run releases.
One precedent is “The Interview,” the Seth Rogen comedy pirated by North Korea. Instead of a wide release at Christmas, Sony played mostly independent theaters (worldwide gross, about $12 million) and at the same time generated $40 million in VOD rentals, with little marketing.
Now, some studios might consider going the same route. If a top title can charge a premium rate and see a 75% rental while avoiding most marketing costs, and generate a huge profit, that would be a game changer.
Theaters have long known that this possibility exists, but no one has dared try it. Coronavirus could make the difference.