How Movie Theaters Fought to Survive (Another) Year of Turbulence and Change

·14-min read

Earlier this month, Virginia-based movie theater owner Mark O’Meara witnessed something he hadn’t seen in nearly two years. A packed house.

Audiences filled the 190-seat auditorium at University Mall in Fairfax to watch “Spider-Man: No Way Home,” the epic finale in Tom Holland’s web-slinging superhero trilogy. In the days since, the Sony Pictures and Marvel Studios film has become the kind of global box office juggernaut that once seemed impossible in the wake of COVID-19. “No Way Home” has already earned $1 billion globally after less than two weeks in theaters and it is continuing to put up monster grosses through the holidays.

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“I went in front of the crowd and waved my hands. I think we filled up because other theaters were sold out,” O’Meara says. “We’re not as well known, and there were a significant number of people who had said they had never been to our theater before.”

For cinema operators like O’Meara, the latest Spidey movie isn’t merely a deus ex machina, something that swings in like a gift from the heavens to boosts ticket sales and popcorn purchases. It’s also a welcome reminder, after a brutal 22 months, that movie theaters can still create a kind of grand cultural happening that simply can’t be replicated on Netflix.

“This is such a good harbinger for the future of the theatrical business coming out of the pandemic,” says John Fithian, chairman of the National Association of Theatre Owners, the exhibition industry’s main lobbying arm. “It’s fantastic news for the rest of the year and into 2022. We think this is a turning point for us.”

Getting to this point has been a struggle, and the rate of change in a century-old sector of the entertainment industry has been stunning. Major studio films like “Dune” and “Halloween Kills” were refashioned as simultaneous HBO Max or Peacock releases. Streaming services snapped up some of the buzziest projects on the market and, in the case of Amazon, bought one of the most storied studios in Hollywood history by signing a deal to acquire MGM, the home of James Bond. And AMC Theatres, no one’s idea of a “cool company” before COVID was a thing, improbably emerged as a meme stock embraced by an army of Reddit traders who sent its share price soaring into the stratosphere. But the headaches, hurdles and head-spinning twists and turns aren’t over yet.

Even as Peter Parker continues to capture more and more moviegoers in his web, the movie theater industry continues to grapple with major challenges. “Spider-Man: No Way Home” has been an optimistic coda to an otherwise downbeat year at the movies, at least in terms of most films’ commercial performance. The domestic box office was much improved from the dumpster fire that was 2020, with total revenues expected to top out at roughly $4.4 billion. That’s a massive 91% increase from 2020, which was after all a 40-year low for the business. However, it’s down approximately 61% from pre-COVID 2019. The good news is that frequent moviegoers, defined as those who go to theaters once a month or more, have returned in force, but ticket buyers who go to a handful of movies annually aren’t really buying many tickets. About 49% of pre-pandemic moviegoers are no longer going to multiplexes, and some of that contingent, roughly 8%, have likely been lost forever, according to studies.

And the rise of COVID cases fueled by the omicron variant has substantially dimmed the prospects for a full-scale recovery regardless of how well the latest “Spider-Man” sequel does at the box office. Take the Christmas holiday as an example of the uphill climb many films face as they try to reach profitability. As “Spider-Man” continued to draw crowds, Steven Spielberg’s rapturously reviewed musical “West Side Story,” Guillermo del Toro’s star-studded thriller “Nightmare Alley,” Disney and 20th Century’s action sequel “The King’s Man” and the Warner Bros. sci-fi action thriller “The Matrix Resurrections” bombed, sank and played to largely empty houses. These films were either pitched at older crowds who are skittish about returning to multiplexes at a time when COVID is out of control or, in the case of the fourth “Matrix,” were released simultaneously on streaming. There are valid reasons why they failed to ignite, but their paltry grosses also illustrate the vast chasm that now exists between success or failure.

Critics and awards groups fell hard for “West Side Story,” “Belfast,” “Spencer” and “C’mon, C’mon,” but reviews alone couldn’t drive attendance, and those films will likely be money losers. In the case of “West Side Story,” an adaptation of a beloved musical from Spielberg, one of Hollywood’s most revered directors, the film is a massive write-off, grossing an anemic $37 million globally on a $100 million budget. Things have gotten so dispiriting that last weekend A24 didn’t even bother to share box office revenue for “The Tragedy of Macbeth,” revealing only that it had “multiple sellouts.” Well, alright then.

As “Spider-Man” continued to draw crowds, Steven Spielberg’s musical “West Side Story,” Guillermo del Toro’s thriller “Nightmare Alley” and the Warner Bros. sci-fi action thriller “The Matrix Resurrections” played to largely empty houses. - Credit: Courtesy of Sony/Everett Collection
As “Spider-Man” continued to draw crowds, Steven Spielberg’s musical “West Side Story,” Guillermo del Toro’s thriller “Nightmare Alley” and the Warner Bros. sci-fi action thriller “The Matrix Resurrections” played to largely empty houses. - Credit: Courtesy of Sony/Everett Collection

Courtesy of Sony/Everett Collection

Tom Bernard, co-founder of Sony Pictures Classics, the indie studio behind “Parallel Mothers” and “Julia,” thinks the movie business needs to do a better job making the case that it’s safe to return to theaters. He notes that no major outbreaks of COVID have been linked to cinemas and argues that theaters have gone to great lengths to take precautions, spending heavily to refurbish their ventilation systems, for instance.

“The older audience they will come back when they feel safe,” he says. “But the theaters have not done enough to make it clear what you can expect when you go there. It’s much safer to go to a movie theater than it is to go to a bar or restaurant. People will return to cinemas, but we need to give them a reason.”

Sony Pictures Classics has remained committed to having its films appear in theaters, but other indie players have embraced alternative distribution plans. IFC, the backers of “Benedetta” and “Bergman Island,” has released movies day-and-date in theaters and on-demand for more than a decade and continued to do so with certain titles throughout the pandemic. It has also put a growing emphasis on its parent company’s own in-house streaming platform, AMC Plus. Next year, for instance, IFC will release “Nitram,” a searing drama about a mass killing that debuted at the Cannes Film Festival, simultaneously in cinemas and on its streaming arm, a first for the studio.

“I would describe this last year as a roller coaster where we played kind of Whac-A-Mole with COVID,” says Ariana Bocco, president of IFC Films. “We did develop a better understanding of how our audience is watching films and where they’re watching films. One thing we have found is older arthouse audiences haven’t come back to theaters in the same numbers. Instead, they have discovered the ability to watch things at home and they’re enjoying that freedom.”

As moviegoers sought out escapism, usually in the form of costumed vigilantes, many films featuring human beings coping with more human-sized problems such as Aaron Sorkin’s showbiz drama “Being the Ricardos,” writer-director Sian Heder’s feel-good family film “CODA” and Maggie Gyllenhaal’s searing directorial debut “The Lost Daughter” migrated to streaming services such as Amazon, Apple or Netflix, where they were shielded from the harsh scrutiny of opening weekend box office grosses. Not all of the films that were made available to stream hailed from the prestige side of the aisle. In many cases, films that began their life as traditional studio fare such as Eddie Murphy’s sequel “Coming 2 America,” the animated “Hotel Transylvania 4” or the Michael B. Jordan-led “Tom Clancy’s Without Remorse” were sold off to streamers when the likes of Paramount or Sony opted for the security of a big paycheck.

And yet it’s hard not to feel as though something is being lost at a time when only Marvel movies and franchise fare are earning their box office keep. In a recent interview with Variety, Jane Campion, whose revisionist Western “The Power of the Dog” was only made possible because Netflix agreed to finance the risky project, lamented the fact that studios relying on movie theater releases are no longer receptive to challenging works of cinema, even as she hailed the convenience and artistic daring of streamers.

“When I look back on my life or I look at life, I remember moments, peaks of waves, that have cemented themselves in my brain,” she said. “And some of those are in cinemas. And when I remember these moments that were, for me, extremely powerful, I remember where I was sitting in the cinema. I remember even what I had on. And it’s all a part of how the memory works to encase that moment for me. And I’m afraid that if we watch everything at home on our TVs, they don’t have any particularity. They just melt into each other.”

So while “Spider-Man: No Way Home” is an undisputed success for theater operators, the increased reliance on superheroes and sequels is worrisome to people whose livelihoods are rooted in the movies.

“I don’t like having the world live and die by one movie,” says O’Meara, who also owns an arthouse theater called Cinema Arts. He points to several late summer and early fall releases, specifically Paul Schrader’s revenge thriller “Card Counter” and the Jessica Chastain-led biopic “The Eyes of Tammy Faye,” as indies he offered in between popcorn season blockbusters. But despite buzzy stars and solid reviews, attendance for those films were barely enough to keep the lights on. “I kept bleeding cash,” he says. “That’s the way it goes.”

Of course, it could have been much worse for operators like O’Meara. In March 2020, when COVID first beat its deadly path across the globe, movie theaters had no choice but to dim marquees, shut their doors and layoff and furlough thousands of employees. Many predicted that the global health crisis would spell end times for the exhibition sector, but a series of tax breaks and government assistance helped keep many cinema operators afloat. The past two years have left many dangling on the precipice, but most cinemas have managed to hang on, with only 5% of U.S. screens closing since the start of the pandemic.

“Considering that the pandemic was the greatest existential challenge to moviegoing ever, we are very proud of this record,” says Fithian. “We were able to survive because Americans love the communal experience of the movies and the government decided it didn’t want this cultural, artistic institution of the cinema to go away.”

Many predicted that the global health crisis would spell end times for the exhibition sector, but a series of tax breaks and government assistance helped keep many cinema operators afloat. - Credit: Ian Allen for Variety
Many predicted that the global health crisis would spell end times for the exhibition sector, but a series of tax breaks and government assistance helped keep many cinema operators afloat. - Credit: Ian Allen for Variety

Ian Allen for Variety

Some chains, such as the Texas-based Alamo Drafthouse, were forced to declare bankruptcy, but have reemerged from Chapter 11 and are planning for a future free of onerous debt. Tim League, the founder of the cinema company which helped popularize the idea of dine-in moviegoing, says that Alamo still plans to keep expanding in 2022.

“When you tear down the company and build it back up from scratch, you’re able to make it a more efficient company,” says League. “We’d been sort of building this Frankenstein monster over 25 years, and this allowed us to reassess and figure out how to do things differently. We feel confident we’ll hit our numbers for 2022 and that we can be a profitable company again.”

In this time of change, studio executives have been closely examining the data to determine ticket buyer’s new criteria for movies that demand to be seen in theaters. Now that most pandemic-delayed tentpoles have finally been released, Hollywood also has to figure out the kinds of films to greenlight in the new theatrical world order. In 2022, industry insiders expect there to be an emphasis on re-educating consumers, many of whom spent the past two years watching new movies from their couches, on where and when to watch upcoming blockbusters.

“It’s gradual. It’s not a light switch. Behavioral changes take a while,” says Warner Bros. domestic distribution chief Jeff Goldstein, referring to the process of getting audiences back to theaters. “We have segments of the audience returning, but they’re not returning with the same frequency.”

For Hollywood studios, 2021 was a year of great experimentation and the rare chance to relentlessly test movie distribution patterns in ways they had salivated over prior to the pandemic. For decades, the only way to watch a new movie was in theaters. Now, individual studios don’t even have a uniform way to release a movie. In the past 12 months alone, some movies played exclusively in theaters for anywhere from 12 to 45 days before jumping to digital platforms, and others were made available on streaming services on the same day as their theatrical releases. The advent of the pandemic coincided with the launch of several new streaming offerings such as Peacock, HBO Max, Paramount Plus and Disney Plus, which were owned by the media conglomerates that house traditional movie studios. This, in turn, gave those studios even greater flexibility when it came to deciding how a movie would be released. It’s also changed the way that these companies measure — or at least spin — success or failure. “The Many Saints of Newark,” for instance bombed at the box office when Warner Bros. released it last fall, but it helped drive interest in the studio’s streaming cousin, HBO Max. In other cases, the shorter theatrical window has allowed films that are struggling at the multiplexes to more quickly reach consumers who might be willing to pay $20 to rent a film on-demand that they’re not inclined to travel to their local theater to check out.

“What does success look like?” says Abhijay Prakash, president of Universal Filmed Entertainment Group. “It’s moved around. It used to be film studios were almost solely defined and measured by the things that you could see and observe, like box office. It’s still the best signal of how profitable a movie may end up being, but the earlier you have something going to a subscription service or on-demand may change that significantly.”

Theater owners have mostly resigned themselves to their abbreviated window of exclusivity, but they are concerned that customers have grown too accustomed to being able to rent or stream movies in their homes at the same time they open in cinemas.

“If windows are 45 days, I do not have a problem with that because 90% of our gross happens within that time frame,” says Tearlach Hutcheson, VP of film at Studio Movie Grill, a movie theater chain with 21 locations across the country. “I’m more concerned with how we retrain people that there’s a theatrical window again. Everyone in the industry should be concerned about that.”

It may be comforting for film operators to know that after a year and change of trial and error, Hollywood has concluded the theatrical window might not be worth writing off entirely. It’s harder to generate excitement for a film that doesn’t have that kind of exclusivity, and it’s even harder to generate a profit. That’s why most blockbuster-hopefuls from major studios are expected to screen in cinemas for an exclusive period (around 45 days for most, but more in some cases and less in others) of time before jumping to streaming platforms or digital rental options.

“We’re really leaning into 2022 as ‘only in theaters’ to create heat that these movies are to be seen first in theaters and afterword on streaming,” says Goldstein.

Next year will offer cinema operators a chance to screen sequels and spinoffs to some of the most popular film franchises in history. The murderer’s row of big screen offerings includes “Black Panther: Wakanda Forever,” “Thor: Love and Thunder,” “Jurassic World: Dominion,” “Avatar 2” and “The Batman,” an update of the Dark Knight saga with Robert Pattinson donning the cape and cowl. It may be lacking in originality, but it’s the kind of lineup that seems tailor-made to pack auditoriums.

“We have to keep promoting the fact that watching movies is better as a group,” says O’Meara. “Theaters are a much better place to watch a movie. I still believe that. There’s something about the social-ness of going out. There’s no way a scary movie is better at home… or a comedy, or a drama.”

It will be the audiences who decide if they agree with O’Meara, and their actions will determine which stories get told on the big screen and which ones find a permanent home on streaming. The future of an art form hinges on audience’s decision.

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