Cineworld will be hoping for blockbuster levels of bookings when it opens its cinemas once more, after a year of shocking losses. Its Regal theatres in the US are the first in the queue to reopen in April with movie fans in the UK allowed to take their seats again from May.
After major movie studios delaying big releases, the world’s second largest chain was forced to lock up its theatres across the world, and wait for the flood of panic over the future of the industry to subside. There was even speculation that it might go into administration altogether, but the company was bailed out with over $750m from a group of lenders.
Cineworld shares are up over 350% since low
Cineworld’s share price plunged 86% between February and October. But after it grabbed hold of fresh financial lifelines and vaccine rollouts lifted the curtain on a more positive picture, its share price has staged a comeback, rising by around 350% since its low.
“A swift recovery will be crucial given the company is saddled with high levels of debt but there are fears some movie fans may have got a little too comfortable watching releases from the comfort of their sofas, and might be slow to return to the big screen,” says Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown.
The deal with Warner Bros (45 day exclusive access to new releases) should mitigate some of these concerns, and give it the edge over streaming giants for a period of time. It will have the right to show the studios’ films for 31 days before being available on other services.
Warner Bros deal: will it be enough to save Cineworld from streaming services?
“That window could be extended to 45 days for films that open to an agreed box-office threshold,” says Streeter. “Deals like this are likely to provide the blueprint for the industry going forward, helping cinemas lure in fans eager to glue their eyes to new releases as soon as they can. The window though is small and so advertising spend may be forced to rise to get seats filled before films drift to devices.”
The capacity of cinemas will still be reduced to 50% when they reopen, which will limit the pace of the chain’s recovery as it also means that sales volumes of merchandise and refreshments will also be lower. However, there is hope that the reopening will prove to be a new uplifting scene in what has been a very sorry story for Cineworld over the past year.’
Shares in Cineworld were down 6% at the time of writing (Wednesday) reflecting that some investors may be taking the money and running now. There has been a LOT of optimism around this stock from traders who think they can get some more juice out of Cineworld as the US and UK economies reopen. Looking at the last week or so of trading, however, there are obviously still doubts about just how profitable Cineworld can be over the next 6-9 months.
We think the bigger threat could be streaming rather than COVID: will customers be prepared to take the risk for the big screen, or indeed, will they just get too lazy, and wait for releases to come out on Netflix?
Cineworld told the market this week that it planned to resume UK operations under government guidance in May.