Reg. Trib. Milano n. 418 del 02.07.2007 - Direttore responsabile: Elisabetta Brunella

International Edition No. 169 - year 15 - 10 September 2020

Special issue on the occasion of the 77th Mostra del Cinema, Venice

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The Covid 19 pandemic has a had a strong impact on the cinema industry, deeply affecting and modifying the way of cinema consumption.

This issue of the DGT online informer is presenting an article written by Michael Karagosian, on the US cinema scene, as well as a selection of interesting experiences carried out by European Cinemas.

Cinema and Cinemas in Lockdown and Beyond
by Michael Karagosian

I was asked to report on how the pandemic has impacted cinema in the US. I don’t have numbers for box office, and even if I did, they wouldn’t be worth reporting. It isn’t numbers that I find interesting right now. There are significant trends afoot, and considerations that business owners should now be thinking about.

Two major factors will impact consumer activity at physical retail operations, including cinema. The first is the direct impact of government-directed lockdowns. In the US, these may be issued at the state, county, or local government level. This first factor comes in shades of grey: there is a lockdown in place that requires cinemas to close, or partially open, or no restriction imposed at all.

The map below depicts how lockdown restrictions vary across the United States at the time of writing. It does not break down the variance in degree of restrictions imposed by local governments, but it does show the variance at the state level. As with any good reality show, the US has failed to implement a centralized strategy and everyone is out for themselves. States compete for supplies and equipment, and messages are inconsistent. When the leader of a country spreads doubt about the effectiveness of masks, it’s hard to convince every person to believe otherwise. The result is wide variance in how lockdowns and health-safety guidelines are implemented. The map, created and published by the Washington Post, a news organization owned by Jeff Bezos (not by Amazon), provides a good sense of this. The darker shades indicate strict lockdown rules that include the closure of cinemas, and the lighter shades indicate looser rules, where white represents no lockdown rules.

Map of US State Lockdown Restrictions
last updated 7 Aug 2020

The virus first impacted major metropolitan areas. Lockdowns produced positive results, but economic and political factors led to loosening the restrictions earlier than medical experts now wish had taken place. What could have been a purely medical response turned into a political football. The result is that the virus is now spreading to all of the regions of the country, including those previously spared. This is evidenced by the illustration below from the New York Times.

Map of Current US Infections
captured 14 Aug 2020

Three months ago, the West and East Coast regions of this map were red, with sprinkles of color in the middle of the country around major population centers. Three months from now, the map will again be different, possibly with more color in the Western half. In California, where I live, the center of the state is now a major hot spot, where the impact was only mild before. Sadly, as has been said by many medical experts and reporters, the virus doesn’t discriminate.

The second factor that impacts consumer activity is the social response to the virus. As the virus impacts a region, people become wary of being around one another. The degree of wariness may vary across age groups, but overall consumer behavior is impacted nonetheless. It is this second factor that should not be underestimated. Of the many stories recorded from survivors of the 1918 flu pandemic it was the late William Sardo Jr.’s story that stood out to me, when recalling that it took four years before people were once again comfortable to congregate.

It is this fear to congregate that should be the focus of today’s business conversation. The antidote to fear is trust, and building trust is the job of business owners. Every store-front business owner today should be concerned with how to build confidence to congregate. It should be thought of as part of one’s brand. The anti-brand, of course, would be for one’s business to be labelled as a hot spot of transmission.

For cinemas, the requirement for employees and the public to wear masks is a starting point. Attention to air circulation is also needed, with the intake of fresh air and possibly 24-hour fan operation. If UV254 light in HVAC systems is proven effective, it may become the defining investment of this period. On the downside, allowing food and beverage consumption in a closed room will be brought into question, as it becomes the common excuse for not wearing a mask while watching a movie. It’s important to note that health experts do not expect vaccines to be 100% effective. Mask wearing and social distancing will continue to be required until the number of new cases reaches a safe minimum. It’s not inconceivable that Mr. Sardo’s 4-year recovery could repeat itself with Covid-19 if businesses rush into re-opening unprepared and with the wrong messages.

There have been some missteps in the US with regard to building confidence to congregate. The map below highlights how early openings have resulted in reversals in many states. Early openings have had a consequence.

Map of the Reopening (and Closing Again) of US States
captured 17 Aug 2020

The messages we communicate are important. The CEO of a major US cinema chain said in June that its cinemas would open but not require guests to wear masks so as to "not be drawn into a political controversy." Such policies are dangerous to a cinema’s brand. Any reasonable person concerned about their health isn’t going to gravitate towards sharing a closed room with other people who do not share their sensitivity. Fortunately, after creating his own controversy, the CEO changed his mind. But the goof underscores the responsibility of the business owner in building consumer confidence, and in turn, building brand. On the surface, it may seem counterintuitive, but stricter policies, not looser policies, will be needed to attract consumers speedily to retail operations again, including cinemas.

In addition to those factors that will affect attendance, one should consider that the cinema business itself is unlikely to come out of this unchanged. In addition to the pressure of keeping doors open with reduced audiences, the length of the exclusive first release window will come into question.

Changes to the release window will not be driven by bold policy, but the distributor needs to monetize inventory. For now, with little new content in the production pipeline, not much friction has occurred. There have been direct releases of movies to home through PVOD, but not such that one could say a major policy shift has taken place. Release dates of blockbusters have been shifted in a bid to maximize revenue through maximizing cinema attendance. While this may signal support for the tried-and-true motion picture release model, it is fragile.

Release dates can be comfortably shifted when there’s little new inventory to fill the pipeline, and, of course, when the capital that financed the production is cheap. But things will change. Content production will ramp back up long before audiences are again comfortable being packed into cinemas. With full pipelines that need to be monetized, the value proposition of cinema supported by a lengthy first release cycle won’t be as strong as it once was. The industry is likely headed towards significantly shorter first release windows from the majors. Whenever the release window has shrunk, it has never been known to expand again.

There is another factor that has cropped up that could lead to changes in the US cinema business. Since 1948, most major studios were restrained from ownership of US cinemas and block booking by an anti-trust decision called the Paramount Decree. The Decree was recently reversed, not unexpectedly, with a 2-year sunset placed on block booking and ownership restrictions. In the pre-pandemic world, this reversal would have made headlines, at least in exhibition circles. Today, it takes a back seat to the damage caused by the pandemic. Where this will lead is anyone’s guess.

None of this is to say that the attraction to spectacle will forever vanish. There may not be a magic wand that returns the business to what it was pre-2020, and the industry is likely to go through fits and starts before things settle.  But there will be opportunities. 

Consider the pressure on DCI that shrinking release windows will have.  If the major studios are willing to release to non-DCI consumer gear a few weeks into a release, will the expense of ultra-secure DCI equipment in cinemas be justified?  This is important, as much of the equipment in the field is at the end of its useful life and replacements will be sought. 

Additionally, independent cinema has a plus-side to consider.  With VPFs now out of the way, the cost of fulfilling independent and regional productions will fall. This is a ray of light in challenging times, however faint. Then there is production to consider, where tools are in the pipeline that will make it easier, faster, and cheaper for storytellers to create their vision with professional results, enabling independent writers, directors, and producers in new and positive ways. 

And, of course, there are new technologies to consider, in particular the availability of large light-emitting displays.  At CES this past January, no less than five major LED display manufacturers touted wall-sized displays designed for entertainment.  These were not DCI displays, but that may not matter in the future.  The unique property of light-emitting displays is their ability to deliver a quality image in a partially lit room, inviting new movie experience models that will likely involve more food and beverage.  All of these things will coalesce in the years to come.  

Sadly, the impact of COVID-19 on human health is by no means over. The effect of this disease on the movie industry, and on business in general, is very much present and could linger for years after. Owners of store-front businesses, including cinemas, face a great many challenges, among which is the need to expand the brand to include trust in guarding the customer’s health.

Attention to air circulation and air quality will be necessary to build confidence in congregating. Ironically, the US, once a leader in cinema and in health, will be a follower, well behind those nations whose infection rates are under better control. There will be a day when cinemas again entertain audiences in auditoriums filled to capacity, but it is unlikely to look like the business we knew.


New experiences in European cinemas
by Elisabetta Brunella

During the pandemic a great many films were viewed - and still are - obviously online.  EuroVOD, the association linking dozens and dozens of platforms specializing in European and quality cinema in the Old Continent, compared the pay transactions in March 2019 and those in March 2020: they had increased fourfold. Members of EuroVOD experienced increases varying between 15% and 1 000%.

But, for spectators viewing the films is not enough: they want to reproduce the "cinema-going" experience. How do we know this? First of all from popcorn sales! In Ireland - a country where a survey has also been carried out based on 1 300 interviews showing how strongly the demand to get back into the movie theatres is felt - sales of the fluffy corn have increased by 63%! Going to the cinema is much more than just watching a film: this is why there have been so many initiatives by exhibitors for recreating the theatre atmosphere. In Hungary, Budapest Film, the second biggest operator in the country, with six sites in the capital city, has created the "Remote Cinema": films for online viewing, that can be paid for on the cinema website, programmed at fixed times, introduced by experts and accompanied by a chat with and amongst the spectators. "When we thought up this initiative," explains Tamás Liszka, CEO of Budapest Film , "we had two objectives in mind: to let our audiences see that, even in such exceptional circumstances, we wished to continue offering them the opportunity to "go to the cinema" and also to motivate our staff at a time of great concern and frustration. On both fronts the response has been extremely positive."Similar initiatives - i.e. exhibitors who have succeeded in having their audiences turn to their own trusted movie theatre instead of a platform that was perhaps generic and lacked a particular personality - were also launched in other countries. In the Slovak Republic, 22 cinemas joined together to create "Cinema on the Sofa", whilst Kino Lumière in Bratislava, linked to the national film archives, together with three other cinemas offered screenings of full length features preceded by short films from the archives with an introduction by the critic and historian Miroslav Ulman and an exchange of opinions amongst participants. In Italy, to quote just one example, Milan’s Cinema Beltrade transformed its daily, quality, screen-sharing programme onto its own platform. France’s first virtual cinema is called "The Twenty-fifth Hour" and has organized screenings with the directors present "at a distance". Members of the public who are interested can register online and, by means of geolocation, receive information and invitations from their nearest cinema.

Another formula that has taken root during this period of emergency is the drive-in, far easier to organize nowadays thanks both to the easy, "portable" or even inflatable screens and to the Bluetooth-connected audio devices provided for every vehicle on purchasing a ticket. Introduced - in their itinerant version - into Belgium and the Netherlands by a Kinepolis initiative, but also in Great Britain, Hungary and, for the first time, in Finland and Serbia, they have experienced an authentic boom in the Czech Republic. The "classic" summer arena, highly popular in Italy and Greece, is also experiencing something new: in Mantua it is going green and is called "bike-in". And so there has been a large demand for cinema on the big screen, both during lockdown and in this "trial" re-opening. Confirmation comes from Carla Molino of IL KINO in Berlin: "My theatre seats 52 and I was afraid that only being able to use 19 seats wouldn’t make any business sense. And yet, I often find myself sold out - obviously with online sales. Up to now I‘ve screened the films from the Berlinale and those that should have been released in the spring. What’s going to happen in the coming months, if we don’t get the films whose production or distribution have been blocked by the lockdown?" A similar cry of alarm comes from Michael McAdam, a Northern Irish exhibitor, who has launched an appeal for the U.S. productions to be released in Europe before their country of origin, still plagued by the pandemic.

This text is based on an article published in the Venice Film Festival issue of Cinema & Video Int'l, the MEDIA Salles media partner.


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