Cineworld shares have dropped more than 60% as fears grow that the world’s second largest cinema chain is about to declare bankruptcy.
The company, which also owns the Picturehouse chain in the United Kingdom, is in debt to the tune of $5 billion.
Like other movie theater chains, Cineworld was severely impacted by the pandemic.
Cineworld recently reported lower-than-expected post-Covid customer levels, blaming “limited” film releases.
According to the Wall Street Journal, Cineworld is preparing to file for bankruptcy, plummeting its stock price.
Cineworld has been contacted for a response. The company hoped that blockbusters like the latest Bond film, Top Gun: Maverick, and Thor: Love And Thunder would entice audiences to return after Covid restrictions.
“Despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations,” it said earlier this week.
“These lower levels of admissions are expected to negatively impact trading and the group’s liquidity position in the near term due to a limited film slate that is expected to continue until November 2022.”
Cineworld operates 9,189 screens in over 750 locations.
It employs over 28,000 people in ten countries, including the United Kingdom, the United States, Poland, and Israel.
According to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, Cineworld “failed to entice enough moviegoers back to help pay back its enormous debts.”
“Hopes were raised that first spies, then superheroes, then fighter pilots would prove to be the company’s magic bullets, but there simply haven’t been enough blockbusters coming through to break the spell of misfortune,” she explained.
However, Peter Williams, a former Cineworld non-executive director, told the BBC that cinema ticket prices were “too low.”
“I’ve always thought that the ticket or headline ticket price is almost too low. “I mean, it’s still a very inexpensive night out,” he explained.
While Cineworld is likely to undergo major restructuring, he believes it will emerge as a “viable business.”
“This is a big business, and people still want to go to the movies.”
Closures for Covids
During the pandemic’s peak, the film industry was one of the hardest hit, with many theaters closing for extended periods or operating at reduced capacity.
Cineworld reported a huge loss for the first six months of 2020 after being forced to close some cinemas temporarily and movie studios postponed the release of some blockbusters.
In September 2020, the movie studio warned that additional coronavirus restrictions or film delays due to Covid-19 could necessitate additional funding.
These are trying times.
Entertainment reporter Steven McIntosh provides analysis.
Jurassic World: Dominion, Top Gun: Maverick, Doctor Strange, Elvis, and Minions: The Rise of Gru are among the major releases that have kept audiences coming in at a time when theaters are desperate to recover from their Covid losses.
However, Cineworld’s owner claims that there hasn’t been enough to keep the company afloat. They claim that admissions are down because Hollywood has released fewer major films than a typical pre-pandemic summer. Total box office receipts are down a third, or 32%, this year compared to the same period in 2019.
The number of releases isn’t the only consideration. For many years, streaming services have posed a threat to cinemas, and the battle for content has recently become even more heated.
Netflix has spent hundreds of millions of pounds producing films such as The Gray Man and Red Notice and distributing them directly to subscribers’ homes.
As a result, movie theaters have had to work harder to convince customers that it is worthwhile to leave their couch to see a movie.
The autumn and winter release schedule gives some reason for optimism: sequels to the massively successful Black Panther and the even more successful Avatar will be released between now and Christmas.
However, the fact that many other major releases are going straight to streaming services is telling. Disney released two successful live-action remakes in 2019: The Lion King and Aladdin. However, their next big hit, Pinocchio, will be exclusive to Disney+.