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Cinema during COVID: death or diversification

4 January 2021: The pandemic has hit the cinema industry hard, particularly the major chains. But breaking away from the blockbuster multiplex model could breathe new life into the sector.

A central part of Hoylake’s regeneration is the Beacon Arts Village, a new cinema and arts development overseen by people in the local community. Its origins stem from Hoylake Community Cinema, one of several projects created by Community Interest Company Hoylake Village Life as a way to breathe new life into the town. 

The cinema screened a wide variety of films, from old classics to independent, rare and foreign language films. It sold homemade food and operated a bar, holding quizzes and actor and director Q&As to draw large, dedicated crowds. With the actor Daniel Craig among its patrons, the cinema made enough profit to fund other organisations and groups, including a three-year film studies bursary to Liverpool University.

Village Life started looking for a site to create a permanent cinema in 2014. It was able to secure its ideal site, Hoylake’s Old Town Hall, in 2017, with planning permission and funding secured, building commenced on the project in November 2019. Five months into the project, the pandemic shut down the cinema industry. 

While it may have slowed progress on the development a little, the Hoylake Beacon team believe the future is bright for its cinema project. While announcements by large cinema chains such as AMC (owners of Odeon), Cineworld and Vue have highlighted the difficulties cinemas have faced throughout the pandemic, Craig Barton, cinema and marketing manager at the Beacon, believes that smaller cinemas can thrive. It’s not an end to the cinema industry, he says – it’s a ‘factory reset’.

“Many places have been without a local cinema for decades and we believe there is an appetite for fully serviced cinemas in these areas, given the popularity of Hoylake Community Cinema and many more across the UK who have had similar success,” he says. “There's no reason that a small independent cannot thrive in their hometowns; they simply need the right backing, the right food and beverage offering, an audience development strategy and programming strategy.”

Big-budget strategy ‘precarious’

Cinemas have been at the mercy of COVID-19 restrictions and the Hollywood studios. The decision to lock down large areas of the UK around the release of one of the year’s few big films – Wonder Woman 1984 – was a blow that came in tandem with the announcement that Sony would release all of its 2021 films on the HBO Max streaming service at the same time as cinemas. The decision to delay the release of the new Bond film two months earlier resulted in the larger chains announcing cost-cutting measures. 

The UK cinema industry is extremely Hollywood-focused, reliant on high-budget, tentpole blockbusters during the summer and Christmas seasons. While this has been a lucrative strategy, it has also been precarious. 

“Collectively, the large cinema chains have got behind them $26bn of liabilities and $31bn of assets, $893bn of cash equivalents, says Rob Arthur, director at specialist consultancy The Big Picture. “They don’t carry sufficient cash reserves. Hence the reason you've seen this flurry of activity with brands racing in the debt markets, raising debt to shore them up for another three or four months.”

In other, less Hollywood-dependent territories, such as Turkey, China and Japan, the cinema industry has been much more resilient. Toho, for example, one of the biggest chains in Japan, is extremely vertically integrated, creating Japanese productions, distributing and screening films and providing home entertainment. This is the model that Arthur believes the UK should follow.

“Japan was very Hollywood-focused up until 15 or so years ago. They made a conscious decision to be more resilient; they needed to be more in control of their local content. So they upped the ante. For the UK, I would say that's possible, because most of the big productions globally, the Hollywood productions, are produced in Pinewood, Shepperton and Leavesden studios in the UK. We don't have a technical lack of capacity or a financial lack of capacity; we just have a dependency on Hollywood.”

Small-scale benefits

The benefits of diversification can be seen on a smaller scale in the UK’s smaller independent chains. Curzon, Picture House (which is owned by Cineworld) and Everyman have fared much better during the pandemic. They have shown a more diverse selection of films, and with their high-quality food, fully stocked bars and high-end seating, attracted more visitors during periods in which restrictions have eased. “Everyman, Picture House and Curzon did significantly better in performance on the film Tenet than the mainstream operators,” says Arthur. “It was primarily because when people were going back out to the cinema, they were willing to pay the money for a great experience.”

Curzon in particular is following a similar business model to Toho in Japan, with its own development fund, distribution arm, and a home streaming service. “They don't have to be a bricks and mortar cinema,” says Arthur. “That's been a really positive model for the lockdown period. They've raised some investment. They still have to pay rent on their buildings, but they've done much better than others by being far more flexible.”

Pivoting into this kind of model will be difficult for the mainstream chains but it will be necessary if they want to survive, says Arthur. Such a change will take significant investment, however, so it could be difficult for the large chains to make this change while profits have collapsed. Creating a streaming service would also be difficult – with such a focus on mainstream, Hollywood films, they would be competing with the likes of Netflix and Amazon for content. 

“They would have to have sufficiently deep pockets to negotiate an agreement to provide premium video and demand. I know AMC has done a deal with Universal that's not likely to be replicated easily,” says Arthur. 

What this does do is open up the market for more local, independent cinemas, like the Hoylake Beacon. As the big studios look for shorter release windows before releasing films through streaming platforms, there is an opportunity for smaller studios, distributors and cinemas to benefit.

“Shorter windows mean less obligation to play big films on multiple screens for several weeks solid,” says Craig Barton. “In short, this means cinemas will be able to be more creative with their programming to fill their screens. They will need to give more time to mid-level films and play small indie films – the latter wouldn't usually make it into many cinemas pre-COVID. This could be, and, in my opinion, will be, healthy for both sides of the film industry and audiences.”