Avatar 2 and Glass Onion prove cinema is back – but too late to save theatres?

Avatar 2 and Glass Onion prove cinema is back – but too late to save theatres?

UK box office is expected to climb to £950m this year and £1.12bn next year, just more than £100m shy of pre-pandemic levels

Kate Winslet and James Cameron at the Avatar: The Way of Water film premiere in London.
Kate Winslet and James Cameron at the Avatar: The Way of Water film premiere in London. Photograph: James Gillham/Rex/Shutterstock

From lofty optimism that Avatar 2 might join the ranks of the highest-grossing films in history, to streamers and studios rediscovering pre-pandemic profits, cinema is finally getting its mojo back. The problem is, it could be too late for cinema owners.

Cinema bosses have latched on to blockbusters including the sequels to Top Gun, Black Panther and a commitment to the big screen represented by Avatar: The Way of Water – officially the most expensive film ever made – as proof that audiences are ready to get back in front of big screens.

When the final ticket stubs are counted, the UK box office is expected to climb to almost £950m this year and £1.12bn next year, just more than £100m shy of pre-pandemic levels.

And yet hidden behind the long-awaited revenue recovery, cinema’s difficulty continues to be admissions. For some movie fans the glut of streaming content has proved a hard habit to break.

Admissions in the UK are forecast to hit 124m this year – a veritable boom compared to 74m last year and just 44m during peak-Covid in 2020 – but still 42% down on the 176m in 2019 before the turmoil began.

While some movie-going demographics remain stubbornly resistant, particularly among still cautious over-55s and younger audiences that find streaming ticks the viewing experience box, movie bosses are convinced the issue is down to a pandemic-driven lag in the production and supply of films for the big screen.

“It is just a supply issue,” says Tim Richards, the chief executive of Vue, Europe’s largest privately owned cinema chain. “We won’t be back to pre-pandemic levels of releases until the back end of next year. There is a lot of evidence [of successful films] now behind us, but not a lot of movies ahead of us.”

There were 92 films released annually on average in the UK between 2017 and 2019, compared to only 62 this year, according to Vue. A third fewer films, and the loss of all-important significant extra spend on food and snacks, is crippling for cinema owners.

In September, UK-based Cineworld, the world’s second-largest cinema chain, filed for bankruptcy protection in the US after succumbing to almost $9bn in debt and lease liabilities. Earlier in the year, Vue was forced to go through a major financial restructure, wiping out equity holders.

US-based AMC Entertainment, owner of the UK’s largest chain Odeon, has seen its market value plummet 80% as the world’s largest chain burns through cash reserves and services $9.5bn in long-term debt. Creditors are reportedly preparing for the worst and have started talks with restructuring advisers.

“We need more movies,” said Adam Aron, the chief executive of AMC. Its status as a meme-stock sent shares soaring during the pandemic and financially insulated the business for a time, but that boost was temporary and has long since worn off.

Film release levels are expected to return to about 85% of pre-pandemic levels next year – with the biggest studios such as Disney, Universal, Warner Bros, Sony and Paramount back well over 90% – pushing UK revenues to just 10% shy of 2019’s £1.25bn.

Sandra Bullock and Channing Tatum’s The Lost City was one of just a few commercially successful small releases this year.
Sandra Bullock and Channing Tatum’s The Lost City was one of just a few commercially successful small releases this year. Photograph: Paramount/Kimberley French/Allstar

Big budget blockbusters requiring the financial return offered by a global big screen release to hit profitability are flooding back.

Director James Cameron is banking on a cinema revival, stating that Avatar 2 needs to become the third- or fourth-highest grossing film of all time to be a success – meaning box-office takings in excess of $2bn by the time the film leaves theatres.

However, there is still a dearth of smaller commercial releases, notwithstanding the success of Sandra Bullock and Channing Tatum’s The Lost City, George Clooney and Julia Roberts’ Ticket to Paradise and horror flick Smile.

“We have seen the lag persist for longer than we thought it would have,” says Otto Turton, the group director of sales, content and pricing at Vue. “Is there a genre of films we are not seeing as many of now as people are used to seeing them released to stream at home? Maybe. But films such as Ticket to Paradise, The Lost City and Belfast have done well in cinema, they are working.”

It could well be streaming services, the cinema industry’s bete noire during the pandemic as studios experimented with bypassing movie theatres altogether, that plug the final financial gap. Their business models are shifting, from a wildly-loss making splurge designed to keep viewers at home, to one of one of sustainability and profits.

Glass Onion could have made $60m and led the North American market if it had longer in theatres, data suggests.
Glass Onion could have made $60m and led the North American market if it had longer in theatres, data suggests. Photograph: John Wilson/Netflix © 2022

Netflix’s co-founder and chief executive, Reed Hastings, saw the popularity of the one-week cinema release of Glass Onion: A Knives Out Mystery, and concluded he had left “a lot” of money on the table by not running it longer on the big screen.

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Netflix did not release box office figures, but industry estimates on Glass Onion’s short performance suggest it could have made $60m and led the North American market had it been given a longer outing.

And last month, Amazon – which in 2021 spent $8.5bn buying MGM, the Hollywood studio behind the James Bond and Rocky franchises – committed $1bn annually to release eight to 10 films a year on the big screen – putting it on a par with major studios.

In addition, traditional studios are brutally reassessing how output such as films and movies should be exploited to maximise profits.

“What happened with Glass Onion and working with Netflix was unthinkable just a few years ago,” says David Hancock, research director of cinema at Omdia. “Theatre releases can be extremely lucrative. Theatre releases also give movies more relevance, it differentiates them from the avalanche of streaming releases, bringing subscribers value, it is like a Kitemark.”

Avatar 2 may not ultimately bring cinema back to peak performance as a $40bn-plus annual industry, but that is not necessarily a bad thing.

“So what if we wind up a slightly leaner business than before the pandemic?” says Paul Dergarabedian, senior analyst at Comscore. “Numbers matter but it doesn’t mean to say the industry is failing if it didn’t happen to return to $40bn. Not if the upshot of the pandemic is that what we have is a leaner, meaner and more efficient business.”

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