"Given the continued uncertainties around reopening timelines, capacity restrictions and movie-goer responses, we remain cautious on the pure-play exhibitors," says B. Riley FBR's Eric Wold.
B. Riley FBR analyst Eric Wold in a Friday report said the second-half film release schedule should be considered "in flux" after San Francisco unveiled plans for businesses' restart following the lockdown due to the novel coronavirus pandemic that eyes cinemas to open in mid-August, which is after the currently scheduled releases of Tenet and Mulan.
"While we understand that all of the exhibitors have shored up their balance sheets in recent weeks to provide additional liquidity, given the continued uncertainties around reopening timelines, capacity restrictions and movie-goer responses, we remain cautious on the pure-play exhibitors," the analyst, who recently downgraded his rating on Cinemark, concluded.
San Francisco mayor London Breed's tentative schedule includes movie theaters in phase 3, which has a target date of mid-August "although the possibility of multiple sub-phases could push movie theaters beyond that target," Wold wrote. "Note that San Francisco represents the first of the three major box office cities to actually provide somewhat of a specific date for the movie theater re-openings — with this date coming after the first two key movies currently scheduled to be released following the COVID-19 shutdowns."
After all, Warner's Tenet is scheduled for July 17, its original launch date, with Disney's Mulan set for a release a week later after the studio moved it from its original release date in late March.
Wold concluded that the San Francisco timeline could suggest cinemas in New York and Los Angeles will also open after these dates. "Although we acknowledge that each of the three major cities (and both states) are working on their own individual timelines, we believe the later-than-anticipated opening timeline for San Francisco probably does not bode well for the other two," he explained. "While we do not believe San Francisco on its own would be enough to influence the studios' decisions, we would expect that all three cities would have a major influence. At this point, movie theaters are included in stage 3 in Los Angeles with an unknown timeline, but with Governor Gavin Newsom stating in late April that movie theaters were 'months, not weeks' away. And in New York, movie theaters are included in phase 4 along with Broadway theaters — with some media reports indicating they may not reopen until January."
Wold's takeaway: "While there has not been any significant film release timing shifts in recent weeks around the July/August calendar, we believe the second-half calendar should still be considered in flux. We assume studios are closely watching for any adverse changes in major market reopening time frames and/or movie-goer demand levels in early reopening states (which have been poor according to early reports — with the caveat theaters are showing library titles). We may be in a situation where no studio wants to be first out of the gate even if they have a lack of competition — because an unsuccessful theatrical release would be more painful to the bottom line than delaying the release date before any major marketing spend has occurred."
