China's Cinemas Reopen, But Profits Remain Elusive

Cinemas are fighting an uphill battle for profitability if the limit on the screening auditorium capacity and the lack of new blockbusters continue. The return to normal business may occur next February depending on the course of the pandemic.

By Huixia Sun

Cinemas in low-risk cities across China have been allowed to admit patrons since July 20, as long as they meet strict health and safety requirements, including physical distancing and enhanced cleaning protocols.

Among the top 60 cities with the highest box office revenues, cinemas in 33 cities have opened their doors to the public. Those cities include Shanghai, Shenzhen, Guangzhou, Chengdu, Chongqing, Hangzhou, Suzhou, Nanjing, Changsha and Tianjin.

The routine in a cinema during the subdued Covid-19 epidemic period is epitomized in CGV Cinema in Nanjing. No tickets are sold in the cinemas. Instead, movie-goers have to book tickets online, choosing the screening period and seat number. They get paper tickets in the box office with the proof of their reservations.

Before entering the cinema, they must put on a face mask, get their digital health bar scanned and register their real names.

All popcorn, drinks and food sections are closed now.  

“In order to prevent the resurgence of coronavirus infections, the staff in the cinema must wear gloves and face masks all the time. The capacity in each screening auditorium is capped at 30%. The seating distance of one meter is strictly maintained. We also require all movie goers to wear masks and ban eating or drinking in a screening room,” said a staff member at CGV Cinema.

Given the cinema as a venue of heavy traffic and concentration of people, the intervals between showing periods are elongated at CGV Cinema. Staff members disinfect the showing rooms thoroughly during the intervals. In addition, hallways and ticket offices are cleaned every hour and health conditions of all staff members are monitored and reported every four hours. The ventilation is constantly on in order to guarantee the health and safety of movie viewers.

From Valentine’s Day To Double Seventh Festival

As of 5 p.m. on July 20, day one of reopening after about 6 months of closure in response to the Covid-19 outbreak, box offices across the country totaled RMB3.22 million (about US$457,390), according to Maoyan Data Professional. It is hard to compare with a pre-Covid-19 business day because the cinema industry is a business of averages: operational losses on weekdays can be offset by weekend box offices.

A First Farewell, which debuted on the first day of reopening, led an array of new and old movies in terms of revenues. It announced its premier date right after the China Film Administration announced the reopening of cinemas in low-risk regions on July 16.  

The film, set in a village on the edge of a desert, explores the hardships and losses of three Uygur children, an inseparable trio, against the backdrop of stunning images of seasonal change: lush greenery, winter waterfalls and lonely trees. The lead character, the Uygur boy, experiences heart-warming friendship and a painful farewell to his mom.

This poignant movie reaped RMB1.11 million in revenues, accounting for about one third of total revenues on day one.

On July 20, there were two other new releases. One was a documentary and the other an action movie. All other movies showed were old blockbuster movies, including Wolf Warriors II, American Dreams in China and The Mermaid.

The highlight of the reopening week was on Friday, when two Hollywood movies, Dolittle, based on a classic children’s book, and Bloodshot, based on a comic book, were released in China following their debut in North America earlier this year.

Dolittle, a movie targeting kindergarten kids, reaped RMB3.32 million, accounting for 45.5% of the total daily revenues. Bloodshot came second, taking in RMB1.2 million or 16.4% of the total daily revenues, according to a major website of real-time box office data. 

Due to the Covid-19 pandemic, two Chinese movies --Love You Forever (《我在时间尽头等你》) and Colorful Days(《荞麦疯长》),which were originally released on February 14, are rescheduled for the Double Seventh Festival, also known as the Chinese Valentine’s Day. That special day on the traditional Chinese calendar falls on August 25 this year. The fanfare for the two movies has already started.

From A Negative Number To Zero

As of July 20, cinemas across China had been shut down for 179 days. After about six months of homebound routines, people have become accustomed to watching a movie at home.

Many cinemas are offering extremely low ticket prices to lure viewers back. At the Dianying.taobao app, the price of the first ticket sold for the replay of Ne Zha in a cinema in Chengdu was just RMB3.1. The cinema received only RMB0.1 per ticket after splitting the revenues among the app and other stakeholders. 165 tickets were sold out instantly.

Many cinemas in low-risk cities are still waiting for the green light from local authorities. Different reopening procedures apply in different cities. In some cities, registration with local authorities would work but in others approvals are needed.

Even in cities with a go-ahead from local officials, some cinemas are choosing not to open at least for now.  

“A screening room with the capacity of 100 seats would reach the break-even point only if there are 15 viewers,” said an employee at Wanda Cinema. “Big cinemas can afford the loss but small cinemas may choose to wait a bit.”

In the days immediately after the reopening, many cinemas are just testing the water, rather than aiming for a profit.

Fang Fang, a cinema manager in Shanghai, said: “Additional costs are needed for disinfection, health and safety. However, revenues are less. It is worse than opening a brand new cinema, which is going from zero to one. But this reopening is like going from a negative number to zero.”

There was a very brief cinema reopening in late March. On March 22, a total of 523 cinemas in Xinjiang, Inner Mongolia, Sichuan and Fujian opened their doors, only to score total ticket sales of RMB 41,400. Each cinema received only RMB 79 on average. After five days, the State Film Administration ordered a second closure.

In the first quarter of 2020, China’s cinemas collected the total revenue of RMB2.238 billion, down 88% from the same period of 2019. Revenues for cinemas with a capacity of over 2,000 seats fell by 87.7% but for those with fewer than 500 seats by 91.3%, according to the Association of Chinese Cinemas.

In a market survey conducted by the association, the average revenue for 187 cinemas was RMB344,500 in the first quarter this year but their operating costs in the same period were as high as RMB1.17 million.

Soon after Wuhan was shut down on January 23, all cinemas across China suffered a loss in February. As of late May, 47% of cinemas were plagued by a cash crunch; 42% of cinemas were on the brink of being wiped out.

Of 187 movie theaters, there are 15.4 full-time workers and 7.5 part-time workers on average. As of late March, about 20% of cinemas laid off its workers. Most of the cinemas that witnessed layoffs are those with a capacity of fewer than 1,000 seats. Remaining cinemas have cut salaries.

Fang said that most cinemas cannot afford salaries without a salary cut or a layoff. With the capacity limit at 30% now, the post-layoff employees are enough to cope with the workload.

Without the rekindling of enthusiasm for the cinema experience as Covid-19 still lingers, it may take months for the decimated industry to return to normal.

Many cinema managers predict a long recovery. The release of new blockbusters will lure some moviegoers back to the cinema. On the horizon too is the October 1 holiday, China’s National Day, which will likely lead to another surge in box office revenues. The final return to normal would be the Chinese New Year in 2021, which falls in mid-February. But it all depends on the course of the pandemic in the second half of this year.

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