The company, the world’s second largest multiplex cinema chain, said that they are struggling with an over five billion dollar debt, with no clear way out.
Taking a Hit from the Pandemic
The company, which also owns Picturehouse in the UK and CinemaCity in Hungary, expressed that whatever happens, their cinemas will ‘remain open for business’ and that there would be ‘no significant impact on jobs’.
Cineworld currently employs over 28,000 people globally. Like many other cinema chains, Cineworld took a significant hit during the pandemic. Many theatres were forced to close for long periods of time during the lockdowns or had to operate at reduced capacity. In addition, industry experts opine that people just got out of the habit of going to the cinema as a result of the pandemic, as almost everybody switched to online streaming services during the lockdowns and are comfortable using them in the long-term.
Cinema chains hoped that their new blockbusters such as the new Bond movie, the new Top Gun and the new Thor would all lure back their audiences after the lockdown period ended. The new Top Gun movie starring Tom Cruise has in fact amassed over 1.8 billion dollars at the global box office, which made it one of the top 10 highest grossing films of all time. However, last week Cineworld expressed concerns about there not being enough major movies around to boost audience numbers.
Still Struggling to Stabilize
In 2019, before the pandemic, the annual gross revenue of box offices worldwide was at a record 42.5 billion dollars according to Comscore. Films like Jurassic World Dominion and Minions: The Rise of Gru have done well so far in 2022. But compared to 2019, box office receipts this year are down by around a third, or 32 per cent.
Streaming services, whose popularity rose during the lockdowns, also pose a serious threat to cinema chains. When Universal Pictures released Trolls: World Tour online at a time when theatres had to close due to the coronavirus in 2020, Cineworld and rival AMC, which controls the chain of Odeon Cinemas, announced they would ban Universal’s films from their cinemas when they reopen. Cineworld has recently agreed with Warner Bros to reopen cinemas in the US on condition that films be screened in theatres first before they are streamed. But inflation and the rising cost of living have now taken their toll on streaming services, too, with Netflix reporting a steep decline in subscribers as a result of economising consumers.
Last Friday, the stocks of Cineworld took a deep dive, with shares plunging 60 per cent after The Wall Street Journal reported that the company is set to file for bankruptcy within weeks. Cineworld announced this Monday that they are looking at different ways to restructure their business – including a Chapter 11 filing in the US. This filing would allow the company to operate normally while they are negotiating with their creditors.
The company did not comment on whether they are looking to liquidate in the UK, or if they do, how their 4,600 employees there would be affected. They also did not discuss what would happen to those who hold Cineworld or Picturehouse subscriptions or vouchers. The company stated: ‘Cineworld would anticipate to retain its activities in the regular course up until and beyond any filing and eventually to continue its business over the longer term with no significant impact upon its workers.’
In the UK and Ireland, Cineworld operates 128 theaters. It has 9,189 screens total, spread over more than 750 venues. It is active in ten nations, including the United States, Poland, and Israel. Although Cineworld has a market value of about $69 million, it is nearly $5 billion in debt. The company has grown by making acquisitions all across the world. However, it abandoned a proposal to acquire Cineplex two years ago, sparking a protracted legal dispute in which the Canadian company demanded significant compensation from Cineworld.
On Monday morning, Cineworld’s stock price slightly increased. However, the share price is still far from where it was at the beginning of 2020.
Cineworld also owns CinemaCity, the largest cinema chain in Hungary. If the filing for bankruptcy happens, there is no telling whether these cinemas would continue to operate, despite Cineworld’s pledges to the contrary. In Hungary, willingness to visit theatres also plummeted after the pandemic with online streaming services gaining more and more popularity. Recently, Disney+ also started to stream in the country, creating even more consumers who prefer to stay in the comfort of their home to watch a movie – since they already paid for it.