“The impact in 2020 from Covid-19 (coronavirus) on the motion picture business cannot be overstated,” a finance source recently told us. That’s as the closure of cinemas in China alone is approaching a loss of $2B to the global box office, while the disease has now seen spikes in Korea and Italy. What looked in late January as a possibly short-term, confined issue has now taken on enormous proportions, clearly on a human scale, and also on the film industry. As movie theater attendance has slowed in several markets, compounding the losses, an estimate we’ve heard in overall ticket sales impact could be as high as $4B worldwide by the end of March. A ringing question in distribution circles is how long the situation will continue. Says one source, “We are decision makers and problem solvers, but unfortunately because the problem is so unknown in terms of its degree, we just don’t know how deep we’re in. No one knows.”

Italy, a mature major, brings up concerns of a possible spread onto the European continent. Currently, about 50% of cinemas have been closed there, including in the Lombardy region, which is home to Milan. Amid those closures, we hear some studios have also made the decision to delay releases of upcoming titles including The Invisible Man (Universal) and Onward (Disney), while local films are also being affected. Venice’s Carnival events too have been called off and Paramount said this week the studio was altering the production plan for a three-week Venice shoot on Mission: Impossible 7. That was amid efforts of the local government to halt public gatherings in response to the virus’ threat.

The prospect of a spread across Europe is “definitely very scary,” notes a distribution exec. Such a scenario “would have major repercussions on the business as the year heats up.” There have been further new cases in the past days including in France, Germany, Spain, Austria, Croatia, Greece and Switzerland. In total, according to statistics published earlier today, the number of cases is approaching 81K worldwide with nearly 3,000 deaths.

The situation in Korea — which has been basking in an Oscars afterglow — is particularly worrying as it is the world’s fifth largest box office market. As we noted on Sunday, Disney moved Pixar’s Onward off of its date there while the Global Times reports local pics Call and Innocence have also been delayed. The Korean Film Council said last week that attendance was sharply down; a challenge, we hear, is fewer screenings because there are longer periods between shows so that theater teams can sanitize auditoriums.

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Elsewhere, estimates we have heard are that Hong Kong attendance was down 81% in one week this month versus the same period last year, and Singapore was off by 64%.

Japan — notably following the Diamond Princess cruise ship saga and amid sluggish response — is also a concern. (Other sectors are of course being affected in many places with implications for broadcasters and brands. A senior member of the International Olympic Committee told the AP this week that the summer Olympics in Tokyo would more likely be cancelled rather than postponed if the situation becomes more dangerous.)

So what are the studios doing? Apart from keeping in close touch with teams on the ground in the various affected markets and doing their best to ensure their safety as well as limiting travel and switching some local release dates — which we may see more of depending on how the virus spreads — their hands are somewhat tied. An oft-heard refrain in speaking to executives is that this is “uncharted waters” while one offers, “All of us all around the world are in a stand-by position.”

The situation in China, which will have the overall greatest impact on global box office (though largely from the lack of local titles contributing in-market), is not expected to right itself any time soon. There are some positive signs as the number of patients recovering from the virus begins to outpace the number of new cases. Still, we have heard that a best case scenario could see movie theaters back online in early April. We also hear that more realistic timing could be early May, or, in a worst case (for now), July. That is traditionally a blackout period on imports, though one that was essentially kiboshed in 2019. Now, there may not be blackout periods, or school vacations, for the rest of the year because those have already taken place due to force majeure. And as one person notes, “There are all sorts of things an authoritarian government can do.” It’s a “tragedy and is sad on every level. Our tiny part of the world is suffering, but it doesn’t compare to the human level.”

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Adds another source, “Schools and companies will probably be on six-day weeks” when the quarantines are lifted. That doesn’t leave a lot of time for moviegoing.

USC professor and China expert Stanley Rosen says, “The government has clearly lost some credibility, and I assume the theaters won’t open until migrant workers start returning to the big cities. Given prejudices against migrant workers, there may also be a fear that some of them have undiagnosed cases, kind of like the point made in Parasite that rich (and middle class) people think the poor ‘smell bad’ (or worse). It’s a long time between now and April 1, and we don’t know what will happen before then.”

In general, the studios have been left in a holding pattern over the status of their recently shelved and upcoming releases. Disney’s Mulan, a ballad to China — which was expected to be the major driver on the film — is looking likely not to have a day-and-date release in late March (a date was never set previously as the Chinese authorities don’t typically confirm until 30 days out). We hear that Disney is not mulling moving Mulan off its domestic date to coordinate timing.

Marvel’s Black Widow is scheduled for late April/early May in the rest of the world, and so hopefully would see a China release shortly thereafter if the theaters come back in time.

Universal’s first time at bat with Bond, No Time To Die, has seen its Beijing premiere and press tour cancelled. It has an early April UK date with domestic the week following. Again, there was no set China date, but it now looks like 007 will be delayed. The last Bond movie did about $84M in the Middle Kingdom.

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Sony has Bloodshot with Vin Diesel — a major draw in China — in mid-March, but is similarly unlikely to be able to put the movie into the Middle Kingdom any time soon. Some have suggested that studios may begin to shift their release dates on a global level so as to avoid Chinese piracy and not dampen theatrical prospects once the cinemas reopen, but we understand this is an ever evolving situation.

Paramount has already announced that Sonic The Hedgehog won’t go out on its February 28 date in China.

Overall, it should be recalled that the Hollywood studios recoup just 25% of takings in China, thus slightly blunting the impact (though IMAX could be among the hardest hit by an extended period of dark screens there as it has a large footprint in the market and works with local titles as well — it had been due to release several of those during Chinese New Year). If the UK, say, which can do £100M on a movie, was similarly affected, it would be more impactful. Still, while a finance source notes, “China is not a huge contributor to the bottom line,” they add, “people are freaking out.”

Another thing to bear in mind is how the studios are looking towards the future. This year was already expected to see lower grosses versus the record breaking 2019, but are they reconsidering how they account for China? We hear that the current situation has so far not seeped into decision making. Certain films, think big proven franchises, may have China built into their greenlights, but overall we understand that the studios’ business models don’t weigh to China as films are not solely dependent on the market which has always come with an inherent risk on expectations — and a lower revenue share.

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So what will happen once the theaters reopen? In China in particular, will there be a rush out to the movies once the ban lifts after so much forced confinement? Or will it look like Amity Island after a shark attack with folks not really believing it’s safe to go back into the water?

Rosen offers, “The question is whether people will be willing to congregate in theaters, even with their masks on. Some pundits think they won’t, others think they’re just waiting for the chance to meet up with their friends again, so it could work.”

Certainly, it’s expected that the backlog of Chinese films will be the priority for local authorities, but it’s opined that some of those films may now just not be released. Or, better, that they might be spread out over time to make up for a lack of new productions with studios locally having also shuttered in January. Some are getting back to work, though in part that’s for TV series which are easily delivered to audiences inside their homes. Local film companies have also asked the government for tax and other relief.

Still, China will want to make up for the RMB it’s already lost this year and so isn’t expected to turn its back on big studio titles. An issue, however, is whether day-and-date releases will be possible, and if they are not, does that mean the movies are instantly pirated thus dragging box office down when the movies do eventually go out. Backlog and stacked dating on this front is also a concern.

Ultimately, if the theaters turn the lights back on in May, the authorities have Black Widow and Universal’s Fast & Furious 9 which would be teed up for possible day-and-date starts. Universal also has Illumination’s Minions: The Rise Of Gru over the summer, a franchise that exceeds in the market.

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Rosen cautions, however, “In terms of Hollywood, it seems clear that China will prioritize ‘key projects’ and domestic films once things get back to a semblance of normalcy, and there may be blackout periods for Hollywood if certain times of the year — for example the May 1 holiday — are extended. China is still very concerned about becoming the largest theatrical market, which is one reason they’re not allowing other films to follow the example of Lost In Russia in signing streaming deals with iQiyi or other streamers.”

Huanxi’s Lost In Russia, which was originally scheduled to debut in theaters during the Chinese New Year holiday, went straight to streaming sites where it could be watched for free, while film Enter The Fat Dragon aired on Tencent Video and iQiyi over CNY. This caused upset in exhibition circles where folks were angered that they had spent money promoting the titles only to see them shifted to online.

“In short,” Rosen adds, “we’re in uncharted territory at the moment but, as the losses mount, Huanxi’s streaming decision does provide a quick influx of considerable cash and has to be on the table for many companies if this situation continues on longer than expected.”

With all of the shakeup imposed by the Covid-19 virus, and as uncertainty abounds, our finance expert concludes, “Fortunately, 2021 has a robust lineup of pictures from the studios.”

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