“Each auditorium within the theatre has its own HVAC system, which consistently diffuses fresh air from the ceiling down toward the floor where it is then returned to the filtration equipment, constantly refreshing the air,” was among the high points of the news release.
That attitude — staid over flashy, practical instead of grandiose — characterized Cinemark before the pandemic. It may just end up saving the company when it’s over.
As theaters begin to reopen around the nation, including in large markets like Los Angeles and New York, questions linger over how quickly consumers will feel comfortable packing into dark rooms to see films. If it turns out they don’t, that could dampen or delay theaters’ recovery.
That’s where a strong financial cushion comes in. And no large chain has a better one than Cinemark.
Wedbush Securities’ Michael Pachter, one of Wall Street’s leading theater analysts, cites Cinemark’s better financials, a high level of pandemic preparedness and a generally disciplined approach.
“I think Cinemark will come out of this the strongest of the chains,” he said.
Restraint is a hallmark of Cinemark, which operates more than 4,500 screens around the country. In contrast to leaders of other megachains, the colorful Adam Aron of AMC and Mooky Greidinger of Regal/Cineworld, Cinemark chief executive Mark Zoradi has a more sober reputation. Asked in an interview about the outlook for the coming months, Zoradi did little to explode his conservative image.
“I’m not one to all of a sudden say the floodgates will open,” he said. “This is a reopening in moderation — the pace of the product flow and the vaccine distribution will ensure that.”
It was a far more muted response than that offered by AMC’s Aron, who after a cash raise in January famously declared, “Today, the sun is shining on AMC.”
Covid-19 has ravaged the movie business, as it has so many other sectors.
North American box office dollars were down 80 percent and ticket sales down 81 percent in 2020, according to a study released Thursday by the Motion Picture Association. It found that a majority of Americans — 54 percent — didn’t enter a movie theater once the entire calendar year. In a typical year, that figure is under 25 percent.
But while pundits and consumers tend to lump movie theaters together, not all chains were in fact hit equally.
AMC, the country’s largest chain with 600 locations and 8,000 screens, buckled under high debt, warned repeatedly throughout 2020 of a potential Chapter 11 reorganization and required a bailout of sorts from a Wall Street subreddit group.
Cinemark, with 330 locations and 4500 screens, has been spared many of those ill effects. The firm, based in Plano, Tex., came into the crisis with lower debt, spent responsibly, was not forced to radically restructure its debt in 2020 and required no stock run-ups to pay off that debt (though it surely would have liked one anyway).
According to SEC filings, AMC registered a loss of $4.6 billion in 2020. Cinemark, with half the number of locations, lost a lot less than that: $618 million. The number wasn’t good news, but experts believe the company can absorb the hit, in part due to net profits totaling $1.15 billion dating back to 2015.
As a result, Cinemark has not said it will close any U.S. venues. AMC will shutter about 60, or 10 percent of its locations; Cinemark or another healthier company could potentially buy some struggling locations at a discount.
When it became clear in early 2020 the virus could spread, Cinemark put the brakes on new investment, putting that money into a rainy-day fund. In an interview, Zoradi declined to reveal the fund’s size but said the company has enough saved up to last through 2021 even with no new revenue.
Cinemark also benefited from its wide geographic distribution of theaters. The company has theaters in 42 states, and fewer than 10 venues in 38 of them. That helped it as the virus hit some parts of the country harder and states took different approaches to shutdowns.
(Some of that breathing room, it should be said, comes from cost-cutting: Cinemark slashed salaries drastically in 2020, spending just $145 million with theaters closed, a fraction of its $410 million expenditure in 2019.)
Built out of a small Plano company by founding family member Lee Roy Mitchell beginning in the 1980s (he remains executive chairman) Cinemark has not been above making a splash. In the 1980s and 1990s it added video games and lighthearted decor to many theaters; it also marketed itself with a slinky animated cat named “Front Row Joe,” part of what industry veterans hail as a long history of savvy marketing. The company was one of the first to introduce stadium seating, and later reclining seats, on a wide scale.
Unwanted publicity has also sometimes found Cinemark. In July 2012, a gunman opened fire and set off grenades at an Aurora, Colo., location of its Century subsidiary during a “The Dark Knight Rises” screening, killing 12 people and putting Cinemark at the center of a debate about theater safety.
But more often it has acted under the radar, with more deliberate moves. As some chains had been making headlines for rapidly expanding — AMC spent more than a billion dollars in 2016 to buy the 276 theaters of Carmike, then the United States’ fourth-largest chain — Cinemark was making acquisitions like Rave Cinemas, a 32-location chain based in nearby Dallas, paying a much more modest $240 million for them in 2012.
Large acquisitions give theaters scale, and thus more leverage in negotiating film-rental rates with studios; it’s something that AMC, under Chinese ownership until recently, put a premium on. But large numbers of theaters such also means higher debt and expenses, and potentially more failures in markets where the chain has less experience.
“Cinemark is a little boring as a company compared to AMC,” said one studio executive who spoke on the condition of anonymity because they work with both firms. “But in a pandemic, boring is sexy.”
Over the years the company also has expanded into Central and South America, where it now has 200 theaters, or 1,450 screens, about a quarter of its overall total. That gives it a notable international footprint, though it’s on a smaller scale than Cineworld, Regal’s U.K.-based parent company, which is a force on both sides of the Atlantic.
Cinemark also lacks some of its rivals’ gaudy premiere locations, as AMC has with its flagship Empire 25 theater in Times Square. Critics say that such venues, while expensive, are necessary to drive brand awareness.
That has given the 66-year-old, who was hired to the top post at Cinemark in 2015, less of a showman’s flair and more knowledge of how the buttoned-up MBA culture of the modern studio functions, say several film veterans who have worked with him.
To talk to the executive is to experience a keenly nuanced understanding of the business, but rare bursts of extravagance or departures from the message. He responds to a broad question about the innovative future of moviegoing, for instance, by delving into laser projection, a development that will increase brightness and colors but is of a decidedly more technical sort.
Cinemark’s chief financial officer is Sean Gamble, another former studio executive, from Universal Pictures.
Stability, though, does not come without challenges. With movie-ticket sales flat and margins tight, even a good box office year isn’t hugely lucrative for theaters. In 2019, the third-highest year ever for box office with $11.3 billion in sales, Cinemark tallied a total of $194 million in net profit.
The company’s Central and South American business also remains a question. About one-quarter of Cinemark’s screens are in the region; it has more than 85 locations in Brazil, controlling about a third of the screens in a country of 210 million people. And Brazil has been slammed by the pandemic, a trend that continues with many hospitals near capacity and a high death toll.
Cinemark acknowledges that the region has posed a challenge for the company; its theaters have gone from 65 percent open at the end of 2020 to 50 percent now. In a recent earnings call, Zoradi said that “we remain open, where allowed, and efficiently close and reopen as government restrictions change with the fluctuating COVID status.”
Some experts also question whether moviegoing will awaken like other parts of the entertainment business. Jim Nail, a consumer-behavior analyst at Forrester, said he has some skepticism.
“I think there’s a pent-up level of demand with theme parks,” Nail said. “It’s much harder to make the case there will be a huge uptick in theater attendance.” He also noted that, with most of the action indoors, theaters also come with more safety concerns.
Zoradi says that he expects the return to come in waves beginning in April and May as people feel more comfortable, then rippling into the summer and fall.
“The early adopters will tend to be young males,” he said. “Older people will be more cautious, but they’ll be returning too; they’ll want to get out of the house and have a shared social cinematic experience.”
Then he punctuates his point — how else? — with a low-key matter-of-factness.
“The reality,” he said, “is we will be fine.”