Stimulus Boosts Indie Theaters, But Details Remain Unclear

It seems too good to be true: the little guy is getting favored treatment from the Save Our Stages segment of the COVID-19 government aid package. Delayed for months and heavily influenced by lobbying interests, initial reports suggest that independent cinemas and smaller local and regional chains will soon get much-needed support.

This is a major victory for the National Association of Theater Owners (NATO), after a long fight for relief for their members. The initial House-approved bill had included money for live venues (music, stage, museums, and other performing arts centers), but NATO worked hard to get movie theaters included.

The details are incomplete so far. NATO hosts a Zoom meeting Wednesday for members to flesh out what they know and take questions. We reached out to some exhibitors who have looked at the detailed bill. They confirm some initial elements, including some not previously reported:

The stimulus package precludes the top three domestic circuits.

Not eligible for stimulus benefits are AMC, Regal, and Cinemark, which dominate the U.S. theater market and provide the majority (around 57 percent) of the usual $10 billion+ annual gross. They fail on multiple grounds. Restricted are companies that are publicly traded, foreign-owned (AMC and Regal), carry more than 500 full-time employees, or span more than ten states.

In short, the aid will not help circuits in varying degree of financial distress. Their future is in unclear, with one or more facing daunting challenges (AMC, the largest, is heading toward bankruptcy). How committed the studios are to delaying windows for home viewing will depend on how much of a recovery top circuits make. They will have to manage through other means.

Top companies have access to other federal aid packages as well as equity from financial resources, but all three have taken on additional debt.


Arclight Cinema

Arclight Cinema

The impact on mid-sized circuits is uncertain.

Marcus, the largest regional circuit, is also publicly traded. And the qualification status of other significant players like Landmark, Pacific (which operates the Arclight Cinemas), Harkins, and Alamo is unclear. We can assume they are weighing their options. We will know more soon.

The amount of money available could be as much as $5 billion.

The total Save Our Stages program has $15 billion available. Exhibition sources suggest that $5 billion is earmarked for theaters. If so, that is a huge amount to be allocated.

While it would be shared by theaters with a variety of programming, it will certainly benefit quite a few specialized theaters. These play a higher share of independent films (though the major chains provide a major share of top hits).

More details of how those resources (however large) will be allocated will become clear in coming weeks.

Initial priority goes to the smallest companies.

Per one exhibitor, of the $5 billion, 40 percent will be allocated to cinemas who employ 50 or fewer full-time employees. The remaining 60 percent will be for those who employ more.

Specific rules for loss recovery.

The program will recover up to 45 percent of the revenue lost between April and December 2020 compared to the same nine months in 2019. This caps at $10 million for any one entity, with five maximum allowed.

Any company (this would mostly involve cultural institutions) that are funded by more than 10 percent by the government are excluded.

Those who lost 90 percent or more of revenue during this period will be prioritized, with those with over 70 percent next in line.

As in all such initial readings of complicated legislation, more details and specifics will become known, as well as the application process. The NATO member virtual meeting should reveal more, and it is still too early to determine how quickly money may flow.

On balance, this is positive news for independent theaters.

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