James Bond and the Death of Cinema

(Bloomberg Opinion) -- A powerful figure somewhere in Los Angeles makes a ruthless choice that threatens the livelihoods of tens of thousands of people on both sides of the Atlantic. It's a scenario one could imagine working for a James Bond subplot.

In fairness, Metro-Goldwyn-Mayer's decision to delay the eagerly awaited release of the latest 007 movie — “No Time to Die” — by another five months is an understandable reaction to the Covid-19 pandemic's still considerable grip on the U.S. and Europe. How many people are ready to brave a cinema right now?

But the immediate knock-on effect to the movie-theater industry has been devastating. On Monday, the U.K.-listed Cineworld Group Plc — owner of America's Regal cinema chain — responded to the Bond bombshell by shuttering its 663 cinemas in Britain and the U.S., putting 45,000 jobs at risk. Chief Executive Officer Mooky Greininger, whose family owns 20% of Cineworld, will now struggle to meet his loan obligations. The company's shares went into free fall on Monday, plummeting by more than 40%.

Covid-19 is a catastrophe for theater operators. As lockdowns forced cinemas to close, Hollywood studios started pulling their scheduled releases. “Fast & Furious 9,” “Wonder Woman 1984” and Marvel's “Black Widow” were all delayed. “No Time to Die” had already been delayed once, too. Greininger was counting on the blockbuster to reinvigorate cinema-going. Revenue at Cineworld fell 67% in the six months through June to $712 million.

That MGM still intends to release the film in theaters should provide some solace, at a time when studios are experimenting with going directly to online-streaming platforms. The Walt Disney Co.'s “Mulan” scrapped its wider release in favor of direct distribution on the Disney+ streaming service. The success or otherwise of that approach will determine the long-term viability of huge cinema chains, but the evidence suggests MGM still thinks it needs a theatrical release (eventually) to make an adequate return on “No Time to Die's” reported $250 million budget. The full cinematic blockbuster experience may not be dead quite yet.

Greininger had little choice but to close theaters. Cineworld said it was burning through as much as $60 million of cash a month with screens partially open in September. With reserves of $285 million available at the end of June, he would soon have started running out of funds. But it also means that his company is likely to break its agreements with lenders, which set a limit on how much debt it is allowed as a multiple of earnings. That could let the lending banks seize control of the company or its assets.

The question is, would they want to? Cineworld's problems have little to do with any failings on the part of Greininger and his team; they're a product of the extraordinary circumstances prompted by the pandemic. There's little anyone else could to remedy that, and this isn't a good moment to find new tenants for real estate.

A restructuring seems probable, nonetheless. The lenders have appointed FTI Consulting to negotiate with Cineworld about that prospect, Sky News reported Monday. The company's net debt jumped from $375 million in 2017 to $8.2 billion this year after the acquisition of Regal.

Cineworld could need another $500 million in borrowings to ride out the virus, according to Citibank analysts. If the studios really are delaying releases rather than shifting them online, a Bond-style resurrection may be possible.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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