Cinemas in China begin recovery from pandemic closures

After being shut for almost six months, the cinemas are finally reopening beginning on July 20, 2020. But strict health checks and audience limits are still in effect to prevent the return of COVID-19.

July 20 may be an ordinary workday, but it was a great moment for plenty of movie lovers. Tianshan Theater in Shanghai's Changning District welcomed its first audience in almost half a year. Meanwhile, well-known TV host Wang Han held a livestream on e-commerce platform Taobao and selling tickets for the newly released movie. More than 5 million people watched, and almost 10,000 tickets sold.

The online platform seems to provide huge support for the film industry to recovery. Film director, actor, and producer Teddy Chan's latest action-adventure fantasy "Double World" will hit iQIYI and Netflix. He said the online movie launch maximizes the streaming revenue across the world amid the COVID-19 pandemic.

People never stopped wanting to see movies, but theater closures during the pandemic hit the cinema companies badly. China's biggest movie theater operator Wanda Film Holding reported a loss of more than 1.5 billion yuan in the first half of the year. Jinyi Cinemas lost more than 3 million yuan. The theaters are back in business now but are still restricted to only 30 percent of the normal audience capacity. Is there any way for them to get out of the woods?

As a first step, Wanda Film signed a new deal with IMAX last week to expand their partnership, which will enable the company to upgrade to the latest IMAX screening technology in its 10 top-grossing cinemas, including Beijing CBD Wanda IMAX and Shanghai Wujiaochang Wanda IMAX. IMAX is providing the expensive systems on a revenue-sharing basis, rather than asking the cinemas to pay for them upfront.

"Wanda is figuring that more moviegoers will focus on a high-quality movie experience, such as IMAX. Though cinemas suffered a lot during the pandemic, many leading companies are investing, bucking the trend. They are trying to establish a top-tier cinema chain with a high reputation, which will be good for their long-term development," said Gu Jia, chief strategist of Media and Internet at China Merchants Securities.

Several A-share stocks in the film sector got a good boost today from the news that China will re-open cinemas in low-risk areas. Gu said the hard times have forced some immature hot money to quit the movie sector, and that should create a healthier financial environment for the film industry long term.

"Most of the unprofessional funds have quit, leaving only long-term funds with solid roots in the film industry. This is a very good opportunity for a thorough-going reform in the sector. Companies are now firms are returning to their core capabilities, which is producing high-quality work. After this re-shuffle, the survivors will be able to grow stronger in the future," Gu noted.

Theater capacity during the film festival will still be kept at 30 percent, which means about 600 people at a time will be able to view a film at the cinema. Ticket sales for the film festival's international shows started today at dianying.taobao.com. Films will be shown at 29 cinemas around the city, but tickets will be sold only online.