Indie Cinemas Across Europe Facing Financial Ruin Amid Coronavirus Crisis

Courtesy of Cineworld

As lockdowns throughout the continent force European screens to go dark, independent cinema owners warn that their whole industry could disappear: "It's a question of 1-2 months before we see bankruptcies."

Independent cinema owners across Europe are struggling for their financial survival amid the coronavirus crisis. The global pandemic has hit Europe hard, with a majority of countries on partial or complete lockdown and cinemas in every major territory shuttered.

While few sectors of the film industry will be spared damage by COVID-19, independent exhibitors are the ones being hit first, and hardest, by the pandemic. Unlike the major movie chains, indie exhibitors do not have large capital cushions to ride out the crisis. And unlike the diversified studios, which are still generating cash via online and other platforms, most movie theaters have no alternative revenue source.

“We have no revenue, zero. And costs — rent, salaries, etc. are still the same,” noted one German arthouse exhibitor. “It can't hold.”

Italy, which has been under quarantine since late February, has been hardest hit. The country has seen the world's second-highest number of diagnosed COVID-19 cases outside China, with around 31,500 known infections and more than 2,500 deaths to date.

“We closed down Feb. 24, so this is our fourth week shut,” says Monica Naldi, who runs the Cinema Beltrade in Milan, a one-screen, 200-seat art house theater in operation since 1935. “Officially, things are supposed to get back to normal at the beginning of April, but it doesn't look like it's going that way. We really have no idea what will happen.”

The Italian government has stepped in with measures from suspending tax payments to helping cover layoffs to mortgage relief to help employees and businesses hit by the COVID-19 crisis. Provisions also include a state guarantee of up to $5.4 million (5 million euros) for small- and medium-sized businesses such as indie cinemas.

But Naldi says she has so far seen little in the way of relief for her theater. The city of Milan suspended rent payments for cinemas owned by the municipality, but not for ones, like hers, rented from private owners. Tax relief also means little for a business with no revenue to tax, she notes.

As for direct subsidies from national cinema bodies — something that has been proposed in neighboring France — Naldi isn't hopeful Italian bureaucracy will react in time to make a difference. “We are still waiting for government-approved financing from two years ago,” she says.

Last weekend, André Jansen closed the doors to his Berli Hürth cinema, a one-screen theater near Cologne, Germany, which has been in his family for four generations. “It's the first time in 70 years we've had to close,” Jansen says. Even before the German government shut down cinemas, coronavirus fears had decimated the box office. “The returns the day before the closure were 2 percent of normal,” Jansen notes. “It was dead.”

Angela Merkel's government in Berlin has already announced it will make unlimited financing available to small and midsized businesses through Germany's national development bank. But independent theaters, says Jansen, can't afford to take on more debt.

“Our profit margins are slim at the best of times, if we took on a 1 million euro loan, when are we going to pay that back?” notes Kalle Somnitz, managing director of the art house cinema group Filmkunstkinos in Dusseldorf. “The vast majority of indie cinemas don't have much capital coverage at all. It's a question of one to two months before we see bankruptcies.”

Like many across Europe, Somnitz is calling for direct help from the government to cover employee wages and subsidies to compensate for the collapse in revenue.

In Poland, where theaters have been shut since March 12, the film industry has set up a crisis team, made up of members of the exhibition, distribution and production sectors, which will meet this week with government representatives to try and find a way to keep the indie business afloat.

“Independent cinemas account for 25 percent of the market in Poland,” notes Marynia Gierat, owner of the Kino Pod Baranami art house cinema in Krakow. “If that disappears, it will be a major blow for the whole industry.”

In the U.K., which has been lagging a few weeks behind much of Europe in terms of COVID-19 cases and the government response, Tuesday saw all its major cinema chains — Cineworld, Vue, Odeon, Curzon and Everyman — announce in quick succession that they were shutting their doors until further notice. The move came not under order from authorities, but the morning after U.K. Prime Minister Boris Johnson gave a TV briefing in which he urged the public to stay away from public spaces. Many smaller indie cinemas ­— blindsided by Johnson’s announcement — were compelled to shut their doors later that day.

"Boris Johnson told the U.K. to stay away from cinemas just before 6 p.m. on Monday, and we typically welcome 200 to 300 guests to our senior screen on Tuesday morning. I think it’s fair to say that it could have been communicated a little better,” said one exec working at a small cinema chain. “By telling our audiences to stay away, but not legally asking us to close, Boris made it impossible for us to keep trading, but also confused the public. … I don’t know how they could have done this worse.”

Even leading up to the fateful decision, the smaller independents had been complaining about their treatment from an industry in flux, finding out about major release changes with no notice at all, often through social media rather than directly from the studio.

Now shut, the future is looking bleak for these companies, and that’s even despite a 330 billion pound ($388 billion) package unveiled by the British government on Tuesday. Most wouldn’t qualify for the new 25,000 pound ($29,000) grant for businesses below the 51,000 pound ($60,000) value threshold, although one manager did acknowledge that the temporary pause on rates would be a “great help.”

"But as of today, we’re essentially going to have no money coming into the business at all. Our rent is due quarterly in advance, next week. The [tax] return is due shortly afterward,” said another manager, who suggested the likes of Cineworld may enjoy some protection thanks to paid subscribers. “We have no staff on zero-hour contracts as we just don’t agree with them. The question is, how long can any business afford to keep paying people with no money coming in?”

With few alternatives available, independent cinemas are scrambling to find alternative revenue sources. Several are launching, or ramping up, VOD and cinema-at-home platforms to offer customers a way of supporting the indie market. Alongside established art house services like Mubi and Curzon's Home Cinema service in the U.K. and Ireland, indie groups like Germany's Kino-on-Demand are offering exhibitors an online platform to stream their films to self-isolating audiences in their territory.

“VOD is the only solution in this moment,” says Naldi, “but the indie cinemas and distributors have to come together to do something, to launch a platform, because otherwise Amazon and Netflix, who are already out there and available at a touch of a button, will take advantage of the situation.”

Draken Film, a VOD platform run by Sweden's Göteborg Film Festival, offered one potential solution on Wednesday, announcing a collaboration with leading Swedish distributors that will see Draken donate half of the revenue earned from new subscribers to independent Swedish art house cinemas. Each new subscriber can decide which cinema they want to support. During the first six months, half of the revenues will go directly to that local cinema. Titles slated for release via Draken Film include Céline Sciamma's Portrait of a Lady on Fire, Haifaa al-Mansour's The Perfect Candidate and Give Me Liberty by Kirill Mikhanovsky.

“The coronavirus is a tough blow to the film industry,” said Göteborg artistic director Jonas Holmberg. “Cinemas being empty and even closing down will affect everyone working with quality films; the consequences for the cinemas are likely to be devastating. It is now the cinemas need our and everyone's support!”