China's Wanda Film Warns of $226M Loss After 6 Months of Cinema Shutdowns

Wanda China Cinema - Getty - H 2016
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China's largest cinema operator, which also controls North America's largest chain AMC Theatres, has seen all of its Asian theaters idle since Jan. 25, months before movie theater shutdowns hit the U.S.

China's largest cinema chain operator Wanda Film said it expects to lose $214 to $228 million (RMB 1.5 to 1.6 billion) in the first half of 2020 thanks to over five months on continual cinema shutdowns in response to the coronavirus pandemic.

The decline represents a stark reversal of fortunes from the $75 million profit the Chinese exhibition giant reported during the same period in 2019. "Operating income dropped by a big margin compared with the same period last year," the company said in a statement, noting its ongoing rent and salary obligations.

Movie theaters across China shut down en masse on Jan. 23, shortly before the weeklong Lunar Near Year holiday, always the country's biggest box office stretch of the year. Wanda's production and distribution business also are hurting amid the pandemic. The studio's latest tentpole Detective Chinatown 3, the latest installment in a series that has grossed nearly $700 million, was set to be released over the holiday but remains on the shelf. Production of other projects has been indefinitely delayed.

Total box office in China for the first half of 2020 was $311 million (RMB 2.2 billion), down 93 percent from $4.4 billion (RMB 31.2 billion) during the same period last year, according to data from Artisan Gateway.

Although China has made great strides in controlling the coronavirus, cinema operators have suffered repeated setbacks in their attempts to resume business over the past several months.

In mid-March, Beijing regulators appeared to have settled on a province-by-province phased reopening strategy, giving approximately 600 cinemas in the least COVID-19-affected regions of the country the green light to reopen. Within days, however, they were ordered reshuttered, reportedly at the direction of senior central government authorities who were concerned about the prospect of a second outbreak. The industry went back into waiting.

In early May, reopening again appeared imminent. China’s top administrative body, the State Council, publicly stated on May 8 that indoor entertainment facilities, including cinemas and live music venues, could resume business nationwide. Yet no instructions for precisely when and how the reopening should be undertaken were ever provided, keeping theater operators in limbo, awaiting further guidance from officialdom. Then, on June 11, Beijing discovered a fresh cluster of locally transmitted COVID-19 infections at a food processing facility, prompting the city's health authorities to again order cinemas to remain shut.

Rumors circulated through Beijing industry circles earlier this month that the reboot was finally coming in late July, but an official plan, or confirmation, has been unforthcoming.

Wanda also is the largest shareholder in North American cinema chain AMC Theatres — the Chinese company owns 49.85 percent of AMC's outstanding common stock, but holds 74.89 percent of the combined voting power — but Tuesday's earnings warning made no mention of the group's North American holdings. AMC is held by a division of the Dalian Wanda Group parent company, not the Wanda Film subsidiary, which is listed on the Shenzhen stock exchange.