As Ontario enters Stage 3, Cineplex keeps screens dark

REUTERS/Chris Helgren
REUTERS/Chris Helgren

While dine-in restaurants, bars and gyms in areas across most of Ontario will be able to reopen doors to the public on Friday, Canada’s largest movie theatre chain is holding off on doing the same.

Cineplex (CGX.TO) confirmed this week that it will not be reopening its Ontario theatres on Friday, the day when many jurisdictions across the province will be allowed to begin Stage 3 of Ontario’s reopening plan.

“We are still reviewing what's being proposed by the province, so as a result we aren’t in a position to open our theatres in Ontario on Friday,” Cineplex spokesperson Sarah Van Lange said in a statement.

“While we are certainly excited for the day our operations can resume, our top priority has always been the health and safety of our employees and guests and ensuring that their time with us is safe, comfortable and welcoming.”

Cineplex did not provide further detail regarding its decision.

On Friday, the company also said it will lay off “just over” 130 employees in Canada and the United States as it grapples with the coronavirus pandemic and the termination of the Cineworld takeover deal. Cineplex is currently suing Cineworld, which had offered to buy the Canadian theatre chain but has since walked away from the deal.

“While we are confident our business will recover, in the short and medium-term we are focusing on a smaller number of projects and priorities supported by a sustainable financial model,” Van Lange said.

Under Ontario’s Stage 3 reopening plan, indoor gatherings will be limited to a maximum of 50 people. That restriction complicates the reopening equation for a company like Cineplex, says business strategy expert Mark Satov.

“This is an example of policy that was made by the government that was not thought through completely,” Satov said on Yahoo Finance Canada’s Thursday episode of Crisis Management.

“There are so many different, creative ways that I think you could find a way to get capacity up without deteriorating health impacts,” Satov said.

“I think Cineplex is making a statement to government that: ‘I would be happy to open, but I can’t open under these conditions, because that’s not the way my business runs.’It’s just not sustainable for them to open right now.”

Other challenges remain

When Cineplex does open its theatres to Ontarians, the company may face additional challenges when it comes to its movie lineup.

National Bank analyst Adam Shine said in a note to clients that delays of key movie releases, including the highly-anticipated Tenet and Mulan films, “certainly isn’t good news” for movie theatre operators like Cineplex.

“With key summer releases now getting pushed to August, movie operators will have to be hoping for bad weather, as late summer holidays get taken and students eventually begin to prepare for a return to school (virtual or real),” Shine wrote.

“Of course, Tenet and Mulan could always get postponed again and further wreak havoc on a sector much in need of a break.”

Vince Guzzo, the chief executive of Quebec-based theatre chain Cinémas Guzzo, said in an interview with Yahoo Finance Canada that the major movie releases will depend on how the pandemic unfolds in the United States.

“New York, for example, represents 12 per cent of the North American box office. We need New York to reopen to get those titles,” Guzzo said.

“Unfortunately, contrary to other business, we are not in 100 per cent control of our destiny because we do rely on U.S. movies.”

In the meantime, Guzzo said his chain is playing Canadian, Quebec and French movies and hoping that the Hollywood blockbusters land soon. Those new movie openings could bring business back up to 50 per cent, he said. The theatre’s business is sustainable at 75 per cent.

“We’re trying to create a reason to go to the movies,” Guzzo said.

“This model doesn’t work work with shutdowns.”

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