New hope for cinemas rides on blockbusters

The recent failure of several high-profile consumer-facing companies has underlined again the loss of livelihoods due to the pandemic. SA lost 1.7-million jobs over the second and third quarters of 2020, which coincided with the hard lockdown, according to Stats SA's latest data.

Job losses have continued since then, particularly at businesses that were struggling before the pandemic.

Lockdowns and travel restrictions have been the final nail in the coffin for Greyhound, Citiliner and Musica, which recently announced they were closing, while Ster- Kinekor is in business rescue.

KAP's Unitrans division said in a statement that its Greyhound and Citiliner bus services had experienced declining passenger numbers and that the effect of Covid-19 regulations "limiting interprovincial travel and coach occupancy levels" as well as "the closure of the Zimbabwe and Mozambique borders have exacerbated the situation".

It said it would sell the 83 buses in its portfolio.

KAP Industrial confirmed that 693 employees at Greyhound and Citiliner would be affected, and bus company Putco said this week it was cutting more than 200 jobs.

Clicks said it is "committed to accommodating" staff from Musica - which had 516 employees at the start of the 2021 financial year - within the Clicks group, "where this is operationally feasible".

At Ster-Kinekor Theatres no retrenchments were made as a result of Covid-19, said acting CEO Motheo Matsau. In 2019, 97 staff were retrenched.

Nu Metro, which has had to downsize operations, said it has "managed to retain staff without having to implement any retrenchment process" due to the Temporary Employer/Employee Relief Scheme (Ters) and reduced salaries and working hours.

But it said the level 3 lockdown from late December 2020 "without the support of Ters, restrictions on capacity, trading hours and the delay in movie releases from international studios" resulted in Nu Metro "implementing a temporary layoff scheme with certain staff".

But the company is confident it will not go into business rescue and is expecting cinemas to experience a second wind when blockbuster movies that have been delayed due to the pandemic are finally released by international studios.

Chantelle Burrows, national marketing and content executive for Nu Metro, which has 25 theatres across the country, believes cinemas "will experience a significant uptick in attendances" and that this view is "supported by leading industry experts from the US and Europe".

She said this is due to the "strong slate of major blockbusters" that have been held back for release by international film studios during the pandemic, which includes titles such as Fast & Furious 9, Marvel Studio's Black Widow, Top Gun: Maverick and Bond film No Time To Die.

She said there is also demand for "shared, out-of-home entertainment experiences in a safe, social environment" by consumers "who have been kept in isolation at home during the lockdown".

Burrows said though cinemas are in the "midst of an unprecedented crisis it doesn't mean that cinemas will be closing down".

But there is no question that the industry has its back against the wall at the moment.

Ster-Kinekor's movie theatres remain open for business while the business rescue process is under way.

Burrows said Nu Metro itself is "stable and is not considering business rescue".

But the group has had to come up with strategies to reduce costs and make sure it remains viable.

"Nu Metro's cinemas remain open and trade on a limited basis as part of its responsible operational strategy to ensure the future sustainability of the business," she said.

"Our strategy includes the implementation of various cost efficiencies at cinema level, limited trading times [Nu Metro is currently only open Friday to Sunday every week] and the temporary closure of cinema complexes that receive lower footfall."

She said that in general, landlords have been "very sympathetic" to the cinemas and that "arrangements and negotiations with regards to rental relief are ongoing".

Morné Wilken, CEO of Hyprop Investments, which owns shopping centres such as Canal Walk, Rosebank Mall and Hyde Park Corner, said cinemas "definitely have a place in the tenant mix which has proved critical for shopping centres".

"People like to go out and they like to interact with each other. And going to a movie house is a better experience than watching it on TV. It's about buying popcorn, sitting in a place with proper surround sound; the whole experience is totally different," said Wilken.

As far as Ster-Kinekor entering business rescue is concerned, he said normally in a business rescue situation the business rescue practitioner will likely make contact with the landlord and "tell us what is their proposal in terms of rentals".

"In most business rescue cases the companies wouldn't pay rental or they would pay a limited amount of rental."

He said from a cash-flow perspective, shopping centre owners with cinemas as tenants had already been offering them rental relief, so not receiving income from them would not be "such a big problem for us at this point in time".

Des de Beer, CEO of Resilient, which owns shopping centres such as Irene Mall and The Grove in Pretoria, Jabulani Mall in Soweto and the Mall of the North in Limpopo, among others, said business rescue gives a company a "breather to reset the business".

He said Ster-Kinekor and Nu Metro have "had very few blockbusters this year".

"That's the problem, and obviously people are very wary about going to cinemas at the moment.

"It's a tough business and I don't think it will do well until the Covid pandemic is well under control."

De Beer is sympathetic to the situation facing cinema operators, saying that "even though they have officially been open" for some months, he knows "they haven't been trading well".

From an income perspective, he said cinemas are not "big rental payers for landlords" because as anchor tenants they are considered big entertainment drawcards for malls and are heavily subsidised in any case.