Exhibition giant Cineworld reported its full-year 2021 earnings this morning in London, showing sharply narrowed losses and vastly improved revenues versus 2020. CEO Mooky Greidinger is bullish on the the outlook for the world’s second-largest exhibitor which also owns Regal in the U.S., as the company predicts admissions in 2022 could reach 85% of the record-breaking domestic levels seen in 2019 and as much as 95% in offshore markets including the UK and Central Europe where Cineworld operates.
Still, following pandemic-induced cinema closures across the estate, the company is carrying sizable debt. It is also appealing a decision by the Ontario Superior Court of Justice to award Cineplex C$1.23 billion ($971M) after Cineworld terminated a deal to acquire the Canadian exhibitor in 2020. Cineworld remains confident it will prevail in the appeal.
Greidinger spoke to Deadline today regarding those issues as well as his outlook on windowing, ticket pricing and more of what the future may hold.
DEADLINE: Your earnings report today showed great improvement in revenues and a narrowing of loss, but the group is carrying a lot of debt. What is it going to take to reduce that?
MOOKY GREIDINGER: We need to continue to produce cash in the way that we did in the last quarter of 2021, and to go back into normal numbers for the whole the year.
When we look at the lineup ahead of us now, in April we are confident that we’ll get close to 2019 numbers and in the following months this should start reducing the debt and this is the direction. As long as we had closed or cinemas that opened with limited lineup, it was of course difficult to reduce the debt.
DEADLINE: And you are continuing to invest in cinemas with new sites opening this year?
GREIDINGER: We continue with our strategy. We are investing in the cinemas, and we see very positive results on the renovations and the new cinemas. Although the investment was slowed down, we never stopped and once business goes back to normal, of course the first priority is to deal with the debt, but we will continue to invest in the cinemas. We are currently finishing construction on two new sites in the U.S. and we are refurbishing about seven or eight across the group. We have more on the plate, but you know, it’s not normal times. We are moving slowly, but we are moving in a good way.
DEADLINE: How are Regal’s newer cinemas performing in the U.S.?
GREIDINGER: They are really growing in the numbers. They are going into the list of the top cinemas in the United States and the reaction of the public is outstanding. We’re really very happy with that.
We knew and believed that this is what was going to happen because of our UK experience, but still, one needs to really see it happening. To see now the results of the Irvine Spectrum in California and the Hacienda Crossing in San Francisco and Union Square in Manhattan, they are really all growing with amazing results. It takes time for every cinema after refurbishment, or a new cinema, of course, to mature and they are running into maturity very quickly.
DEADLINE: Coming out of Covid, how is your relationship with landlords?
GREIDINGER: We are done with most of our landlords, with regard to the Covid period and with regard to the future, and we are in very good shape with them. Most of them were very supportive. We have some that we still need to agree with; some chose the way of litigation, but I hope at the end of the day this will also be settled. The vast majority of landlords are in agreement and good relations.
You don’t need to be a genius to understand that when a business is closed down for a year, it cannot pay the full rent. The relations between us and the landlords are — there are locations that we are in for 30 years already — so if there is a bump in a year or a year-and-a-half, being a very good tenant, we got good credit from our landlords.
DEADLINE: What is happening with Cineplex and the legal proceedings?
GREIDINGER: We are in the last stages of finalizing the appeal. We have submitted the headline of the appeal and we are now about to get the final timetable from the court with regards to the time table of submitting our appeal. We want it to proceed and we strongly believe in the results of the appeal and I think that at the end of the day, we have a strong legal team behind us and we believe, without going into details, that we have a very strong chance to reverse the decision. Anyhow the final call if of course in the court.
DEADLINE: You have deals in place with all of the studios, but are you anticipating further shifts to release schedules ahead?
GREIDINGER: I think that going directly to streaming or trying to go day-and-date will become really a rare occasion. At a certain stage, some of the studios thought mature audiences are not back yet, at another stage people were worried how family movies were going to do in the cinemas.
Currently, we see that families are back. We see that the results of Sing 2 for example in the UK are through the roof. Kids will never give up going to the movies and also the more mature audience is coming back. Look at the success of Belfast, for example, in the UK.
DEADLINE: What’s your outlook on windowing?
GREIDINGER: I think Covid made clear, and all the “test” that were done around the Covid period made it clear, that the place of big movies is for sure in the cinema with relatively a long window, let’s say anywhere from 45 to 80 days, and a mid-size movie should also have a window. I think the new normal will become around 45 days — and there will be some exceptions here and there and we will have to take a decision whether we show or not.
At the end of the day, I think it is a much bigger event on home entertainment when a movie is coming after 45 or 60 or 70 days as a huge theatrical blockbuster than if it is being released day-and-date or direct to streaming. One has to see the excitement around the arrival of Spider-Man to home entertainment or the arrival of James Bond to home entertainment, because if you compare it to movies that opened day-and-date, you know in a few days they are forgotten. The phenomenon of the movie business was always that the more successful the movie was in the cinema the more income it generated in home entertainment whether it is DVDs or VOD or pay-per-view, cable TV, free TV or whatever.
But even in a free TV deal which is the end of the cycle of life of the movie, the movies that will get the highest price will always be the movies that were in cinemas.
DEADLINE: You are quite bullish on 2022, with possibly a return to 2019 levels by the end of this year?
GREIDINGER: It can always be plus 10% or minus 10%, but I think at the end of the day it is realistic. Excluding of course January and February that were behind but as we start April we hope we are there.
We had some tension, if we can call it that, in January and February because there was no product. Then The Batman came. We are very happy with the results in the UK and now the U.S. is growing again. We can be very optimistic. This is looking good. We need the big movies to keep coming. I think we have ahead of us one of the most impressive lineups in recent years.
We have Morbius, then we have Sonic, then we have Fantastic Beasts and then we have Doctor Strange and then we have Top Gun and Jurassic World and Thor and Minions and Lightyear, and ending the year with Black Panther and Avatar. I think we cannot complain, the lineup looks very, very strong.
We had a great fourth quarter really from all aspects. Especially with all the Covid around and omicron really bursting out the last week of December in the Western world, to have the movie which is now ranked as the number six biggest movie of all time and number three in the U.S. shows only how people are eager to go back to the cinemas, how people are missing the cinemas. This really gave us a very big boost of confidence of how strong is our product and how much people want to go out and spend good time especially now when times are not so easy financially, we are still the most affordable entertainment outside of home and we are very happy with what we see.
DEADLINE: There’s been a lot of talk about surge ticket pricing recently. What’s your view on that?
GREIDINGER: There are different prices taken in different timings or movies in this industry for many years, it is not something which is new. Sometimes there are markets where in the middle of the week tickets are a bit cheaper, sometimes there is a time of day in a big opening where there is some additional charge. Nothing here is new.
For Regal or for Cineworld Group, I’m sure everyone understands that we had gone through two very difficult years, that costs have surged in an unprecedented way. Hourly rates on labor went well beyond inflation, energy costs have soared dramatically. So all costs including construction and maintenance soared.
We had to go and see what we can do with the pricing — being very careful because we are on our comeback now. We decided that it will be better to charge on some of the bigger movies an additional one dollar, and not to go to the alternative to increase all of the prices. We need somehow to cover our soaring costs and so we had to do this. I think that it was well received by the audience. People understand because everywhere you look around now the prices are going up. I think we went in the most minimal way which is possible. And our strategy remains to stay the most affordable entertainment outside of home.
DEADLINE: If it’s sort of normal practice, why do you think there was so much attention paid when AMC recently announced the pricing around The Batman?
GREIDINGER: I did not understand why there was a need to announce something which is relatively common in the industry, but this is a question that has to be addressed to AMC and not to me.
But, I think at the end of the day this is the normal course of business. The cost of many things in the world is going up. For Regal, we took a very mild move with a minimum change, and we continue to analyze what is the situation and how high costs continue to go. I really hope, of course with no connection to the business, that war will be over in Russia and Ukraine, it is an unbelievable human tragedy which must end. This clearly also affects the world economy and therefore we see an additional instability in cost of goods and mainly energy all over.
DEADLINE: What is happening with your cinemas in Central Europe? Has there been impact from the situation in Ukraine?
GREIDINGER: On the first week of the war, we naturally saw a drop. People were surprised, people were worried — maybe less surprised, but were very worried.
Now we see business coming back. There are no big movies except The Batman, so it’s early to judge, but I think everything is going back to normal and we really — all of us, not only us as the industry — all of us hope this will end sooner rather than later.
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