Cinemas have been one of the industries hit hardest by the COVID-19 pandemic. In March 2020, all theatres were forced to close their doors for what was thought to be a brief, 14-day pause while the nation got its bearings in managing the emerging crisis. Over 10 months later, only one third of these locations are showing movies and theatres that have re-opened are operating under a requirement to limit capacity and/or sale of concessions. Because of this exhibition status, studios have followed a recurring cycle of postponing the release dates for their most important movies. As a result, box office revenues in North America were down more than 80% in 2020 when compared with the bumper sales the industry experienced in 2019.
For months, we have heard the same question every day – will cinemas be able to survive? Our response is that we will make it through but only if we remain positive. Millions of movie fans want to be entertained by the best Hollywood has to offer and seeing a movie in a cinema setting is a vastly superior experience to watching it at home.
The industry has rallied in its own support with initiatives such as the CinemaSafe, reassuring movie-goers that movie theatres are a safe environment and #SaveYourCinema, bringing awareness to the financial struggles faced by theatre operators. Thankfully, the federal government has stepped in to offer a helping hand.
- On 1/11, the US Small Business Administration (SBA) began accepting applications for the second round of relief loans under the Paycheck Protection Program (PPP), intended to cover primarily payroll expenses for affected businesses in all industries.
The funds received under a PPP loan can be “forgiven”, as long as the funds are used for approved payroll and other expenses and the organization demonstrates a reduction of at least 25% in gross receipts for at least one quarter in 2020 when compared with the same quarter in 2019.
- Soon, the SBA will also begin accepting applications for disaster relief grants under the Shuttered Venue Operators Grant (SVOG) program. This program is specifically targeted to provide support for cinemas and other organizations that offer in-person entertainment.
Exhibitors can qualify to receive a grant of up to 45% of their gross revenues from 2019. To apply for the SVOG, an organization must first register with US System for Award Management (SAM) to become an entity which is eligible to receive a federal grant. Go to www.sam.gov to register your organization. It can take up to 10 days to complete this process so exhibitors planning to apply for SVOG funding are advised to begin this process ASAP.
Note that an exhibitor cannot receive both a PPP loan and an SVOG grant. Depending on the specific circumstances at your theatre, the amount calculated under SVOG’s “revenue drop” formula may exceed the amount calculated under PPP’s “payroll cost” formula. In order to get ready to apply, you should gather financial records covering 2019 and 2020 periods and consult with your accountant to review possible tax implications.