The spread of coronavirus is shuttering film sets and closing movie theaters overseas
Along with other entertainment sectors such as fashion, sports and travel, the increasingly global film market is already seeing effects from the coronavirus as it continues spreading throughout various countries.
The latest fallout came earlier this week when a three-week shoot set in Venice for the seventh "Mission Impossible" film series was put on hold after the number of confirmed cases in Italy reached into triple digits.
"Out of an abundance of caution for the safety and well-being of our cast and crew, and efforts of the local Venetian government to halt public gatherings in response to the threat of coronavirus, we are altering the production plan," a representative from Paramount Pictures said in a statement. "We will continue to monitor this situation, and work alongside health and government officials as it evolves."
The coronavirus has already shut down much of China and its film industry, and officials with the U.S. Centers for Disease Control and Prevention, the National Institutes of Health and other agencies said this week it is "inevitable" that the virus would spread here.
China is the largest movie market outside the United States, and the domestic film industry could be severely affected if the virus spreads domestically.
Some film executives are already reacting. In addition to halting production on "Mission: Impossible VII," Paramount has indefinitely suspended the Chinese release of "Sonic the Hedgehog," which has been dominating the domestic box office. The releases of "Dolittle," "1917," "Jojo Rabbit" and "Little Women" there have also been suspended. A promotional tour and premiere scheduled to take place in April for the latest James Bond film, "No Time to Die," has already been canceled.
On a recent earnings call, Imax chief executive Richard Gelfond said the company "faced head winds in China early this year due to the coronavirus," which made for a "tough start" to 2020. "While the coronavirus is a serious short-term challenge, we see it as a rare, out-of-the-ordinary event that will ultimately pass," he added.
An analyst who spoke on the condition of anonymity to be candid called the situation a "big mess" and told The Washington Post there is consternation in the film industry, partially because of how unprecedented the situation is. "We haven't seen anything like this before, and we don't know long it will last," he said. "China now is a much bigger part of the overall box office than when SARS occurred."
Before the outbreak, China was expected to surpass the United States as the largest movie market in the world this year, according to B. Riley FBR analyst Eric Wold.
Compounding the problem is that China began shuttering movie theaters just before the Lunar New Year, a time when they historically see the most foot traffic. As noted in the Hollywood Reporter, "Ticket revenue in China in the three weeks following the shutdown totaled just $3.9 million, compared to $1.52 billion during the same stretch last year."
Studios are presented with a few difficult choices. They can release a film into a country that isn't going to movie theaters (and, for the most part, isn't able to). They can delay a film in hopes that they'll be able to later release it in China, making it subject to the country's restrictive policies on imported films. (As Peter Schloss, CEO at CastleHill Partners, a Beijing-based bank focused on the entertainment industry, told the Hollywood Reporter, "Imported films are likely to suffer in the rescheduling as we have to expect Chinese films to get priority." Plus, as Wold noted, even if every film is eventually released in China, moviegoers may not immediately feel comfortable rushing back to reopened theaters.) Or they can send a film straight to video or streaming services, meaning they would probably never recoup production costs - much less turn a profit. (This is unlikely, Wold said, as it "would set a bad precedent.")
Analysts seem confident that the current situation is a weatherable storm for these studios. What could prove potentially devastating for domestic studios is a widespread outbreak in the United States, one that keeps people sequestered in their homes.
"The real risk with the domestic market is if we see theater closures like we've seen in international markets. Do we get to the point where theaters are actually closing or where consumers don't feel comfortable going into places where people are congregating?" Wold asked, pointing out that "where stock prices are hit the most in the past couple of days, it's theater stocks, theme park stocks and places where people congregate."
Still, he emphasized, "At this point, it's perceived risk more so than actual risk."
