Let the Credits Roll: Cinema giant Cineworld confirms closures following Covid-19 crisis
October 12, 2020
2 min read
What's going on here?
Cineworld, the second-largest cinema chain internationally, is closing all US and UK venues until further notice. This comes after the latest James Bond film has been postponed for the second time, a move that has not only hit the cinema industry hard but has put tens of thousands of jobs at risk.
What does this mean?
Cineworld has 127 cinemas in the UK and 536 cinemas in the US. Therefore, its closure commencing Friday 9 October is set to put 5,500 jobs at risk in the UK and 45,000 jobs globally. The move to shut its venues until further notice came after the latest James Bond film, “No Time To Die”, among many other blockbuster titles have been postponed whilst cinemas wait for enough footfall to make releases financially viable.
Following enforced national closures, Cineworld re-opened but made it clear that it would struggle to survive a second lockdown. This premonition announced just three months ago became too close for comfort as the FTSE 250 company’s recent announcement of closures caused its share prices to crash by almost 60%, reaching 15.46p at one instance.
Clearly, these closures indicate a treacherous path ahead for Cineworld and the cinema industry alike.
What's the big picture effect?
There are several effects to consider here – both legal and commercial.
Matters may be a lot more serious for the cinema giant than just temporary closures. Reports show that Cineworld’s lenders are in talks about the £6.2bn debt the company soon owes, a figure that is five times higher than the company’s 2019 EBITDA according to the Financial Times. Consequently, the syndicate of lenders are discussing the prospect of a company voluntary arrangement. In other words, insolvency is on the cards for Cineworld.
More broadly, the cinema industry could be faced with insolvency proceedings. Indeed, Cineworld wrote to Prime Minister Boris Johnson and the Culture Secretary reporting that the cinema industry has become “unviable”.
Law firms – especially those with a media focus – are therefore likely to see their cinema industry clients struggling in the months to come. This may involve litigation and settlement agreements surrounding unfair dismissals. To date, Cineworld has released no statement on how its employees will be paid, many of whom are on zero-hour contracts. It is likely that the Cineworld Action Group, representing employees internationally, will continue to advocate for affected employees.
While the Prime Minister has subsequently encouraged Brits to attend the cinema more frequently, chain and independent cinemas alike have increasing concerns about the industry’s buoyancy due to the significant drop in audience numbers. The industry finds itself in a Catch-22 situation as film studios are hesitant to release films until there is more certainty about increasing audience numbers.
Finally, the knock-on effect of these closures could affect towns and cities already struggling from a decaying high street as restaurants and bars that rely on post-movie footfall could experience losses. This may bring property-related matters to the table for law firms whose clients are affected.
The cinema industry’s future was already uncertain with the rise of online streaming services. Will the Covid-19 pandemic push it over the edge? Cineworld may just be the first of many to topple over.
Report written by Edie Essex Barrett
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