Shuttered for Seven Straight Months, Israeli Cinemas Face Bankruptcy

Some local theater operators have tried creative ways to generate revenue, but without success

Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
The Cinema City movie theater complex in central Israel.
The Cinema City movie theater complex in central Israel. Credit: Ofer Vaknin

Israel’s cinemas have been shuttered since the start of the first lockdown in the middle of March, and owners say that if they aren’t allowed to reopen fairly soon even the biggest of the chains will face bankruptcy. Creative solutions for generating revenue have met up with government resistance or indifference.

Like its counterparts abroad, local operators of movie theaters have been decimated by the pandemic. Some of the largest foreign chains – including the Israeli-owned Cineworld – have closed theaters altogether.

Haaretz Podcast: Why is Israel arming Azerbaijan against Armenia? Listen to Yossi Melman

-- : --

“The situation in Israel is no different. If the coronavirus continues for another six moths, everyone will go bankrupt, we and all the other chains. No one has an endless supply of money,” said Avi Edri, CEO of the Cinema City chain. “The only business in the country that has been closed for seven straight months is the cinemas.”

The company invested 200 million shekels (over $59 million) in its theaters in Beer Sheva and Hadera just in the last two years and it continues to pay rent on all its facilities, he said. But to date, Cinema City has only received 500,000 shekels in government aid.

The Israeli cinema market is dominated by three groups, according to figures prepared by the market research firm Czamanski Ben Shahar for TheMarker. Israel Theatres is the leader with a 32% share, followed by Cinema City and Hot Cinema, with 25% each.

Except for a small retreat in 2018, the movie business has been growing steadily in the last several years. But this year, assuming the theaters aren’t reopened, revenues are expected to plunge 80% to 100 million shekels from what Czamanski Ben Shahar estimates were 2019 revenues of 518 million.

Since March, the industry has been saddled with costs and no revenues to cover them.

“All our properties are leased and none of our landlords have canceled our rent. Some of them have agreed to delayed payments, but the time to repay is nearing and we’re talking about 7 million shekels a month. I’m also still employing scores of workers and there’s electricity costs of about 1 million shekels a month. At the same time, we’ve gone down from turnover of 400 million shekels to zero,” Edri said.

He complained that the government provided 200 million shekels to live theaters, but hadn’t designated cinemas for special support, even though the local film industry depends on them.

No deals with Netanyahu

The Edri family is regarded as close to Prime Minister Benjamin Netanyahu, but Edri denied he had made any direct appeal to him. “Let’s say I’m Netanyahu’s friend, can he cut me a check? Do we want to become Case 10,000? We are serious people that live in an orderly country and when we need help, we go to the relevant authorities, in this case the treasury,” he said.

The Israel Cinema Association asked for a meeting with Finance Ministry officials two weeks ago, he said, but has not received any response. He attributed the delay to the “chaos” in the second lockdown but said he believed the government would eventually come through with aid.

The biggest chain in Israel – Israel Theatres, a unit of publicly traded Cineworld, owned by the Israeli Greidinger family – doesn’t speak to the media. But its problems are apparent from its reporting to the London Stock Exchange.

At the start of October, the company said it was closing all its U.S. theaters, which operate there under the Regal name and in Britain – a total of more than 8,000 screens. The decision came after Cineworld ran up $1.6 billion in losses in the first half of the year, turning around from a $140 million pretax profit the same time in 2019. It blamed Hollywood for delaying releases, such as the James Bond film “No Time To Die,” that it needs to fill seats.

Cineworld doesn’t provide information on Israeli operations, but its financial report said it had received a $6.9 million loan from the Israeli government due in 2026 “without financial conditions.” CEO Mooky Greidinger, meanwhile, has appealed to British Prime Minister Boris Johnson to renew a subsidiary program to “avert a generation of adults and children suffering a cultural blackout and to help keep the credits rolling on a multi-billion-pound industry.”

Israel Theatres, which operates five cinemas under the Yes Platinum name and another five as Rav-Chens, permanently closed the Rav Chen in the Seven Stars Mall in Herzliya after mall owners refused to adjust the rent in light of the coronavirus restrictions. The company declined to respond to queries, but the implication is that it did reach satisfactory agreements with its other landlords.

At the Lev chain, which is controlled by the Shani family, sources said the business had benefited from the fact that it owns its facilities in Tel Aviv’s Dizengoff Center and in the town of Even Yehuda.

“If we had to pay rent at [Dizengoff] Center, which is our biggest theater, we would have a problem,” said Guy Shani, the chain’s CEO. “Six of our locations are rented and in some we have been able to put off rent payments – but delay means we still have to pay later. The situation is horrible, but at least we’re a stable business.”

With no idea when they will be able to reopen their doors, cinema owners had contemplated various creative solutions only, in their words, to be frustrated by officials.

Drive-ins thwarted

“We organized drive-in screenings to take place over a few days in the Tel Aviv beach area. We had three different events arranged, but at the last minute the police refused to permit it,” said Shani. “That happened at the end of the first lockdown and since then we haven’t really tried to plan events like that, both because every time we do the government ultimately prevents us and because we realized that it was impossible to profit from a drive-in because it’s a big investment and the experience there is not optimal for our clients.”

Lev began offering video-on-demand movies about three months ago, but Shani said it hadn’t begun to make up for lost cinema revenue.

Cinema City tried a different route to drum up revenues.

“We read about an American cinema chain that had reached an agreement with legal authorities to hold trials in theaters to enable distancing,” said Edri. “We approached the Education Ministry and some municipalities to host students and reduce classroom crowding. We even talked with some colleges. But right now everything is stuck and nothing has come out of it all. We just wanted to get people in.”

Even if the government does give the green light to cinemas at the end of December or over the course of January, most operators said they didn’t plan to open. About 85% of the films screened at the big chains in Israel are American, and the big Hollywood producers are delaying the release of the blockbuster films they need to draw viewers or are releasing them via online streaming.

“The government is talking about reopening in January, but we’ll need to see if there are enough movies to show,” said Edri. “We’ve given some money to speed up completion of Israeli films produced by our production company and that’s given us an inventory of five to six movies – but it’s not enough.”

An industry executive who asked not to be named said he saw two possible outcomes.

“In the best-case scenario, the illness rates in the United States will go down by December, theaters will reopen and the distribution companies will start releasing films as planned, like the new Wonder Woman,” he said.

But, he warned: “The less optimistic scenario is that theaters wont be able to operate in any reasonable manner for the next few months and the movie companies will decide to delay releases again. This will be a real problem for the industry.”

And the day the coronavirus is over?

“It’s hard for me to say whether people will be scared to go into enclosed space or whether they’ll flock to them in droves after being shut in for so long,” admitted Shani. Edri said he believes it will be difficult to get moviegoers back into the seats. “Well need to spend a lot of money on marketing to get the public used to spending time in theaters.”

Click the alert icon to follow topics: