The country's vast network of 70,000 movie screens has been idle since Jan. 25, during the early days of Beijing's aggressive efforts to contain the outbreak. Hundreds, if not thousands, of movie theater companies already have gone bankrupt over the more than five months of shutdown, according to local media reports. And while the U.S., Europe, Japan and Korea are now moving towards full reopening, China's cinema chain operators still have no clarity on when they might be able to resume business.
On May 8, the country’s top administrative body, the State Council, officially gave indoor entertainment venues the green light to resume work. But no instructions for precisely when and how the reopening should be undertaken was ever provided, so theater operators were left in limbo, awaiting further guidance from officialdom. Then, on June 11, Beijing discovered a cluster of locally transmitted COVID-19 infections, the respiratory illness caused by the virus, prompting the city's health authorities to order cinemas to remain shut. The limbo continues.
Amid this relentless welter of bad news, Jimmy Wu, chairman and co-founder of Lumiere Pavilions, one of the country's top-tier movie theater circuits, says he believes the pandemic has provided "a golden opportunity for the cinema business in China to reinvent itself — and become stronger than ever before."
A pillar of the Chinese industry, Wu, who began his career as an engineer and tech entrepreneur, is known for his persistent lobbying of common sense film policy in Beijing, as well as a trailblazer for exhibition technology in the country. Lumiere Pavilions was founded in 2007 as a specialist in upmarket, state-of-the-art theaters, placed in the toniest quarters of China's major cities. Today the company operates 42 multiplexes, including 11 Imax theaters, across 26 Chinese cities, with several others under construction. In 2012, a Lumiere theater became the first in the world to commercially install Dolby Atmos and RealD’s Ultimate Screen, which enabled China to be the only country to release the 10FL high-bright 3D version of 20th Century Fox's Alita: Battle Angel, which Wu presented alongside producer James Cameron during its Beijing premiere.
Wu concedes that the pandemic has created "the hardest moment in the Chinese film industry of at least the past 20 years," but he insists that he is optimistic that the exhibition sector will emerge stronger "if the industry and government work together and are smart about it."
The Hollywood Reporter connected with Wu for a call over WeChat to discuss how Lumiere Pavilions has weathered the crisis, his ideas for leveraging 5G and China's group buying phenomenon to reinvent moviegoing and how the deteriorating relationship between Beijing and Washington could hurt Hollywood's future growth at the world's second-biggest box office.
How are you holding up, Jimmy?
I'm not so bad. I'm in Los Angeles actually. I'm safe and comfortable.
How long have you been away from Beijing?
Oh gosh, I've been here since the middle of March. I didn't plan to stay so long, but the thing is, in China now they make you do your quarantine in their designated hotel. I worry that it might not be safe — you don't know who else has stayed there, or maybe the person in the next room could be sick. So I'm staying here until Beijing or Hong Kong lifts the two-week quarantine requirement. Then I'll fly back.
How was business going for Lumiere Pavilions before the pandemic.
We were doing very well. As you may already know, CineAsia awarded Lumiere Pavilions its exhibitor of the year award in 2019. Revenue per screen, or per seat, was doing very well for us until the pandemic started. Now we are suffering. We have had zero income since late January — but we are still hanging in there. So far, we have not laid off any of our full-time staff and we have paid them their full salary.
How have you been able to do that? Most cinema chains in the U.S. laid off and/or furloughed their entire staff very early in the pandemic.
Well, we were in a cash-rich position before the pandemic, but we can't go on like this indefinitely, that's for sure. The government is not helping anything. They've given us very little support. But we will need our best people working for us more than ever after the pandemic is over. We have spent years hiring and training the best people in the business. We're not going to throw them away.
For some part-time employees or lower ranking employees, we arranged for them to work for delivery companies — for restaurants and supermarkets. You know, during the pandemic, these services are very popular and important, and some of them actually approached us, asking if they can hire some of our people on a temporary basis. I said, no problem: if you can pay them and they want to work for you, that's great, because they're good people and we have nothing for them to do right now. So we've been able to help them find temporary work until we open up again. I'm happy about that.
Meanwhile, we're constantly negotiating with all of our landlords to wave at least three to six months of rent. They also claim that they have to pay bank loans, pay their interest and whatever else. We understand that, so we negotiate. We also had about five new projects that were under construction when the virus started spreading. We renegotiated those rent terms, which has been helpful. We even took over a few new cinema projects from other companies that could no longer afford to pay for them. The terms were good, and I'm hoping they will turn out to be great deals over the long term.
So the government support really has been negligible?
So far, we've had to survive with almost zero government support. Maybe some of the local governments give you like RMB 50,000 ($7,000), or at most RMB 100,000 ($14,000), but that's meaningless considering what we are facing. I keep pleading with the government to give us more assistance. So we're kind of frustrated.
So, the big question: When do you think cinemas will start showing movies again in China? There was a brief, failed attempt to reopen in May, and then the central government officially gave the green light about one month ago, but the recent COVID-19 resurgence in Beijing appears to have squashed the industry's hopes again.
Due to the Beijing circumstances, I have no idea when we're going to be able to open. Sadly, I don't think we will be open in July, but we're still preparing for it just in case we can. My cinema manager in the Sichuan Provence just put forward a suggestion online, which has been widely shared on WeChat. He said the government should not expect, or require, all cinemas to open at the same time. China is too big. The Film Bureau issued a document saying that all cinemas must reopen at the same time and be under the coordinated command of the Film Bureau. But China is such a big country. We can't have a one-size-fits-all approach with this. The central government should let the local governments and cinema owners decide when and where to open. If some places are less severe, then they should open now and gradually all cinemas will be reopened depending on the local control of COVID-19. I think he has the right idea. The risk level should be decided by the local government, not the central government.
U.S.-China relations are at a low point. As an exhibitor, are you concerned that a continuing deterioration of the relationship could eventually affect U.S. film imports into China?
Well, I don't think they're going to reduce the number, but it probably won't increase. A few years ago, people were saying that the quota might be lifted and many more Hollywood imports would be coming to China. Not anymore. The relationship has gotten really bad, and I don't think it's going to get better anytime soon. But you never know. You just need to prepare for the worst, right? I always picture the worst possible scenario and prepare for that.
I've been saying that if we have a bad relationship with the U.S., let's bring in more movies from other countries. What we will need as we open up is more good movies; it doesn't matter where they come from. Capernaum, an arthouse movie from Lebanon, earned $54 million in China last year. Our audiences are very open to movies from all around the world and many countries produce at least one or two great movies every few years. We should bring them all in. This will help the cinemas and it will help the government regulators — they can be politically correct by saying they are aligning with more countries around the world, not only the U.S. and Hollywood. They can even say they are diluting the U.S. share; but what we need is more good movies overall. Everything has two sides. I've actually been telling everyone: This moment is a great opportunity! It's a once in a lifetime chance.
Really? How so?
COVID-19 has hit the industry very badly, but if the government's smart, this is also a very good opportunity for China to catch up and become the number one market in the world. Because every market is hurting right now. First, we need to open up and bring in many more films from all over the world. Number two, we need to be much more creative about what the cinema can be. We need to try totally new things.
Like what?
We need more guerrilla strategies. I had a nice dinner some time ago with Fu Ruoqing, the new chairman of China Film, and Gong Yu, the founder of iQiyi, and I pitched them one of my ideas. They were very supportive of it. We have the biggest movie audience in the world, and we need new ways of bringing them to the cinema. China Film Group wants to establish what they call a "Central Library," where all the films authorized by the government are put into a central server. We are about to have 5G communication technology in China and I've actually already tested it at China Telecom. It's super, super fast — it takes just a few minutes to download a full quality movie. The other piece is group buying. These platforms, where you get a group of friends together to buy something or a service at a big discount — they are very popular in China, almost everyone is doing that sometimes. So I said, okay, China has all this amazing infrastructure and technology — let's put this together and make it work for our cinemas.
How will it work?
So the idea is, the customers use a Lumiere Pavilions app, and they contact us and say next Friday they want to watch their favorite movie at one of our cinemas in Beijing with really nice seats and sound. We tell them, okay, if you can get at least 25 people together, you can have a screen at 3 p.m., 5 p.m. or 7 p.m. And then they go and try to gather all of their colleagues and friends and friends of friends on WeChat. Or someone can host, maybe a company boss — and buy all of the tickets for everyone. Of course, we'll give them at least some group discount.
Then we access China's Film's Central Library, which will be set up to generate the KDM for us based on this temporary on-demand usage. (KDM means Key Delivery Message, which unlocks an encrypted movie and allows the cinema to play it for a set amount of time). Then we download the movie almost instantly over 5G.
How did Mr. Fu and Mr. Gong receive the idea?
iQiyi is very supportive, because they license hundreds of movies each year, so if we partner with them, and find a way to make their library available — of course, we will share revenue with them — this could open up a new stream for them.
Mr. Fu also was very interested in it. He pointed out that in 2019, average attendance at a screening was 13 people. So if we set 25 as the minimum for renting a screen, that's like two normal screenings in one. Since then, we have actually developed an app and we are already testing it with China Film.
The government should like it too. Every province, each year, produces a lot of propaganda movies, but nobody ever sees them, because they aren't big enough to get any screen share. But if you put them on China Film's server, these Communist Party guys can contact us and say, "I have 30 party members and we want to watch this movie." Fine with me. If you pay the money, we'll download and play it for you!
Lumiere Pavilions is going to be the cinema partner at Universal Studios Beijing, when it launches in the next year. How is that partnership progressing — especially in light of the pandemic and shutdowns?
So far, it seems like we will be on schedule. We're still having weekly meetings, or biweekly meetings, with them, but of course they're all online now. But that's fine — we're already used to it. We've confirmed the design and ticketing systems. We're making progress. I believe the theme park is still on schedule and so are we.
Source: The Hollywood Reporter by Patrick Brzeski