Don't expect Hollywood blockbusters to return until more cinemas in New York and California reopen

There's no denying it. The box office is in trouble.

Hollywood postponed another wave of blockbuster films in recent days as ticket sales remain low and audiences stay home on their couches. The delay of "Wonder Woman 1984," "Black Widow," "No Time to Die" and more have left a gaping hole in the theatrical calendar. The exodus prompted Cineworld, the owner of Regal, to shutter more than 500 theaters in the U.S. starting this weekend.

Some fear that the trend will hold until there is a viable coranavirus vaccine or populous states like California and New York reopen more theaters.The two states together account for 21.5% of the total U.S. box office receipts each year, according to data from Comscore. But they also have outsized clout. Movies that succeed in these markets can generate buzz that spreads and sells tickets in other parts of the country. 

"I don't think we see any major new films until NYC and LA are able to open their theaters," said Eric Handler, managing director of media and entertainment equity research at MKM Partners. "Middle America cannot support the industry on its own."

Currently only 139 of California's more than 500 movie theaters are open to the public and only two of New York's nearly 300 locations are open. And those numbers could fall after Cineworld shutters its Regal sites.

New York City makes up nearly 24% of all of New York state's total box office and Los Angeles accounts for around 30% of California's. These cities have above-average ticket prices and population density, as well as being hubs of the entertainment industry, making them vitally important to the industry's financial well-being.

In 2019, the average movie theater ticket cost around $9. That figure includes lower-priced tickets, like senior discounts and $5 Tuesday specials, as well as higher-priced tickets from metropolitan areas that can range from $12 to $15 and sometimes even higher.

"Immense focus has been placed on the importance of New York and Los Angeles, rightly so to a certain extent because they contribute between 10 and 15 percent on most top-earning films domestically," Shawn Robbins, chief analyst at Boxoffice.com, said. "However, the overlooked aspect of their collective impact is the advertising blitz they can drive."

Robbins noted that these cities have massive advertising penetration. New York City, for example, is known for its yellow taxis adorned with film posters and massive billboards in Times Square.

These states are symbolically important to the rest of the U.S. because they are the places where Hollywood producers, directors and actors live, said Comscore's senior media analyst Paul Dergarabedian.

Los Angeles is particularly important to filmmakers because of its role in establishing Oscar eligibility. In the wake of the pandemic, the Academy of Motion Picture Arts and Sciences altered its rules for the awards show, allowing films to gain eligibility if they are shown in New York City, the Bay Area, Chicago, Miami and Atlanta. It also said that films that were supposed to be shown in theaters but were forced to go to streaming would be eligible, as well. Previously, no movie that skipped theaters in LA would be considered.

"This is about more than just ticket revenue from two major cities," Robbins said. "It's equally, if not more so, about the cultural statements, campaigns, and narratives those hubs feed to the rest of the country."

Beyond that, consumers may need to see the number of coronavirus cases decline meaningfully. Since the pandemic began 7.5 million people have been sickened in the U.S., according to a CNBC analysis of Johns Hopkins University data. The rate of new cases has been rising in recent days, with nine states hitting record high cases, based on a seven-day average to smooth out any delays in reporting new illnesses. 

"The overwhelming majority of traditional moviegoers just aren't ready to experience films in theaters, no matter how good the films are, or how many cleaning upgrades a theater has made," Jeff Bock, senior box office analyst at Exhibitor Relations, said.

"In the meantime, it will be up to theaters and chains to decide if they can furlough or not, or continue to operate with library titles, indies and the occasional studio throwaway," he said. "I do not envy the decisions these theater owners will have to make in the very near future."

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