Russian cinema chains suffered billions of dollars in losses due to the departure of Hollywood

The largest Russian cinema chains suffered billions of dollars in losses in 2022, and their revenue fell by about half compared to the previous year. Such dynamics can be seen on the example of the available financial statements of a number of leading market players, which RBC studied.

Thus, the main legal entity of the largest combined cinema chain Formula Kino and Cinema Park  , JSC Cinema Park, which manages 65 cinemas, lost 43.2% of its revenue in 2022 - it fell to 4.6 billion rubles. This is comparable to the result of 2020 (4.3 billion rubles), when, due to measures to combat the pandemic, cinemas simply did not work for several months, and later were opened with restrictions on the number of viewers. The net loss of Cinema Park JSC in 2022 amounted to 1.8 billion rubles. against 861.8 million net profit in 2021. For comparison: the loss in the pandemic 2020 was greater - it reached 7.8 billion rubles.

The united cinema network has one more legal entity - RSM LLC - which manages 12 cinemas in Moscow, the Moscow region , St. Petersburg and the regions. Its revenue decreased by 47.3%, to 1.1 billion rubles. Net loss for the year amounted to 482.4 million rubles. against profit of 37 million rubles. in 2021

The revenue of the KARO network (the legal entity that manages the majority of cinemas is KARO Film Management LLC) decreased by 41.8%, to 2.2 billion rubles, a net loss amounted to 1.3 billion rubles. against 9.4 million rubles. a year earlier.

The legal entity of the same name, which manages the Kinomax network , reduced its revenue by 46.6%, to about 2 billion rubles. Loss - almost 1 billion rubles. against profit of 193.4 million rubles. in 2021

The company operating the Cinema Star chain also reported a comparable drop in revenue - minus 44.2% year-on-year : revenue amounted to 491.5 million rubles. with a loss of 40 million rubles. (against revenue of 880.8 million rubles and profit of 9.3 million rubles a year earlier).

The representative of the KARO network refused to comment on the results of 2022 and the prospects for 2023, and the press services of Kinomax and Cinema Star did not respond to requests from RBC.

How do movie chains make money?

The main source of income for cinema chains is the screening of films. For example, at Cinema Park JSC and RSM LLC, film screenings brought in almost 68-69% of revenue (3.2 billion rubles and 729.2 million rubles, respectively), follows from the explanation to the financial statements. In addition, sales of popcorn, soda and other products of cinema bars (Cinema Park earned 23% of revenue, or 1 billion rubles; PCM - almost 26%, or 275.5 million rubles), as well as advertising placement services, sublease of vacant premises and other activities.

What happened to cinemas in 2022

After the start of Russia's special military operation in Ukrainethe largest American film studios refused to release their new releases in Russian distribution. In 2021, out of 40.7 billion rubles. almost 75% of box office receipts were provided by foreign films. At the end of 2022, the share of foreign films in the box office fell to 47.9%, and the entire film distribution market in terms of box office decreased by 41.9% and amounted to 23.7 billion rubles. The situation also affected the collections of domestic films: among the films that were released in wide distribution and received a subsidy from the Cinema Fund, only one became commercially successful - "The Young Man" by Alexander Fomin. Against the backdrop of the crisis, as Vedomosti's sources reported, Russian cinema chains even stopped paying Universal, Disney, Warner Bros., Sony and companies representing their interests in RUSSIA for films that had already been released.

Market participants - both the cinemas themselves and film producers - over the past year have repeatedly turned to the authorities with a request to allocate subsidies to support the industry. Cinemas will be able to survive the transition period only with the help of the state, Sergei Selyanov, chairman of the board of the Association of Film and Television Producers, said at a working meeting in the State Duma. However, the Ministry of Finance refused to allocate the 6.5 billion rubles requested by the industry, and the Minister of Culture Olga Lyubimova said that the authorities cannot “just invest money for nothingin the cinema" to compensate for the departure of Western studios. Movie theaters managed to get some support only at the regional level. Thus, the Moscow authorities allocated direct payments from the city budget to film networks to compensate for the costs of licensing agreements for the use of rights to domestic films and grants for advertising Russian films.

The rental began to stabilize only at the end of 2022: the number of visitors for the rental week from October 27 to November 2 reached 2.1 million viewers, which corresponded to the last week of March, when Hollywood films were still fully shown in cinemas. In the first week of 2023, cinema attendance set a record for the entire time of observation, which was ensured by the success of only one film - "Cheburashka", which, according to the results of the first ten days of rental, became the highest grossing Russian film, and in total collected more than 7 billion rubles.

What the film market expects from 2023

The past year has been "catastrophic" for film distribution, says Alexei Vasyasin, HEAD of the united film network "Formula Kino" and "Cinema Park". According to his expectations, 2023 will be a little better for the industry, and the market turnover will be about 30 billion rubles. (against 23 billion in 2022). “However, even this is not enough to build illusory plans and draw castles in the air,” Vasyasin complains. “In order for the industry to be self-sufficient, its turnover should be 35–40 billion rubles in order to recoup all costs, pay off banks, and so on.”

Vasyasin calls the current dialogue with the authorities on measures to support the industry “populism”, explaining his position by the fact that, despite the public statements of individual officials, no concrete decisions that have legal force have been made. “At the moment, neither the issue of compulsory licensing nor the issue of subsidies has been resolved in order to survive until 2024-2025, when Russian producers will shoot their films,” says the head of the United Cinema Network.

Why are the authorities against compulsory film licensing?

For the first time, the issue of compulsory licensing of Western content, including films, was raised in August 2022 by State Duma deputy Dmitry Kuznetsov. Then he introduced a bill that supposed to give the COURT the power to decide on the issuance of a license to content without the consent of the copyright holder. The initiative met with a negative response from most of the industry, especially online cinemas, and never reached the readings.

Legislators returned to this topic again in January 2023: deputy Anton Gorelkin said that the State Duma was discussing a bill “which will allow cinemas to legally show new foreign films.” However, in the same month, at a meeting in the Federation Council to support the cinema business, the initiative was criticized by the relevant ministries. The Ministry of Culture considered that such a measure would allow cinemas to receive only a few blockbusters a year, the content of which is doubtful "from an ideological point of view." And the Ministry of Digital Development said that the compulsory licensing of Western cinema "demotivates both investors who invest in the production of domestic projects, and the platforms themselves, which should promote Russian content."

The prospects for cinemas in 2023 are “foggy,” says Pavel Solomatin, a leading expert at InterMedia. “If earlier we could watch three or four well-performing films from different segments a month - both blockbusters and “average” films, now in four months we have seen only three strong films - “Cheburashka”, “John Wick 4” and “Challenge,” he explains. According to Solomatin, there is "more and more talk about launching new projects" on the market - potentially strong and cash. “But they won’t come out soon, so the most important thing is that cinemas don’t close for their premieres, and the audience doesn’t wean themselves from watching movies legally,” adds RBC’s interlocutor.