Patrick Corcoran, vice president of the National Association of Theatre Owners, joined Yahoo Finance to discuss NATO's letter to Congress urging them to include movie theaters in any stimulus package that may be voted on and how movie theaters are being affected by coronavirus.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. Myles with you here in New York. We're joined now by Patrick Corcoran. He's the National Association-- or he is with the National Association of Theater Owners.

Patrick, thanks for joining us. And I want to talk to you about kind of high level here the economics of running a movie theater. We've seen this business, among many others, come under pressure as the economy has frozen here as a result of the coronavirus.

And we've talked to a number of folks in the restaurant industry. They usually have a couple of weeks of cash on hand. So really tight tolerances there for this kind of a shutdown. What are your members usually working with in terms of working capital? And how acute are their needs right now, given that most theaters around the country have been forced to close?

PATRICK CORCORAN: Well, it's such a diverse industry that it's really hard to nail down what the cash reserves are for any particular company. We have billion dollar companies, and we have mom and pops with two screens in a small town. But it's a very cash intensive business. It requires the turnover of customers to keep that cash going through to pay off loans, to pay off landlords, to pay suppliers, and to pay employees.

So going basically, it's a $15 billion industry that went to zero in about a week. So that's essentially where they are. Without that cash flow, without the infusion of liquidity, they simply can't keep paying their bills.

JEN ROGERS: So for the movie business-- and I personally-- I love going to the movies. So, just say that upfront. But it was kind of in decline a little bit before, with all the streaming stuff going on.

PATRICK CORCORAN: Well, and I'm going to challenge you on that.

JEN ROGERS: I was going to say, do you think that that's not the case, that the movie business is robust? Or that there is some sort of secular issue happening that's making it more vulnerable right now?

PATRICK CORCORAN: No, it's very robust. And if you look at the numbers over time, you really get a sense of it. You know, we've been over $10 billion for the last eight years, over $11 billion for the past four. And if you look at admissions, basically, we've been very stable over the last five or six years. It's been up and down based on the kind of product that was in the movie theater.

But if you go back farther, if you look at 2004, right around where our peak was, we-- if you look at $100 million grossing movies, we have more of them. They sell more tickets. They make more money. It's in that $50 to $100 million grossing kind of title, you know, comedies, dramas that are star-driven, characters, story-driven, not big IP productions. There, we have fewer of them. They make less money. They sell fewer tickets.

And the reason for that is the studios have stopped making them and putting them in movie theaters. And the reason for that is because what used to sort of sustain that was you'd have theatrical release, which would make a certain amount of money. And then the home video release would make more money. So you could cover any mistakes, any shortfall in the movie theater.

What's happened since 2004 is transactional home video has fallen by 62%, from 24.9 billion in 2004 to 9.3 billion last year. So they got out of that business. They couldn't sustain it. But we're seeing now with the rise of streaming, which is the thing that's actually killing the home video, it's not hurting theaters, it's hurting home video.

With the rise of subscriptions, they have this huge competition right now among major streaming players putting billions of dollars into the business, doing a lot of content, trying to get subscribers, trying to get filmmakers. And they need a way to differentiate that content. One of the ways to do that was to put it in movie theaters for full theatrical release, which basically gives it sort of a brand name when it makes it to the streamer.

So it's going to be a reverse of what we saw in the early 2000s, which was DVDs being a backstop to theaters. In this case, theaters are going to be a backstop to subscription and make money for them. But they have to get to the theaters first.

AKIKO FUJITA: Patrick, you pointed to the diversity among your members, anywhere from sort of the big names like AMC to the small, local theaters. I mean, if this closure or this lockdown is expected to last another month, even a month and a half, two months, how many of those can survive? What do you see on the other end?

PATRICK CORCORAN: Well, we think most can survive. And that's why what's in the Senate right now with the relief legislation is so important. Because what all of them are missing, no matter what their size is, is liquidity. They have to be able to pay those bills, pay those leases, and to get them over this period where there's no revenue coming in.

And at the same time, we need support for our workers that we can't provide right now because we have no revenue coming in. So those two elements are really important, both for large companies with a loan guaranteed package, as well as the Small Business Administration loans that are going to provide liquidity to keep those theaters in business until our customers can come back.

And that may be a few months from now. But that's why this legislation is so important. It's not just movie theaters. It's any kind of public-facing business that, right now, is seeing, you know, their foot traffic and their revenue go from down to zero or maybe 10% of what it was they had a week ago. And that's in small towns, big towns, every neighborhood across this country. And that's why this legislation is so important.

MYLES UDLAND: All right, Patrick Corcoran with the National Association of Theater Owners, thanks so much for the time. And we'll talk to you soon.