Russia’s Local Exhibitors to Take Big Hit From Hollywood Exit
Among the tentpoles leading 2021’s post-pandemic box office recovery charge was Venom: Let There Be Carnage, with an impressive $501 million global haul. Outside of the U.S., where it’s usually the U.K. that sets the pace for major Hollywood movies, Russia comfortably took second place, Sony’s superhero sequel earning $37 million in the country.
While the world’s exhibition industry creaked back to life in 2021, it was Russia — where the majority of cinemas had stayed open the entire year and where many straight-to-streamer titles had landed in cinemas (it’s yet to get Disney+) — that took advantage, leaping ahead in the box office rankings.
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Whereas in 2019 it was in ninth place (with $947 million, a 2.2 percent share), in 2020 — thanks to a shorter lockdown than most major markets — it was up to seventh ($378 million, 3.1 percent) and last year sixth ($601 million, 2.8 percent). As per local estimates, Hollywood titles make up around 75-80 percent of this figure.
One Russian industry source tells The Hollywood Reporter there had been “a lot of optimism” for 2022 to see a return to (almost) pre-pandemic levels, aided so far by titles such as Spider-Man: No Way Home ($55 million), Uncharted ($17 million), Sing 2 ($16 million) and Death on the Nile ($8 million). The Batman was next up.
Then, on Feb. 24, Putin ordered his troops to begin an invasion of Ukraine.
Over the course of just a couple of days, beginning with Disney on Feb. 28, Hollywood studios — and most major corporations across the board — hit the pause button on their Russian business dealings, halting upcoming releases. For Disney, that meant canceling the local release of Pixar’s Turning Red on March 10. Next in the studio’s pipeline are Doctor Strange in the Multiverse of Madness (May 5) and Lightyear (June 16). Batman hasn’t traditionally been among the biggest superheroes in Russia, but the local exhibitor source still says Warner Bros.’ latest Caped Crusader installation — which has charged out of the gates since its March 4 release with a global box office of more than $250 million already — would have been a major player, one he expected to amass “around 2 billion rubles” (just under $26 million as per late January exchange rates, before the Russian currency tanked).
Even ahead of the boycotts, there had already been a “significant impact on the Russian box office, from a studio perspective, due to the devaluation of the ruble,” notes Rob Mitchell, director of theatrical insights at London-based analysts Gower Street. Mitchell points to the weekend of March 3-6, which dropped 37 percent week-on-week in the local currency, but some 50 percent in dollar terms. Uncharted, he says, lost around $390,000 in 11 days from Feb 24-March 6 due to the exchange rate change.
While the loss to studios from these boycotts may not seem inconsiderable (75 percent of 2019’s total box office tops $710 million), Disney CFO Christine McCarthy has downplayed any financial impact. Speaking at a Morgan Stanley conference on March 7, she said the studio’s “exposure” to Russia and Ukraine was 2 percent of its total operating income (and Russia made up about 90 percent of this), describing it as “not a significant number for us.” Disney’s operating income in 2021 was $7.8 billion, putting 2 percent at $156 million annually (a figure McCarthy also said included licensing deals).
There’s little concern that the loss of income from Russia is going to do any real damage to studios overall, especially as Western Europe becomes a major force again thanks to relaxed COVID-19 restrictions. But the boycotts do come just as the Russian market seemed to be turning a major corner. Alongside the return of box office revenues, streaming and high-end TV was beginning to get going. Netflix — which has also suspended its Russian operations — reportedly had 192,000 subscribers by the end of 2021 (and passed the 100,000 daily users mark that saw the country’s regulator add it to a list of those required to comply with new laws and carry Russian state TV channels).
Away from Hollywood, the overall economic impact felt in Silicon Valley — particularly the decision of Google and YouTube parent company Alphabet Inc on March 3 to stop selling online advertising in Russia — is likely to be much larger than that experience by studios. According to the SPARK business database, Google’s turnover in Russia in 2020 was 85.5 billion rubles ($790 million).
Alongside Google, Snap and Twitter also stopped selling ads in Russia following the Ukraine invasion. Facebook and TikTok were forced to suspend or shut down their Russian services because of Russia’s new “fake news” law, passed March 4, aimed at silencing dissent and limiting information about the invasion. Hours after the Russian government announced it was blocking access to Facebook as part of the censorship crackdown, parent Meta Platform Inc. said it would pause all advertising in the nation and would stop selling ads to Russian businesses. TikTok announced it was suspending livestreaming and new content to its Russian video service, but would maintain its in-app messaging service in the country.
But like the studios, the tech giants are unlikely to consider the losses of their boycott as anything more than a scratch and a small price to pay to show solidarity with Ukraine as Russian violence intensifies. The most damage will almost certainly occur within Russia itself and push many exhibitors — who had only just emerged from a painful pandemic and have become so reliant on major studios releases — back to the edge of bankruptcy.
As the source notes, if the boycott lasts two months, then survival is achievable, with maybe around 2-3 percent of cinemas closing. “But if it lasts six months, then I think half the cinemas will close,” he says. “And if it’s longer, it will kill the industry.”
A version of this story first appeared in the March 9 issue of The Hollywood Reporter magazine. Click here to subscribe.
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