Shaken, But Stirred: Emagine Entertainment Emerges From Pandemic Test

Paul Glantz loves James Bond movies, but the chairman of Emagine Entertainment has more than a fan’s interest in No Time to Die, the latest flick starring Daniel Craig as Agent 007. Glantz, who had to idle his regional chain of theaters last year due to government shutdowns during the pandemic, will be monitoring the U.S. box-office stats for this weekend’s opening of the highly anticipated United Artists release like a hawk.

“It’s considered the acid test for people coming back to movie theaters” as the pandemic wanes, Glantz told Chief Executive. “Based on the box office so far in Europe, and based on our advance ticket sales, I’m feeling pretty comfortable that folks will, in fact, return to the movies.”

It’s been nearly two years since Glantz has felt comfortable about the prospects for Emagine, a Troy, Michigan-based outfit that operates 27 theaters in four states in the Upper Midwest and has acquired leases on four more outlets from a failed chain in western Michigan. He became so frustrated at a state-mandated shutdown last year that he loudly sued Michigan Gov. Gretchen Whitmer.

Originally optimistic that his closely held company had the financial resources to weather the Covid storm, instead he had to go to Huntington Bank to get the Midwest regional lender to deem Emagine a company worth saving under the federal Main Street Loan program. Emagine’s losses and continued degradation of business would end up amounting to $46 million.

Emagine had to lay off about 1,000 of its part-timers and other employees out of a total base of about 1,100, though Glantz maintained 100% health benefits for theater managers and other valued staff. Glantz also was forced to return to his dozens of investors for a capital call, for the first time for any of his business entities in a quarter-century of capital-raising.

The company was bleeding well more than $1 million a month after debt service early this year. And Glantz is still optimistically awaiting the outlay of $20 million in pandemic-related Shuttered Venue Operators grants to Emagine from the Small Business Administration.

But nowadays, with the easing of Covid restrictions and a solid docket of new theatrical releases—beginning with No Time to Die—for the balance of the year, Glantz has a “pretty positive” outlook. Emagine again enjoyed positive debt service for the summer months, and he believes that will continue in the fourth quarter.

“We’re breathing a huge sigh of relief because it appears that we’ve gotten through the most difficult part,” he said. “That’s assuming we don’t have another lockdown.”

Another major assist to Emagine and the theater-operator industry was that releasing new movies immediately to video and to online streaming services didn’t prove to be entirely the right answer for Hollywood studios during Covid as movie screens around the world went dark in 2020.

“I can’t blame the studios for what they did, because they had films ready to go and their cash flow was largely constrained, like ours,” Glantz said. “They had new streaming platforms, and used them as the opportunity to build a subscriber base, which Wall Street loved.” And, of course, disintermediation of traditional outlets is a popular theme in industries ranging from car retailing to real estate.

But, noted Glantz, the business-model alteration didn’t play out as the studios hoped. Last summer’s release of Black Widow starring Scarlett Johansson, he said, was huge for the pandemic era. But its second-week stats—a crucial test of staying power for any movie—were dramatically outperformed by a more recent release, Shang-Chi and the Legend of the Ten Rings, whose distribution was handled in a more traditional way.

“Shang-Chi largely outperformed expectations, whereas Black Widow underperformed—and that was largely due to piracy,” Glantz argued. “Theaters have a much better means of preventing theft of intellectual property than studios have with online releases. This has demonstrated empirically that there is true value in theatrical release versus direct to video.

“It shows the optimal economic model for the industry is being able to optimize revenue through theaters, then pay-per-view, and ultimately to streaming services. Perhaps studios have learned that’s the optimal economic model for our industry.”