In hindsight, the first couple of weeks of March 2020 have a dreamlike quality. We remember specific details of newfound anxieties—wash your hands, don’t touch your face, did I just hear someone cough?—but the memories are simultaneously distant and distinctly accessible. The entire world was bracing for something no one quite understood.
Jackie Brenneman, executive vice president and general counsel of the National Association of Theatre Owners (NATO), and Esther Baruh, NATO’s director of government relations, had spent the prior weeks visiting member cinemas ahead of CinemaCon, the exhibition industry’s annual convention in Las Vegas. By that time, cinemas in China, Italy, and South Korea had already suspended operations due to the spread of Covid-19. It was unclear if movie theaters in the United States would have to follow suit, though the likelihood of that occurring was growing by the day.
“At first, everything that was happening seemed to be building up to something, like a slow but sustained dripping faucet—drip, drip, drip—until all of a sudden, there was a flood and the whole world totally shut down,” says Baruh.
On March 11, the World Health Organization formally recognized Covid-19 as a global pandemic. Within hours, NATO officially announced that CinemaCon 2020—scheduled to begin in less than three weeks—would be canceled. In a matter of days, every cinema in the United States had voluntarily suspended operations until further notice.
Baruh has a professional background in lobbying—it was her principal role at NATO’s office in Washington D.C.—but despite her premonition that this would be more than a two-week affair, she had no indication of the extent of the crisis to come. “The team was holding meetings in Kansas City,” she says. “Between the time we took off in D.C. and returned from Kansas, we had retained a lobbying firm because we could see that things were closing down and we were going to need federal aid. At the time we only had an inkling of the scale of what we would be lobbying for.”
Brenneman, on the other hand, had limited experience working on behalf of exhibitors around government policy. “I was not a full-time lobbyist before the pandemic,” she says. “I had done some work with the Department of Justice for the different consent decree reviews—first Paramount, then ASCAP & BMI—and I had attended one day on [Capitol Hill] with NATO. That was really all the lobbying I had done: antitrust, being the lawyer in the room, and explaining the possible impact of a proposed law or administrative action.”
NATO’s efforts to assist cinemas in the early days of the pandemic were principally focused on helping movie theater workers get by while their places of work remained closed. The trade group donated $1 million to the Will Rogers Motion Picture Pioneers Foundation to support the Pioneers Assistance Fund for cinema staff left unemployed by the pandemic. At the time, much of the country, if not the world, remained under the impression that the virus would dissipate after several weeks of lockdown measures. Any long-term harm or impact to the business seemed uncertain. “We had no idea how long this threat would last, how seismically things were going to shift,” recalls Brenneman. “It felt like we were stuck in a lobster pot: trying to be as proactive as we could in a situation where you’re necessarily only going to be able to react.”
The first major piece of government pandemic aid Brenneman and Baruh tackled was the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Passed at the end of March, the stimulus package was considered a lifeline to the U.S. economy as it reeled from the sudden business disruption brought on by Covid-19.
“We spent a lot of time making sure that the members who qualified for the various aid programs could access them,” says Baruh. Working from NATO’s Los Angeles office, Brenneman recalls a rapid mobilization of resources: reading drafts, fixing problems, and sharing them with members early on. “We were all assigned different sections when the CARES Act draft language came out,” says Brenneman. “I got assigned to the Paycheck Protection Program (PPP) and the Main Street Lending Program. Because of my background as a lawyer, I was able to flag things that could be a problem for our members.”
NATO began hosting informational webinars with their members, addressing questions from cinema operators in a series of FAQ memos compiled by staff to guide them through the process. “We tried to make sure that movie theaters were as included as possible on every single provision that would help every theater owner,” says Brenneman, citing the Net Operating Loss Carryback provision from the CARES Act. “It enabled our members, many of whom had record years leading up to 2020, to count all their losses against their financial performance going back up to five years. That summed up to millions of dollars, hundreds of millions for some circuits.”
As the pandemic dragged on into the summer, it became clear that the economic relief provided by the CARES Act wasn’t going to be sufficient to get movie theaters through the crisis. “The time period provided by the aid programs was too short; it didn’t end up being a two-month pandemic,” explains Baruh. “We couldn’t afford temporary solutions. The biggest problem we faced was that all of a sudden, movie theaters went down to zero revenues while still having to pay all their bills.”
Operating expenses became an even greater liability for exhibitors once local lockdown orders were lifted in a piecemeal fashion throughout different parts of the country. In parts of Texas, cinemas were allowed to reopen by May 2020. New York City, on the other hand, a major artery for the global box office, kept cinemas closed until March 2021. Without enough of the box office market share available, studios opted instead to delay releasing any new titles until there was a greater number of open theaters.
“Every state—down to individual counties and municipalities within a state—enacted their own closure orders. That meant everyone had their own rules around reopening. There were little pockets across the country where things were reopening. Sometimes they were statewide, sometimes there were counties, it really depended on the individual powers of local government,” says Baruh. “We realized that we had to make sure movie theaters could reopen in a way where they had parity with similarly situated businesses. So if a house of worship was being permitted to reopen, and people could come back at a certain capacity, we had to make sure that movie theaters were being given a similar chance to reopen.”
“We, as an industry, were hit way harder than any other. We were closed for longer than we should have been closed in a lot of places—and that became a big fight,” adds Brenneman. “We weren’t asking for special treatment, we were asking for equal treatment. If restaurants could only be at 25 percent capacity, fine, but that meant movie theaters should also be open at the same capacity.”
“The biggest fights were around the two biggest markets, and they were the last ones to open: New York and California,” says Baruh. “We needed those two markets back because studios were wary of releasing films until there was a large enough footprint of movie theaters that were open. During that time, even if theaters were allowed to reopen by their respective authorities, it wasn’t viable for them to do so without new films coming out. The more markets we could open, the likelier it was for studios to release more films. It was the only way our industry could get itself out of this vicious cycle we were in.
“We ended up working across many different levels with the network of regional associations affiliated with NATO to get the industry reopened. That meant a lot of conversations with public health officials and politicians at various levels,” continues Baruh. “It was a very confusing—in some places a very opaque—process to understand the decisions that state and local governments were making about what kind of businesses could reopen, and under what rules.”
As the campaign to reopen theaters intensified, NATO kept a close eye on the multitude of scientific studies being conducted around the world tracking the spread of Covid-19 in indoor settings. Under every objective scientific measure, movie theaters emerged as one of the safest indoor entertainment venues during the pandemic. Advanced filtration systems coupled with social distancing through decreased capacity and mask wearing all combined to deliver a relatively low-risk night out. The spread of air particles from patrons in an auditorium was mitigated by a silent audience, all facing in the same direction, while seated and breathing normally under a resting heart rate.
NATO consulted with epidemiologists to develop Cinema Safe, a uniform set of guidelines and protocols to welcome audiences back to theaters in August of 2020. “We had a lot of members who had their own safety programs, they put a lot of money into branding them, and we recognized it was necessary for the industry as a whole to have a voluntary commitment to a set of epidemiologist-approved standards,” says Brenneman. “Something that worked for the entire industry.”
The launch of Cinema Safe set the stage for the release of Warner Bros.’ Tenet in September. Its implementation at over 300 cinema companies in the United States at launch reassured the first batch of audiences making their return to the movies, addressed any lingering concerns from government officials, and showed studios that exhibition was committed to promoting the safety of the moviegoing experience. The resulting box office performance of Tenet, however, didn’t do enough to convince studios to revert to a consistent release schedule—creating a vacuum in the calendar for exhibitors and audiences alike. For cinemas in the United States to survive the pandemic, there needed to be an additional economic lifeline that could address the industry’s unique business model. As opposed to restaurants or gyms, cinemas are wholly dependent on content from outside entities to draw patrons. If that content pipeline is disrupted, the economic consequences are disastrous—leading some cinemas to lose less money being closed than open.
The NATO staff dedicated a lot of time to different pieces of legislation to help address the problem, but the political climate in the country was hardly favorable in the fall of 2020. With a presidential election coming up in November, both political parties were taking a hard look at which specific pieces of legislation to support. “There was a ton of disagreement between the House and the Senate about how much to spend on a second Covid package, a huge discrepancy between what the Democrats and Republicans wanted,” remembers Baruh. “On the one hand, it caused a lot of panic, because the longer we went without a specific aid program, the more difficult things became for everybody. On the other hand, it bought us time to keep working and refining and making sure that we were fighting for something that was going to be really helpful for the industry.”
Since the passage of the CARES Act, with every passing month, the trade groups in D.C. had been lobbying frantically for sector-specific aid. One of the trade groups Baruh was familiar with was the National Independent Venue Association (NIVA), which had only been formed in March 2020—as a direct result of the pandemic—to represent music and performing arts venues. NIVA was actively working to get its own bill, the Save Our Stages Act, passed as part of a second national Covid economic relief package. The bill was originally designed to assist concert and live theater venues—movie theaters were not included when Save Our Stages made it into House Democrats’ first version of the legislation in late September 2020.
Baruh had developed a good working relationship with NIVA leadership. Their bill had something few others counted on during a divisive election year: support and momentum. Moreover, the cinema industry shared a lot more similarities with live entertainment venues than any other sector.
“We realized that if we wanted industry-specific assistance, we had to ally ourselves with the live music venues because, ultimately, we operate in the same way,” says Baruh. “You’ve got a network of indoor venues that rely on a supply of artists—in our case, movies provided by studios—to make the business run. We were in a similar situation, being indoor venues relying on content coming from outside distributors. Our businesses operate through this symbiotic relationship with content providers, you can’t really have one without the other. The pandemic had hit us both very hard.”
NATO’s close ties to NIVA opened the way for cinemas’ inclusion into the Save Our Stages Act, later renamed the Shuttered Venue Operators Grant (SVOG). To move forward, however, NATO’s executive board, which includes several members of publicly traded companies that would be left out of the bill, would have to get behind it. “To the credit of our executive board, they supported this—and we had publicly traded companies who lobbied for this, used their relationships to leverage to help make this happen,” says Brenneman.
With the industry’s support in place, cinemas then had to convince members of government to dedicate additional funds in the bill for their theaters. NATO worked with the bill’s principal sponsors—Senators Amy Klobuchar, John Cornyn, and Chuck Schumer—to include an additional $5 billion for movie theaters in the program. The effort was buoyed by a public campaign of moviegoers and some of the world’s best-known filmmakers to reach out to Congress in support of the bill and other relief measures. The action resulted in over 355,000 letters to Congress, culminating in bipartisan support from Democrats and Republicans to earmark $5 billion for cinemas as part of SVOG.
The bill, including movie theaters, passed in December of 2020. “I remember being in my apartment when I found out the program was going to be in the bill, as modified to include movie theaters” says Baruh. “The first thing I did after hearing the news was turn on the song ‘Run the World (Girls)’ by Beyoncé and start dancing. It was an incredible feeling.
“Even though SVOG didn’t include every movie theater company in the United States, I think it ended up helping every single movie theater company in the United States,” says Baruh. “It’s not the same industry without the small and medium chains, it’s not the same footprint. The smaller businesses help buoy the big businesses. SVOG had a trickle-up effect; by saving smaller and midsize theaters, that meant we preserved the industry’s wider footprint, which ultimately helped more movies come into the market.”
The movie version of this story would likely end here, on a high point after the legislative victory. The funding is guaranteed, cinemas are saved. The End; roll credits. The truth, unfortunately, is mired in bureaucracy. Passing the bill was only half the battle; there was another fight altogether coming into focus: ensuring cinemas could successfully apply and receive the funds allotted to them.
It took months for the Small Business Administration (SBA) to open a portal for cinemas. When it finally came online, it wound up crashing on the very same day. The rules for applying were initially unclear, leading to over a dozen guidance changes from the SBA, some of which changed the rules to apply significantly. Funds were granted on a first-come, first-served basis. There was no clarity on applications that were being denied, nor an appeals process in place to address administrative errors. “The SBA was not very familiar with the movie theater business, so we had to do a lot of education for them. It was a bumpy process getting the grant program off the ground,” remembers Baruh.
“It was a law that passed in December 2020, and it turned into a constant source of stress for us through August 2021,” adds Brenneman. “We were having daily 7 a.m. phone calls with the SBA. Daily stakeholder calls trying to figure out and fix problems. No one felt that we had the luxury of time; people thought the money would simply run out. We simply didn’t have any assurances when the program first launched and those first rejection letters came in.”
The troubled launch of SVOG can be partly attributed to the scrutiny the SBA was under following the rampant fraud that accompanied PPP loans the previous year. A lifeline for countless businesses, PPP was also susceptible to cheating as the government scrambled to get a hold on the pandemic. The SBA seemed determined to avoid the same mistakes the second time around with the SVOG portal. But their lack of transparency, along with an initial wave of rejections without explanations or an appeal process in place, sowed doubts that exhibitors would ever see any of the money they were entitled to.
Baruh testified before Congress on behalf of NATO in May 2021, five months after the program was enacted, calling for urgent fixes to the application process. Things began to improve in the weeks following her address, as other industries and lawmakers voiced their own concerns about the program’s shortcomings at launch. “Even though we were frustrated that it took so long, the program did work the way it was intended to,” says Brenneman. “It’s an example of why you should have faith in your government. The SBA was under an extreme amount of pressure. It was hard, but you want the government to take their time and be cautious in this type of situation.”
An appeals process was eventually put in place by the SBA, and Brenneman devised a matrix with every eligibility criterion so exhibitors could define what they needed and why they needed it when applying for funding. She personally reviewed exhibitors’ applications, down to their cover letters, and assisted in the appeals process whenever necessary. As of this writing, in March 2022, she was still involved in guiding exhibitors through the process.
Baruh left her position at NATO in September 2021. By then, all eligible cinemas had applied to the program she helped put together. The last industry event she attended in person was CinemaCon 2021, held weeks before her last day on the job. At the event’s annual State of the Industry address, delivered by NATO president and CEO John Fithian, Baruh and Brenneman were singled out and recognized for their efforts before an auditorium full of exhibitors—many of them recipients of the government aid they made accessible. The two women received a lengthy standing ovation.
In a briefing with the press, Fithian later revealed that at the start of the pandemic NATO feared that up to half of the domestic market’s 41,000 screens could have been permanently lost. Thanks to the work of Baruh, Brenneman, and NATO, the domestic screen count for North America in 2022 stands at around 40,578—only 1 percent under the pre-pandemic figures.
The post Industry Figures of the Year: How Esther Baruh and Jackie Brenneman Guided NATO through the Biggest Crisis in the Industry’s History appeared first on Boxoffice.
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