27/05/2020 - A piece of research commissioned by the Lithuanian Film Centre outlines the current situation for national cinema operators, forecasts the future and suggests potential solutions

As the cinemas slowly start to operate under certain restrictions during the coming months, the Lithuanian Film Centre (LFC) is interested in further investigating the long-term impact that COVID-19 will have on cinema operators. Thus, the LFC has requested that law firm Sorainen conduct an economic analysis, as cinema operators have been closed in the country since 16 March.

It should be noted that every year, the Lithuanian box office is on the up: last year, over 4.1 million tickets were sold, bringing in close to €22.5 million in revenues, and a 5% increase had been predicted for 2020. Nevertheless, the situation has changed dramatically, with the five main cinema operators, which control 95% of the market share, recording losses of €1 million during the quarantine, despite the compensation they have received. Evaluation of the analysis has concluded that during 2020, more than €8 million will be lost from ticket sales alone, while another €4 million loss will stem from decreases in other sales, bringing the total loss to €12 million until the end of the year.

The forecast is far from encouraging, as factors such as financial insecurity and fear of the virus will stop the audience from returning to regular screenings, which will have to adhere to the new safety requirements. Smaller audiences than usual are therefore to be expected. Costs for cinema operators are also increasing owing to the need to acquire the proper health-and-safety equipment, to keep up the maintenance of the spaces in the establishments, and to provide their staff with the necessary equipment. One of the relief measures, the postponement of tax payments, won’t be applicable to cinema operators, as they haven’t been in business during the last few months.

Regarding taxation, the researchers noted that the current VAT rate of 21%, which is also applicable to cinema tickets, could be reduced to 5% or even 9% for a couple of years, and this could be extremely beneficial for the operators, which might even be able to match their results from before the quarantine period. A reduced VAT rate has already been implemented in other EU countries, such as Germany (7%), Poland (8%), Finland (10%), Slovenia (8.5%) and Croatia (5%), while Norway has further slashed the reduced VAT rate from 12% to half of that. The researchers also emphasise that a reduced VAT rate could be attractive to future investors, encouraging them to enter the cinema market, and further develop and expand cinemas in the country, as many regions are still in dire need of them.

Rolandas Kvietkauskas, director of the LFC, commented on the results: “We hope that the research will contribute towards a better understanding of this area of the creative market and will help find the best solutions for countering the crisis. The recovery of cinemas is decidedly important to film culture because in recent years, the shortage of cinemas has become particularly apparent, especially in the regions. Additionally, plans for the expansion of cinemas can only be renewed if long-term economic solutions become apparent.”