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Amid movie theater industry uncertainty, Santikos CEO remains optimistic

Some movie theaters are a few weeks into welcoming back customers. But the San Antonio chain has been operating for a year.

SAN ANTONIO — As vaccine distribution continues across the country and states begin to cautiously loosen pandemic-era protocols, orders and recommendations, the nation's moviehouses are seeing something they haven't seen for the better part of a year—they're seeing people, even crowds of them in some showings.  

And yet, unlike their counterparts in some of the biggest markets like Los Angeles and New York, movie fans in San Antonio haven't had to wait with bated breath for the opportunity to return to cinemas in 2021. On the contrary, Sunday, May 2 marks one year since the largest local theater chain – Santikos – welcomed back customers in a limited capacity after being closed for a few weeks, an opportunity afforded to it when Texas Gov. Greg Abbott announced the initial stages of reopening. Unlike other AMC, Cinemark and Regal theaters in the Alamo City, Santikos's box offices wouldn't be collecting dust for too long. 

In fact, Santikos was one of the very first movie theater companies in the country to flip on the marquee lights once again, a decision which CEO Tim Handren told KENS 5 in August wouldn't have happened had most employees not been willing to return to work, and which resulted in Hollywood studios reaching out directly to the local chain. 

Several months after that conversation, the rest of the movie theater business is slowly awakening from hibernation, catching up to where Santikos has been in the process. But the future of moviegoing isn't much clearer than it was a year ago for those of us on the outside. Is staying home suddenly a more desirable option for families who would easily pay up $100+ on a night at the movies? Is the theatrical experience really as endangered as some believe it is?

On the occasion of it being one year after Santikos reopened its doors, we spoke with Handren about that uncertainty, how the company has grown in the last year and how it ended up in the position of industry leader when it comes to compromising safety with business. 

This interview has been edited for clarity and length. 

David Lynch: Have you personally gone to the movies this year? Not as a businessman, but as a fan?

Tim Handren: Oh, I've been a bunch of times! There have been some interesting movies that have come out. Unfortunately there’s not a lot of marketing dollars that are advertising them and so unless you’re a movie fan and you’re going to the Santikos website to watch the trailers, you don’t see a lot of notifications about the movies. But I’ll bet I’ve been two dozen times over the last few months. 

Lynch: Since we last spoke in August, two big things have happened. Vaccination efforts have begun and Warner Bros. announced it would be releasing its 2021 slate day-and-date in theaters as well as on HBO Max for a limited streaming run. Now that we’re a few months into both of those developments, I wonder if the future is any clearer for you than it was a year ago when it comes to post-pandemic moviegoing?

Handren: It’s a great question, and I’m going to be guessing a little bit at the answer. There’s a lot of press that’s coming out right now from most of the studios that this day-and-date thing that Warner Bros. did was an attempt to find a way to create revenue for them without destroying theatrical. I speak pretty directly with some of the executives at Warner Bros., and...that is not going to be a viable long-term model for them. I think they know on a revenue basis that they do far better with their movies when they go to theatrical first, and then they go to some of the other mediums, whether that’s streaming on-demand or the other mediums. 

Here’s what we believe: We believe that this day-and-date thing will continue for a little bit longer. But when you look at movies like (“Godzilla vs. Kong”), when you look at “Mortal Kombat” that just came out and you see the results that are coming from that—those would have been huge movies had they not gone day-and-date. And I believe Warner Brothers’s game plan is as things get closer to normal and more theaters are open – right now just barely over 60% of theaters across the country are open – that they will get back to a traditional model. 

One thing that is going to absolutely change is the windows; how long are things going to play in the theaters on a formal arrangement basis before they go to some of the other mediums. Here's the deal: That has created a boogeyman that people like to write headlines about. In reality, if a movie is a really good movie, it’s going to play in the theaters for a while. And if a movie is not that exciting, it’s going to go away after a couple of weeks. That’s just the way it’s always been. I think what we’re doing right now is we’re acknowledging that more formally in the studio-theater relationships that are going on.

Lynch: So that shorter release window doesn’t send tremors through your plans?

Handren: Not at all. I can tell you, we’ve done the math; for the OK movies, we get 95% to 97% of the moviegoers who are going to see the OK movies, they’re done in two or three weeks anyway. So it’s like (shrugs) if they’re going to shorten the window...you’ll hear the term “17 days” occasionally. That’s significant only because it means three weekends. That’s all that means. 

Lynch: I remember when we last chatted you had mentioned that opening early had resulted in Warner Bros. and a couple of other studios reaching out to Santikos directly. And you mentioned that that new collaboration was keeping y’all in the loop as far as their release plans for “Tenet.” So were you in the loop as far as their 2021 release plan?

Handren: Absolutely. I give those guys a lot of credit. These are big believers in theatrical, and they are not doing anything in any way, shape or form to harm theaters. An interesting article that came out this week, there’s a belief that what Warner Bros. has done has saved a lot of theaters, because they are creating a revenue source for guys like us who are open. So, yeah, that relationship continues to be very solid. We have very candid conversations about all kinds of things. 

Lynch: I want to touch on one of the movies you talked about which was “Godzilla vs. Kong,” because, at least for folks looking at the industry from the outside, it seemed like that’s the biggest of those Warner Bros. movies that’s released so far this year that did quite well at the box office, at least compared to what folks might have been expecting. What does that movie’s relative success mean for a company like Santikos when so much is still uncertain? Or was how much it brought in not quite what you were hoping for?

Handren: On a relative basis, this month of April is the best month we’ve had since last February. I attribute that to both the release of “Godzilla vs. Kong” and “Mortal Kombat,” those have both done very well. (But) not like they used to, right? So we’re handicapping what we guess is gonna be the attendance numbers right now based on what we’re seeing. But right now we’re pretty optimistic we’re going to end the year very strong. Not quite a 2019 kind of a year, but the industry is comparing everyone to 2019, and so when we talk about recovery, it’s all done in percentages of 2019. That’s what everybody’s doing, and that includes us. We may end this year at 50% of 2019, which would be unbelievable to me. That would be awesome. 

Lynch: So that’s the benchmark for y’all. 

Handren: Yeah, we want to get back to those 2019 kinds of numbers. It’s kind of on a steady glide slope up. So if you were to chart it on a piece of paper, for me this is the proper way (motions upward trajectory). It’s kind of giong up like that, and it’s going up quickly. I think the vaccines have given people a lot more confidence, no doubt about it. I think all the things are headed in the right direction for our industry, as I see it. 

Lynch: How many fewer visitors have you seen this spring compared to what would be a regular, non-pandemic spring?

Handren: We’ll have almost 200,000 (who) will have gone to the movies this month, the month of April. That’s a really good month for us. This is the best month we’ve had since last February, there’s no doubt about it. And everything’s going in the right direction. Economically, starting in November was when we started actually not losing money every month, and we’ve done pretty good. We were on a call with the National Association of Theater Owners this past week (where) the question was asked, “Is anybody not losing money?” And across the country, we’re the only theater chain that I know of that is not losing money. That’s how hard-hit the industry is. 

Are we optimistic about the future? I’m very optimistic about the future. What we’ve seen this past month is a super indicator that people want to get back to entertainment of all types. Not just theaters, but I think people want to get out, and I’m hopeful that all venues – whether it’s music or theater or anything where people get out and escape – that’s what this is all intended to be. Enjoy a couple of hours thinking about something else besides life. So we’re very optimistic; we’ve had a very good run for the past five months. And this month is incredibly good, and once June gets here...June is filled with some great movies that are coming out. 

Lynch: The chain made some waves a year ago this week when it became one of the first cinema companies to open across the whole country. Now that a year’s gone by, is there anything you would have done differently at that stage of reopening – whether with the reopening itself or in the preparations leading up to it – knowing now how bone-dry the summer was and, really, most of the rest of 2020 ended up being?

Handren: You know, I wouldn’t have done a single thing differently. I think what we did in terms of responsibility to the community – how we opened – the responsibility we have first and foremost to our employees, I think we did all the right things. Our practices were adopted by the National Association of Theater Owners. Our COO, Rob Lehman, was on the reopening committee to define what Cinemasafe – that’s the brand name that NATO has put on us – what those practices looked like, and every one of our practices were adopted. 

So I think that we were a leader in the industry. I know we were because all of the studios have called us out and said we have been leaders in the industry, to do things that were right. You know, we opened not to make money last May, I think I told you that. We opened to get our employees back to work and we weren’t trying to make money. And we didn’t (laughs). So we were successful in that. But we weren’t losing more money by being open. I think some theaters tried to open up in areas and they didn’t do it in a way that their community thought was good, and a lot of theaters that did open were losing more money by being open. And we did not. 

Lynch: In the same vein, is there anything you’ve noticed in the last year that gives you any indication about how a local theater chain like Santikos might have to evolve going forward? I think a lot about your offering of private screenings of new movies and the option of “bring your own Blu Rays.” I think that ramped up at the end of last year, and Santikos had said that might last through January. But you’re still offering that option now, so do you think that might become a mainstay going forward?

Handren: Yeah, there’s no question that’s going to be something that we keep in our tool set going forward. People really enjoy that. I think that was a creative response to the pandemic. We did it originally so that you could just be with people that you know, and not strangers. But it’s turned out into almost like private event-planning that’s gone viral, right? We’re going to continue doing that. We’re actually pretty sold out on those private events. We still have to keep many of our auditoriums for the general public to come in. But they sell out very quickly when we have a good movie. 

Lynch: At this point, five of Santikos’s theaters are fully operational while three are operating only on weekends. 

Handren: Correct.

Lynch: What kind of benchmarks are you waiting for to see when those might be fully operational as well?

Handren: We’re basing that on two things. One is labor, and matching the right labor with the demand. And then waiting for the demand to come in, frankly; we don’t want to operate at a loss. I would say that probably by the end of May, you’ll see those hours at those other three starting to expand. And that’s based on getting enough of the right labor in; labor is clearly a challenge for everybody right now, not just Santikos. We’re gearing up for a great June, we think people are going to be going back more in June. And then, as it relates to Silverado – the last one to open – we’ll open that up in the third week in May. 

Lynch: In December the San Antonio Business Journal reported that Santikos took out a $50 million loan that seems like it played a crucial role in keeping the chain going through the pandemic. I’m curious to know just how important that loan wasdid it function more as a stopgap, or are you relying on it as long-term financial security?

Handren: We had some bankers who, in my opinion, were being pretty unreasonable. They were viewing our industry as distressed, and they were asking us to take all of our cash and pay down the loans. That would have been difficult for us to continue operating. So the Main Street Lending Facility that we got took out those unreasonable bankers and has created a liquidity for us on a go-forward basis. And for the first year of that Main Street loan we don’t have to service it, so we’re not paying interest or principle on that loan, which is a big cash flow consideration for us. So it was important for two reasons. 

Lynch: You took over as CEO first on an interim basis at Santikos in late 2018, which essentially means half of your tenure has been spent withstanding this historic event. Has your philosophy as a leader changed at all over the past 14 or so months?

Handren: No, not at all. When I stepped in on an interim basis in 2018, I was on the board of directors and I stepped in to fill a gap. And exactly two years ago is when I became an actual employee and I said, “All right, I’ll do this on a longer-term basis.” One of the main things I wanted to do was instill a different kind of culture inside Santikos, and you don’t do that in just six months, right? But I’ve been working on the culture of this company since the day I walked in and just putting a different...a kind of servant-style leadership (in place) with the employees. We should be a fun company to work at. 

I think a lot of the things we did in 2018 and, more importantly, in 2019 laid a foundation of what kind of company we really are from a character standpoint. And 2020 was a great test. Did we have enough time to put in the right components of a culture to demonstrate that we really do care about our employees like we said we did? I think we demonstrated that every step of the way, putting our employees’ needs always first. You can look across the country and look at how most theater chains treated their employees, and I don’t think it was with much dignity, personally. In fact, yesterday I saw an announcement from (Alamo) Drafthouse where they said they were permanently shutting down Westlakes and they just sent a text out to their employees (which) said, “Thanks, goodbye.” And that was how they did it. (shrugs) I just don’t think that’s a dignified way to treat your employees. 

So our culture was tested, but our culture was strong. It’s stronger today than it has ever been because I think all our employees recognize that we really do care about them as people, first. And what we’re doing together at a company that has a great mission at Santikos, we’re here for the entirety of the community. Throughout all of 2020 when we were not getting a lot of people coming back to the movies, we leveraged our movie theaters to help those in need. We did a lot of work with the food banks, we were running blood drives at most of our theaters; blood drives were being cancelled because companies were sending their people home to work. And we did a lot of things with the (South Texas) Blood and Tissue Center, we saved a lot of peoples’ lives by doing that. 

For the food bank, (President and CEO) Eric Cooper would tell you we did a lot of events at our theaters that were needed. As people were going through times of need, we made our facility available to others. So I think we showed who we really are from a character standpoint. We’re a different kind of company and we really do care about this community. And it’s not just about money—it’s about caring in every way possible, and I think we showed that every step of the way. 

Lynch: So. as paradoxical a question as this might be to ask the leader of a theater chain in April of 2021, now that you’ve gone through that test, is Santikos a stronger company than it was a year ago?

Handren: I think we’re stronger in a lot of ways. I think the fabric of our culture and our management team...I meet with my management team every month, and that’s a lot of people, and we get in and we talk about what we’re doing and why, and how we need to treat each other, and how we need to treat our guests. So, culturally I think we’re absolutely stronger. 

Financially, we’re very strong. I think we’re stronger than any other (movie theater) company from a balance sheet standpoint. I think we’ve come out with some new practices from an operational standpoint that we were trying to get our head around before the pandemic. For example, going cashless. We’ve made that a permanent practice in our theaters. The pandemic sorted that out, everybody started doing that in a lot of ways, but what we’ve done, I think, is a permanent change. 

But, yeah, I think we’re stronger culturally, stronger financially – from a balance sheet standpoint – and I think once we get people going back to the movies our financials will be better than they were before. And then, operationally we’ve made enough of the right kinds of changes, I think we’re better all-around.