I would not want Tim Handren’s job, even if it includes free passes to the movies and unlimited servings of buttered popcorn. Handren, a former USAA executive, has served as the CEO of Santikos Entertainment and its nine area theaters since 2019.
The cinema business is in the dumps. Major new releases are few and far between, and not many of us are going to theaters these days, even if they have been rebranded as entertainment complexes featuring bars, bistros, video games, bowling, and more. Even after the pandemic ends, not as many of us will go in the future as went in the past. Most people “go to the movies” at home now, tuning in to Netflix, Amazon Prime, Hulu, and other on-demand subscription services.
For young people, the smartphone is their movie theater. Streaming services have done to the movie business what the internet did to print newspapers. The cinema industry will survive but never be the same.
Looking back, I wonder if David Holmes, Handren’s predecessor in the job, and the Santikos board of directors now wish they had accepted one of two reported offers to sell the theater chain that came in the years after the 2014 death of John L. Santikos. The company founder’s will, made public in 2015, dictated that all dividends from for-profit Santikos Entertainment flow into the John L. Santikos Charitable Trust at the San Antonio Area Foundation to benefit designated area nonprofits.
I first wrote about this missed opportunity in March 2019, but the impact of the pandemic on the business only makes the question more relevant today. Santikos himself, of course, had no way of knowing in the years preceding his death that the entertainment empire he built from his own father’s modest cinema holdings would be so threatened. One wonders if Santikos, a shrewd operator and real estate investor, would have clung to his holdings or sold while the market was still strong.
When the Santikos Charitable Foundation was first announced, Area Foundation CEO Dennis Noll publicly valued the company at $605 million, though it was later disclosed he neglected to include more than $200 million in debt on the Santikos books. Noll predicted that the Santikos Foundation would become the region’s largest charitable organization. It has fallen well short of that prediction.
Santikos executives have never disclosed the names of the would-be buyers or the price they offered. Had the company sold, 100 percent of the purchase price would have flowed into the Santikos Charitable Foundation and inevitably produced far more money for area nonprofits than is now being generated.
Instead, Handren and his team have made major capital investments in new and expanded theaters to remain competitive. Those investments have further reduced the bottom line dollars flowing into the foundation.
The company received a desperately-needed lifeline last week in the form of a $50 million government loan from the Federal Reserve Bank’s Main Street Lending program, facilitated by the Bank of San Antonio. Handren told the San Antonio Business Journal the loan was “a life raft, frankly.”
The pandemic relief program is a generous government bailout. It enables Santikos to retire a private loan whose size and interest rate have not been disclosed. The company did not have to put up any theaters or real estate holdings as collateral. The first year of the five-year loan is interest-free, and in year two, the cash-strapped company only has to make interest payments. Still, all loans eventually come due.
Few businesses have been harder hit by the pandemic than movie theaters. Two of Santikos’ nine entertainment complexes remain closed, and pandemic-era revenue is down 75 percent, according to the company. Many workers were furloughed, probably for good.
Handren and his fellow executives, to be fair, regard their business as strong and sure to recover after the pandemic passes. Others do not share that view.
Globally, the movie business is, to quote Adam Aron, CEO of AMC Entertainment, the world’s largest cinema chain, “battered.” AMC is operating most of its theaters, including AMC Rivercenter and AMC Boerne locally, but most movie fare consists of older releases. Several anticipated blockbusters have been put on hold, and Hollywood film studios will no longer give cinemas exclusive rights to new releases. Going forward, streaming services will become an even greater threat.
Regal movie theaters, the second-largest chain, closed all 536 of its theaters in the United States and the United Kingdom in October, furloughing more than 40,000 employees only two months after reopening theaters in August. The chain likely will remain closed until widespread vaccinations are carried out and new releases can attract paying customers.
Santikos has put in place a range of safety protocols, including employee virus testing, hands-free ticketing, reduced seating in theaters, and mandatory mask use. Despite those best efforts, the experience is simply not the same.
When it comes to the future of Santikos, I remain a pessimist. Perhaps realist is the better word. As with the decline of any legacy industry, cinema’s freefall is a tragedy, one affecting hundreds of workers here, and tens of thousands of workers nationwide. The real tragedy locally may be the missed opportunity to sell Santikos and create a blockbuster charitable foundation.
Someday, a Hollywood studio will probably make a nostalgia-driven movie about the good old days of going to the movies. Many of us will watch with interest, probably from home.