Lose of Revenue May Cause AMC Theaters to Close Permanently
AMC Theatres may not survive Coronavirus pandemic and they may be emblematic of the entire movie theater industry. AMC Theatres recently made their dire financial situation public. AMC is down in revenue a significant amount compared to this time last year. AMC Theatres “revenue fell to $941.5 million, which was down roughly 22% from $1.2 billion in the same quarter last year.” Since no one is going to movie theaters, buying tickets, or concession stand food, AMC has no money coming in. AMC put it bluntly: “We are generating effectively no revenue.”
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Some people may think that if AMC Theatres opened up tomorrow and a big block-buster film opened in tandem with it, that everything would be solved. It’s not that simple. Perception and economics are the problems. Perception – Though, in this scenario, the theaters would be open and films would be released, the Coronavirus pandemic would still be going on and people would still be afraid of contracting it, especially in a confined space like a movie theater (where the air inside is recycled), and in the absence of a widely-available Covid-19 vaccine. Economics – On top of that, there is record unemployment in the United States (nearly 20%) and in other countries. Who wants to spend the little cash that they have on movie tickets when they are potentially dealing with unemployment, paying rent, paying their mortgage, buying food, and buying gas for their car? AMC Theatres are aware of these realities as well. More importantly (and unfortunately for movie theater chains), so are movie studios and movie distributors. AMC “has serious challenges even if restrictions are lifted. That includes studios holding back new films from being shown…Even if governmental operating restrictions are lifted in certain jurisdictions, distributors may delay the release of new films until such time that operating restrictions are eased more broadly domestically and internationally, which may further limit our operations.” Movie studios and movie distributors are going to wait until the economic and vaccine situation in the United States and in China changes before they risk the millions of dollars they have put into their tent-pole and potential block-buster films. Movie studios and movie distributors want a stable economic and societal environment in which to release their films (they are risk adverse). There are currently: equality street marches (with looting) going on all over the world, the Coronavirus pandemic, record unemployment, and this is an election year for President of the United States, featuring the most polarizing president in U.S. history. This is not a stable environment in which to release a regular film in-theater, a new movie franchise entry, or a potential block-buster. Movie studios and movie distributors would be fools to think otherwise. Movie studios and movie distributors best move is to wait until the first quarter of 2021 at the earliest or the second or third quarter of 2021 at the latest (hopefully a Covid-19 vaccine will be available by then) to begin releasing their films in-theater again. That is the safest road for movie studios and movie distributors to take. That road, however, spells doom for many major movie theater chains – they will not have made a dime for almost a year by then. If major theater chains, like AMC Theatres, stay closed until the second or third quarter of 2021, when consumer confidence has returned, they may have already filed for bankruptcy. The movie theater companies that chose to go that route may still be alive after they declare bankruptcy, clearing their debt off their books, and giving them breathing room to reconstruct, but the companies themselves, their names, and the industry as a whole, would never be the same. And do you know who is the big winner out of all of this, who no one is talking about during this conversation, but who is quietly and eagerly watching on the sidelines with cupidinous eyes – streaming services. Second only to them, HD TV companies. The aforementioned streaming services will provide that platform and HD TVs will provide the movie screens. Covid-19 has shifted the spotlight from movie theaters to streaming services. Even if the best case scenario happens (first quarter 2021), I am not entirely sure it will ever completely shift back.
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