AMC, America’s Largest Cinema Chain, Faces Extinction

Despite assuring consumers last week that it would not scale down its business, in the face of Cineworld (home of Regal Cinemas) and Odeon announcing severe movie-house closures, AMC reversed its messaging in the past 24 hours and warned of its imminent demise, alerting all Americans that their days at the movie house are numbered.

AMC signaled to the SEC in a filing early Tuesday morning that something radical would need to change – – an unexpected, giant uptick in business; a bail-out from the government; new investors or some other unpredictable, strategic alliance – – or the U.S. would see its largest cinema chain go under, by the end of 2020 or early 2021.

As a result of AMC’s announcement, its stock tumbled 13% by the end of trading Tuesday.

Some are curious why the company didn’t take an even greater beating given the doomsday scenario the exhibition business currently faces.

Even with many movie houses being open across the U.S., the obstacles for your local theater are staggeringly difficult to overcome and at least for the immediate term, seemingly insurmountable:

a.) NO BIG MOVIES ARE OUT. Studios are releasing very little original content, holding back big titles until things potentially “return to normal” sometime next year. With little original content being shown, why take the risk to go to the movies in the first place?

b.) NYC AND L.A. ARE CLOSED. The country’s major entertainment hubs – – New York and Los Angeles – – are refusing to allow cinemas to open, in the face of uncertainty with the pandemic, keeping “influencers” on each coast from helping to promote cinematic fare. As much as it’s sometimes hard to admit, it matters when New Yorkers and Angelenos go to the movies – – not only because they are the biggest movie markets, but they help set trends for the rest of the country, and the world at large.

c.) IT’S NOT A FEASIBLE BUSINESS. The cinemas that are open are only operating at 33% seating availability, due to Covid-19 restrictions.  Even at 33% potential capacity, most theaters sit empty. Like restaurants and bars, the limited seating and service add up to business operations that simply can’t turn a profit.

d.) STUDIOS ARE CLOSING RANKS. With streaming exploding and studios like Disney
DIS
and Comcast
CMCSA
-Universal announcing reorganization plans that aim towards a “streaming-centric” business plan, all signs point to a long-term pivot towards at-home entertainment, versus cinema-release strategies

e.)  FLU SEASON APPROACHES. Europe’s already experiencing a second, possibly worse wave of the virus. Many predict the U.S. may face a similar, meteoric rise in cases, keeping even the bravest from venturing out to two hours at a movie house with people who “don’t share the same bubble.”

While it’s upsetting and depressing to think of a future without the cinema experience, I predict it will be short-lived. 

Therapeutics will arrive. A vaccine may come along that gives everyone the confidence they need to trust others and mix in enclosed spaces.

None of these things will occur, however, in time to save the existing businesses of AMC, Cinemark, Cineworld, Odeon and other smaller chains.

But those actual movie theaters aren’t going to be torn down anytime soon.

One day we’ll all be back.

And we’ll most likely be seeing movies at a revamped cinema owned by a studio, that finally and forever will be able to keep 100% of the ticket sales, versus the 50% studios currently share with exhibitors.

Do I think the studios are happy to see the movie exhibitors go out of business?

Undeniably, long term, it all works in the studios favor.

They’ll sit things out, stream their content and one day, when they’re ready – – and that’ll be when we’re all ready – – the studios themselves will reopen those abandoned movie theaters and sell tickets at a price they control, with popcorn, soda and other concessions they alone serve, with titles that they can keep in the cinema indefinitely – – just like they used to, when they scooped up all of the movie chains after the last pandemic, of 1918/1919.

Don’t worry movie goers – – for better or for worse, eventually, everything old will be new again.