AMC Theaters warns investors that without a steady stream of movies to bring people to other open-air cinemas, the company could run out of money in late 2020.
Not surprisingly, the theater industry is hurting. Almost every major blockbuster (movies that could make people visit a theater in the middle of a pandemic) has been displaced by 2021, and theaters are still running at reduced capacity. The results are not great; Warner Bros. and Christopher Nolan Tenet – the only remarkable blockbuster that the studio tried to release – failed to come out in the United States, where theaters in major markets such as New York and Los Angeles remain closed. The next big movie is Wonder Woman 1
To try to avoid the potentially devastating financial impact that the ongoing pandemic will have on its business, AMC is outlining several potential ways to raise money, according to public documents released today. This includes continuing negotiations with landlords on theater rentals, launching joint ventures with other business partners and potential asset sales. However, as it seems at the moment, “at the current rate of burning money, [AMC] expects that existing cash resources will be exhausted by the end of 2020 or the beginning of 2021. “
AMC Chief Financial Officer Sean Goodman also warns investors through public documents that there is a “significant risk” that the aforementioned potential sources of additional liquidity may not actually occur – or, he continued, even if AMC Theaters raises some form of liquidity through these potential pathways this will not be enough to compensate for AMC losses. In practice, Goodman lets investors know that it is extremely difficult to predict anything at the moment and “cannot be guaranteed” that any of the plans listed above can solve the problem correctly.
“Our ability to be predictable is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic,” the documents said.
AMC Theaters is not the only company facing an increasingly worrying future. Regal, which is owned by Cineworld, announced last week that it would close its theaters for now. That would cut costs, CEO Mooky Greidinger told CNBC increased by keeping the theaters open. AMC Theaters currently operates only in locations that are open with about 20-40 percent capacity. This represents approximately 83 percent of theaters in the United States, according to the company. However, after the resumption of business, the attendance of theaters decreased by 85 percent on an annual basis.
One of the biggest insecurities of theater chains like AMC is the inability to predict consumer behavior. Even if theaters open en masse next year, studios could continue to slow down films if people stay home. Studios like Disney, Warner Bros. and Universal could move their titles to streaming services. AMC Theaters is working with Universal to shorten the theater window to just 17 days, which will allow Universal to sell it directly to consumers faster and give AMC Theaters a share of the revenue.