Things aren’t getting better anytime soon
AMC Entertainment didn’t try to hide the immense financial duress the company has faced the last several months and the increasingly uncertain future that lies ahead if AMC can’t find new ways to make cash.
The company posted a revenue of $119.5 million in its third quarter, down 91 percent year over year. The same quarter last year brought in more than $1 billion. AMC noted in its earnings that it’s “operating approximately 539 of its 600 domestic locations,” as of October 2020, but cities like New York City and Los Angeles remain big obstacles. The issue is getting people into those theaters on a consistent basis without any big movies to encourage attendance. On Monday, the company also filed new documents stating it was trying to sell 20 million class A shares in an attempt to secure just under $50 million.
“The duration and impact of this pandemic are still affecting us to this day and are certain to continue to affect our results going forward,” CEO Adam Aron said in the report.
AMC has been warning for months that it faced a dire financial situation. In mid-October, AMC said it would likely run out of cash if the company didn’t find a way to bring in some form of substantial revenue while studios delay their films and theaters remain closed in major metropolitan areas like New York City and Los Angeles. Aron previously told CNBC the company is focused on fundraising, not bankruptcy rumors that spurred after public documents filed suggested that could be a possibility.
There are a few revenue methods for raising cash to help tide things over that AMC laid out in those documents, including negotiations with landlords over theater lease payments and starting joint ventures with other business partners (including studios like Universal Pictures). The company also suggested it could potentially sell off some of its assets. As it stood in October when AMC filed public documents, however, “at the existing cash burn rate, [AMC] anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021.”
Without any major blockbusters to drive people to theaters, and with coronavirus cases rising again in states across the country, things are likely to get worse in the immediate future. In those same public documents, AMC’s chief financial officer, Sean Goodman, warned that even if AMC can raise some cash, it might not be enough to stave off possible bankruptcy.
“Our ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic,” the documents read.
Not being able to predict how people will respond over the next few months is one of the biggest issues. Take Warner Bros. for example. The company released Tenet globally, and while the film performed well in international markets, it underperformed in the United States. Even AT&T CEO John Stankey acknowledged on his company’s recent earnings call that executives aren’t expecting a heavy return to theaters in early 2021.
“We’re not optimistic,” Stankey said on the call. “We’re not expecting a huge recovery in theatrical moving into the early part of next year. We’re expecting it to continue to be choppy.”
For studios like Warner Bros., Disney, and Universal, the companies can pivot some of their titles to streaming exclusives. This could help grow HBO Max, Disney Plus, and Peacock respectively. The companies, alongside studios like Sony and Paramount, can also release their movies as digital exclusives, selling them on digital retailers like Amazon and iTunes. Or, as we’ve seen happen multiple times over the last few months, studios could sell their titles to streamers like Netflix, which are seeing massive growth over the last few months as people stay home and need new titles to satiate consumer demand.
The point is that studios have other options; as it stands right now, theater chains like AMC and Regal do not. While theater companies are trying to find ways to survive, they’re also caught in a cataclysmic shift when studios are pivoting faster to direct-to-consumer entertainment (streaming). Warner Bros. and Disney would like to be in theaters. The companies make billions of dollars every year through global box office revenue. But while Disney and Warner Bros. have digital routes to hold things over until things do start to return to some form of normalcy, it’s becoming increasingly unclear if AMC can hold on for the ride.