World News

AMC’s Decline

AMC Entertainment has not sought to conceal its financial position. The company’s future is problematic unless it seeks a way of generating revenue. 

 

AMC reported revenue of $119.5 million in its third quarter, a 91% reduction as compared to last year’s quarter, which recorded more than $1 billion in revenue. AMC asserts it’s “operating approximately 539 of its 600 domestic locations” as of October 2020. Nonetheless, large cities like New York and Los Angeles are still a challenge as it’s difficult to get people to visit the theater without any blockbusters. AMC also affirmed that it’s going to sell “20 million class A shares in an attempt to secure just under $50 million.”

 

File:AMC, Theaters, Plainville, CT.jpg - Wikimedia Commons

For months now, AMC has made aware of their “dire financial situation.” In October, it announced it was going to go bankrupt if it doesn’t find a way to make revenue while films are delayed, and theaters remain closed in major areas. CEO Adam Aron shared with CNBC that “the company is focused on fundraising, not bankruptcy rumors that spurred after public documents filed suggested that could be a possibility.”

 

Possible ways of rescuing AMC include negotiating with “landlords over theater lease payments and starting joint ventures with other business partners” like Universal Pictures (AMC Financial Report, 2020). AMC also said it was willing to sell some of its assets. As of right now, AMC “anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021.”

 

Without any blockbusters urging people to attend theaters, and with the pandemic getting worse across the United States, the future is uncertain for AMC. AMC’s chief financial officer, Sean Goodman, stated that “our ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic.” In other words, the company might go bankrupt even if they manage to raise funds. 

 

Despite their financial situation, Aron reassures investors that AMC is still focused on generating revenue. Aron stated that AMC has “sufficient liquidity to get through the beginning of 2021.” 

The issue remains whether studios will release films they have delayed on time. 

 

According to Aron, Warner Bros., operated by AT&T, is “desperately trying to hold on to their Christmas release of Wonder Woman 1984.” However, AT&T’s CEO John Stankey is “not optimistic.” “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.”

 

Nonetheless, Aron hopes that studios will work closely with AMC like Universal. Currently, Universal has a faster release window, meaning the film has to play in theaters for a shorter time before being released on digital markets. As part of the deal, AMC receives a percentage of the revenue made from copies sold through VOD. Aron remains confident that AMC can “optimize [their] profitability and the studio’s profitability if they can have a combo of theatrical releases and streaming.”

 

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