Can theater chains survive the pandemic?
At AMC Town Center in the Kansas City suburb of Leawood, Kan., the 20screen complex has a few recent offerings: There’s a new comedy starring Robert DeNiro and Rob Riggle, Christopher Nolan’s “Tenet” and a thriller with Russell Crowe.
But it’s the oldies that tell the story of how the coronavirus pandemic has shaped the movie theater industry. The multiplex is showing classics like “The Shining,” “Hocus Pocus” and “Monsters, Inc.,” all more than a quarter-century past their initial theater debuts.
The lack of new releases has been a major impediment for movie theaters, which have been uniquely ravaged by the pandemic as consumers avoid close contact with crowds, particularly indoors. And for two of the country’s largest movie theater chains, it’s becoming increasingly unclear how long they can survive the current climate.
Analysts say the nation’s largest theater chain, Leawood-based AMC Theatres, is nearing possible bankruptcy filing as it bleeds cash — a situation exacerbated by its financial position before the crisis.
Liberty, Mo.-based B&B Theatres, which operates 50 cinemas in seven states, has publicly acknowledged the possibility of a bankruptcy restructuring, but family members who run that privately held company say they’re more bullish on their future, particularly if they receive federal aid proposed to help smaller theater companies.
“As an industry we’re sort of still limping along,” said Bobbie Bagby Ford, executive vice president and a part-owner of the nation’s sixth-largest movie theater chain. “However, every week continues to get better.”
AMC did not respond to The Star’s questions about its future. But its recent financial filings, which portend a possible bankruptcy, have made clear that the company is teetering on insolvency.
“It’s amazing that AMC hasn’t filed bankruptcy yet,” said Garrick Brown, vice president of retail intelligence at national commercial real estate firm Cushman & Wakefield.
The crisis will reverberate beyond the entertainment industry: Any potential theater closures will further stress alreadystruggling malls and shopping centers that depend on chains like AMC as anchor tenants.
Brown said the United States is home to about 7,800 movie theaters.
“In a best case scenario forecast, we are looking at losing a quarter of those. And that’s the best case,” he said. “Things are going to get a lot worse before they get better.”
AMC’s enemy is time. In a filing with the SEC, the company estimated that it had $417.9 million cash on hand.
The company announced in the same filing that it would sell shares to raise about $50 million to muster up more liquidity.
But $50 million may not go far in shoring up AMC’s liquidity crisis, given how much cash the company burns every month while the pandemic keeps customers away from theaters. AMC said in its filing that “it is very difficult to estimate our liquidity requirements and future cash burn rates.”
Investment bank Credit Suisse published a research note on Tuesday that estimated AMC will burn between $97 million and $135 million a month through the end of the year. That puts AMC on a course to run out of cash by January.
AMC has acknowledged it may run out of cash by the end of the year if conditions do not improve.
Credit Suisse’s analysts suggest that AMC needs $1 billion in liquidity to make it through 2021. The note says that’s “unlikely given the uncertainty around the theatrical attendance even if the film slate holds.”
Making matters worse is that customers will likely remain wary of a quick return to theaters in large numbers, even once the United States shows substantial improvement in its handling of the coronavirus pandemic.
AMC began reopening its theaters in late summer. The company said more than 520 of its 600 U.S. theaters were open as of mid-October.
Bruce Nash, president of the film analytics firm Nash Information Systems and publisher of The Numbers newsletter, said he watched how the theater industry rebounded in China, South Korea and Japan after those countries stabilized their coronavirus spread.
Nash estimated it would take about six months after conquering the coronavirus in the United States before film studios started releasing big-name movies to theaters to attract big crowds.
“For AMC that’s a very long time,” Nash said. “It’s a real squeeze for them and it will be very hard for them to survive without a really unexpected increase in business ... or getting further cash to survive and figuring out how to do that.”
Babgy Ford, a fourthgeneration member of the family behind B&B Theatres, said many consumers are ready to go back to the movies. B&B has implemented a slew of safety measures like employee temperature checks, mandated mask wearing and spaced out seating.
“We just need some fresh content,” she said.
While some new films have been released in recent weeks, they aren’t the big blockbusters backed with big marketing budgets like films in the “Wonder Woman” and “Star Wars” franchises, she said.
Earlier this month, competitor Regal cited the lack of new releases as part of the reason it elected to temporarily shutter all 536 of its U.S. theaters.
Aside from decreased consumer demand for live movie going, government mandated closures in New York City and Los Angeles, the nation’s two largest theater markets, have also pushed studios to hold back content.