The largest movie theatre chain in the US is about to go broke. AMC Theatres confirmed in an SEC filing on December 11 that the company will be out of cash by January.

AMC has been telling anyone who’d listen that bankruptcy was possible for months. But its ultimatum follows the explosive news that Warner Bros. will release their entire 2021 movie roster on HBO Max the same day they hit theatres, including major titles like Wonder Woman 1984, Dune, The Matrix 4 and In The Heights. The movie theatre industry, which has seen ticket revenue fall 75% from 2019, is terrified that the option of sofa premieres will crush what’s left of box offices.

But the writing isn’t on the wall. AMC recently picked up $100 million from investment firm Mudrick Capital Management and private equity firms are circling. It’ll take a Christmas miracle (or at least, more than Tom Cruise screaming at PAs) for AMC to make it through the pandemic in-tact. The cinema operator estimates it will need $750 million to keep doors open through 2021, and much more if attendance doesn’t significantly increase in the new year.

How we got here

AMC has been crippled more severely than rivals thanks to a nearly $5 billion pre-pandemic debt load. It racked up the figure over the last five years by outfitting theatres with luxury recliners and acquiring pricey rivals like Odeon and Carmike. 

When most of AMC’s 630 US theatres, which are concentrated in the northeast where lockdown arrived first, closed down between mid-March and August, they already couldn’t afford losses. AMC hemorrhaged $561 million in April, May and June alone, with revenue down 99%. 

AMC’s competitors are hurting, too. Cinemark’s revenue fell even further than AMC’s in the third quarter, 96% compared to 91%. However, Cinemark says it has plenty of cash to get through 2021, even with closures and a barren release schedule. While the company called Warner’s decision “shocking,” it expects to "reach an agreement about the proper window and terms that will work for both sides."

Regal, the second-largest cinema chain, “temporarily” shut down all of its 536 cinemas as a cost-cutting measure, furloughing 40,000 employees in early October. While some thought this was a certain death knell, Regal’s parent company has had better luck than AMC, recently scoring a $450 million lifeline loan, plus $750 million in additional liquidity measures.

An industry in crisis

AMC has done everything it can to increase attendance. But even before the second wave, it became clear that people simply don’t feel safe going to the movies in a pandemic. 

All summer, AMC begged officials to reopen. When some cinemas finally opened doors in August, AMC saw fourth quarter attendance down 92% from 2019. Measures like limited seating capacities, a strict cleaning regimen, limited snack bar service, and even a promotional day of 15-cent tickets have done little to woo anxious movie-goers. AMC even tried out an “optional mask” policy but rolled it back within 24 hours after online backlash.

The theater owner watched in horror as Tenet, which was the first major Blockbuster to debut since the pandemic, fell flat on Labor Day weekend. Although COVID rates were low and theatres were open in 68% of the US, the $200 million film only collected $9.4 million on the first weekend. AMC’s share price and Facebook ‘Talking About’ count both spiked ahead of Tenet’s September 3 release. Both have since plummeted. 

A few weeks after Tenet’s slow burn, The National Association Of Theatre Owners and other industry groups begged congress for CARES funds in an open letter. The letter warned that without aid, “69% of small and mid-size movie theatre companies will be forced to file for bankruptcy or close permanently, and 66% of theater jobs will be lost.”

The future of big movies on small screens

There’s an industry protocol dating back to Blockbuster VHS that 70 days must pass between a movie’s theatrical debut and when it can be released for home consumption. This has protected theater revenue as, each year, Netflix, Hulu and Amazon release more and more original hits that never pass through the box office at all. 

As studios have begun to disregard that golden rule during the pandemic, warfare has raged between movie theatres and streaming services. However, at the start of the pandemic, AMC had no sense of scale for the upheaval that was to come. Back in April, the theatre company vowed to stop screening Universal movies when the studio, emboldened by the success of the digital premiere of Trolls World Tour, teased plans for same-day digital and in-theatres releases. This one came to a truce: eventually, Universal reached deals with both AMC and Cinemark for a 17-day theatrical window agreement. 

But the tides were already turning. In March, Paramount sold off would-be theatrical releases The Lovebirds and The Trial of the Chicago 7 to Netflix. Disney threw down a gauntlet when it moved Hamilton, Artemis Fowl and then Mulan to Disney+-only premieres. Just a week before Warner Brothers news, Disney also revealed a huge expansion of the Star Wars universe including nine new series that will debut exclusively on Disney+ and scheduled more big titles Pinnochio for streaming-only premieres. 

Warner Brothers says its new policy is only a 12 month-measure to get the company through the pandemic. Some think we can’t go back. “You’re going to set up a consumer pattern that they’ll expect this stuff,” one dismayed studio executive told Vulture.  

A light at the end of the tunnel

Streaming fatalists would disagree, but others are predicting that the masses can’t wait to go to the movies as soon as it’s safe. COVID-19 vaccinations were distributed to the first essential workers this week. As a vaccinated future starts to feel closer, lenders, creditors and landlords could be swayed to help AMC avoid Chapter 11 as they embark on last-ditch fundraising, rent and debt negotiation efforts. 

However, AMC’s saving grace might just be bankruptcy. Box office analysts say that shedding debt and theatre leases could be AMC’s best chance of securing their place in the future of cinema — even if that future includes watching The Batman starring Robert Pattinson at home.

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