AMC Entertainment (NYSE: AMC), the country's largest theater chain, raised over $200 million in December 2020. But is that enough to get it through the coronavirus pandemic? And what is the future of the industry as a whole?
Industries in trouble
During bad times, people have traditionally turned to the movies for escape. It's no coincidence that uplifting musicals designed to cheer people up came about during the Great Depression of the 1930s. Who doesn't smile during the Wizard of Oz's "Follow the Yellow Brick Road," Shirley Temple's rendition of "Animal Crackers in My Soup," or Fred and Ginger's "The Last Dance"?
We can't indulge in the escapism aspect of the theater this time around as we're accustomed to doing. Because of the coronavirus, it's too dangerous to go inside a windowless theater, seated for hours in the vicinity of strangers. (Think of the coughing you always hear during the quiet right before the show starts.) So no company is feeling the pain worse than the movie theater industry.
Well, there's the sightseeing industry (hit the hardest according to Business Insider), followed by:
2. Amusement parks and casinos
3. Clothing stores
4. Laundry and other personal services
5. Dental offices
6. The movies
7. Restaurants and bars
8. Furniture stores
9. Spectator sports and performing arts
But you get the point. The movies are in trouble. Will they return?
How AMC did it
AMC has been selling off stocks and bonds to raise money to get it through the crisis, and $204 million is nothing to sneeze at. But this theater chain needs at least $750 million if it plans to make it through the other side of the pandemic.
In a somewhat ironic statement, the CEO of AMC, Adam Aron, says that Washington favors small business over big business, at least in the form of COVID-19 relief. But ask any small business owner, and you might not think Washington favors the little guy. Ask any small independent restaurant owner who had to close while big chains conducted business as usual or any mom-and-pop store forced to lock down while Walmart (NYSE: WMT) and Costco (NASDAQ: COST) remained open (even capitalizing big time on the pandemic). Anyway, that's Aron's take on the matter.
Maybe a pivot is in order
Companies that have been hit hard by the coronavirus -- so hard they might not make it out the other end -- might need to pivot, not relying on their past business model, to survive. Maybe movie theaters, by favoring money-making blockbusters to please investors more than the creators of the movies themselves, hurt the industry by alienating a big chunk of moviegoers.
Some might call what was happening with the big chain theaters corporate greed. There's nothing wrong with making money, of course. In fact, just the opposite is true. It's great to make money. But corporations need to be careful not to mess up a good thing. Don't be surprised to see movie theaters return but start favoring film diversity to stay relevant, like the diversity you get when you add small independent films, along with the big blockbusters, to the mix.
The Millionacres bottom line
AMC might need to take more drastic measures to survive post-pandemic. Some bondholders are urging the movie theater chain to file for Chapter 11 bankruptcy to give it a chance to restructure. AMC has no plans to do that as of the time of this writing.
The bottom line is the future of the cinema as we know it is murky. When will people feel comfortable returning to the movies, or will they even want to return at all? This one needs time and scrutiny before investors can make an informed judgment.