AMC Theatres is warning its investors that if it doesn’t find $750 million, it will run out of cash by the middle of January 2021.
The company issued new public documents today announcing that because executives can’t predict what the supply of movies will be like, and it’s unclear if people will even file into theaters again soon, the company is unsure of how much money it can make. Specifically, AMC’s documents note that executives can’t know with “certainty the impact of the Warner Bros. announcement or any similar announcements regarding the release of movie titles concurrently to the home video or streaming markets.” Conversations with studios like Warner Bros. and Disney have yet to take place, the documents add.
Now, AMC is facing challenges that “have been exacerbated” by Warner Bros.’ move. Last week, WarnerMedia announced that Warner Bros. will release its movies on HBO Max on the same day they premiere in theaters. At the time, AMC CEO Adam Aron blasted the decision — one he only heard about an hour before WarnerMedia announced it publicly. In a statement, Aron said that WarnerMedia “intends to sacrifice a considerable portion of the profitability” in order to subsidize HBO Max.
“As for AMC, we will do all in our power to ensure that Warner does not do so at our expense. We will aggressively pursue economic terms that preserve our business,” Aron said.
It’s no secret that AMC — and other theater chains — are struggling. Back in October, AMC noted in public documents that “at the existing cash burn rate, [AMC] anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021.” The company estimated that in October and November, the monthly cash burn rate was $125 million. AMC isn’t making much revenue, and the one silver lining was having a slate of 2021 movies that could bring people back to theaters. With WarnerMedia shifting a few to HBO Max, and Disney bringing some of its titles over to Disney Plus (not all of them, though), that silver lining is disappearing.
Disney CEO Bob Chapek reiterated the company’s commitment to theatrical releases when asked by analysts during an investors event yesterday. The company generated more than $13 billion at the box office in 2019, and many of its franchises are mega-blockbusters that Disney can only reap full profitability from in theaters (in pre-COVID times). Chapek did add that “flexibility is going to be a big dynamic for us going forward,” which is why certain movies are moving to Disney Plus (Pinocchio, Peter Pan & Wendy), but they’re not fleeing theaters entirely.
“We had $13 billion at box office last year,” Chapek said. “Obviously, that’s nothing to sneeze at.”
While WarnerMedia also isn’t fleeing theaters per se, the US is a big market for film distribution. Offering people the chance to watch a movie at home for $15 on HBO Max — especially during a pandemic — is likely something they’d pick over heading to a theater. In markets where theaters remain closed, like New York City and Los Angeles, HBO Max is the only option. It’s likely that if Warner Bros. had released Tenet on HBO Max in the United States, the company could have bolstered its streaming subscriber base and continued to generate revenue at theaters internationally. Instead, Tenet only amassed $52 million domestically.
Questions about whether theaters will cease to exist have flown around Twitter a lot recently — closures and restrictions put in place because of the pandemic have led to record low revenues even before WarnerMedia’s announcement. While movie theaters are not going to suddenly disappear, AMC’s filing paints a bleak picture of where the largest theater chain in the United States is currently sitting. As the new documents read, the company has “substantial doubt” about its future.