Can AMC Entertainment keep afloat?Struggling cinema company AMC Entertainment crashes by over 15% as news hits that Disney will launch two of its highly anticipated new films on Disney+ the same day as their movie theater release.
AMC has had a rough ride of it since COVID hit and we all stopped leaving the house, and in December the firm warned that it would go bankrupt in January without more funding. The movie theater chain lost almost $4.6 billion (enough $$ for a 65 million year subscription to Disney+) on 77% less revenue than it generated in 2019. The numbers aren’t looking good.
In a last-minute reprieve, the company secured $917 million in investment capital at the end of January, and in yet another surprise plot twist, found itself the latest target of the Reddit amateur trading army that had just taken up GameStop, sending prices skyrocketing more than 300%.
However, COVID aside, AMC still has to compete with streaming services, whose popularity (and profits) have ballooned during lockdown. Netflix saw annual revenue hit a whopping $25 billion in 2020, while Disney gained $32 billion in market value in December 2020 with shares jumping 12% on news that Disney Plus subscribers were expected to triple by 2024.
Premium content is now the name of the game and Studios are also becoming increasingly OK with bypassing cinemas. Warner Media debuted Wonder Woman 1984 in cinemas and on HBO Plus at the same time on December 16, 2020, and the studio has said it will do the same dual-viewability for all its films this year. This week it was announced that two of Disney’s flagship films for 2021, Black Widow and Cruella, will be available online for just $7 a month subscription, and the firm has now begun a complete top-down reorganization to prioritize streaming after a successful pay-per-view run with Mulan last year.
So even though AMC announced last week that it would open 99% of its U.S. cinema locations by March 26, it could still struggle to fill seats when the alternative is sweatpants and snacks from the comfort of your own couch. And as well as markedly lower levels of traffic, the company will also have to deal with higher COVID-related costs to maintain cleaning and safety standards and the pressure that will put on its profitability going forward.
The other option is acquisition – with some far-fetched forecasters out there even suggesting that Disney could buy AMC itself. We’re not quite there yet – but the way things are going, it might only be a matter of time...