The theatrical experience constantly on the verge of extinction, or so we are told. But in the case of AMC, the largest theater chain in the world, it’s damn close to becoming a reality. Due to the shutdown caused by COVID-19, AMC is losing out on revenue, furloughing its staff, and may be forced to file Chapter 11 bankruptcy.
Deadline adds that the rumors of AMC running out of cash are likely to be true. But even if they were to file for bankruptcy, the chain isn’t going anywhere. Well, they aren’t vanishing, let’s put it that way. But there may be a reorganization, including the closure of some locations. This is actually a good thing, considering the nearly $5B in debt they’re carrying. Restructuring may be exactly what AMC needs.
Also working in AMC’s favor is that they’re likely to be considered a “critical vendor”, which “is one with a specialized skillset, mandatory safety certification or proprietary product whose discontinuation of service would have a significant negative impact on a debtor’s operations.” Basically, you take away movies from AMC and their other avenues of revenue, such as concessions, become obsolete.
So claims of AMC’s doom, and thus that of the theatrical experience, are overblown In fact, AMC is already preparing for a possible reopening in May. That seems ambitious and highly unlikely at this stage, but they’re digging through the catalog of titles to see what’s available. Remember, this is what China did a few weeks ago, reopening theaters with beloved films to lure in audiences. They may not get a chance to put that strategy into effect, however. With weeks, possibly months of closure ahead, the lack of revenue is forcing AMC to back out on rent payments to landlords. Here’s an exerpt from a letter AMC recently sent out to landlords…
“Without revenue from its theatres, AMC will cease paying rent and charges under the lease effective as of April, 2020.
AMC asks for your patience and understanding during this difficult time. AMC intends to reopen its theatres as soon as possible after it is safe to do so. AMC looks forward to getting back to business as usual.”
If theaters reopen in full next month, we could see AMC bounce back fairly soon. If not, and this outbreak lasts through the summer, they could be in deep trouble.
