One Entertainment Giant is Threatened by the Virus Shutdown - AMC Theaters Might be Facing Bankruptcy Due to Closures

FILE - In this May 11, 2005, file photo, people enter AMC's Studio 30 theater in Olathe, Kan. AMC Theatres, the world's largest movie theater chain, has unveiled a $20-a-month subscription service to rival the flagging MoviePass. The theater chain on Wednesday announced a new service to its loyalty program, AMC Stubs, allowing subscribers to see up to three movies a week for a monthly fee of $19.95. (AP Photo/Orlin Wagner, File)

 (AP Photo/Orlin Wagner, File)

 

There are some realities and lessons to be found in this possibility.

The forced shutdowns and government bans on public gatherings has been impactful on a number of businesses and industries. One such threatened entity is the national theater chain AMC Theaters. Depending on when this nation rebounds from the outbreak and we return to a normal lifestyle the major exhibitor is projected to be on the brink of insolvency.

The theater chains across the country have seen their businesses all but shuttered for a month now, and the announcement that the largest of these exhibitors could be on the verge of closing down is a sobering thought. With over 650 theaters comprising over 8,000 movie screens, the loss of AMC would create a significant hole in the big screen landscape. Everything will come down to timing.

With some encouraging news coming out of the CDC and the coronavirus task force that we could be approaching the peak of the viral outbreak there are signs that a time to getting back to work across the country might be on the horizon. There remain a number of question marks regarding how long it will be before theaters are back to showcasing motion pictures — and how long they return to normal audience levels. Even if theaters do reopen it is unknown how much time it will take for the public to be comfortable gathering in crowded cinemas once again.

The issue for AMC is one that is being faced by countless businesses across the country. Some armchair business experts have said that a strong, functioning company should be positioned with enough cash to stay solvent after 11-3 months of lack of revenue. As unrealistic as that might be for many businesses of any size, AMC meets this suggested standard and is still seeing the company poised on the edge of a cliff. The company has furloughed not just operational employees but also its management.

Rough estimates have theaters potentially opening doors once again by July, with some speculating August. This could be too late for AMC. One industry analyst sees the company with around $600 million in liquidity and available credit lines. It is estimated AMC has a monthly burn rate of over $150 million. The losses needs to be tabulated beginning last month, as the chain officially closed doors March 16, but the severe drop in business already took place in the weeks prior.

Studios will be more than eager to get their movies back on screens after months of relying on a severely curtailed video on demand platform for current films. This will create a rush of products to be shown that will already challenge exhibitor screen availability. It is unclear how many of the smaller chains and private theaters will also be closing down after this shutdown, so studios could be suffering even more if a large segment of the viewing options are removed from the marketplace.