Few New Movies, Small Crowds: Can AMC and B&B Theaters Survive the Pandemic?
At AMC Town Center in the Kansas City suburb of Leawood, Kan., the 20-screen complex has a few recent offerings: There’s a new comedy starring Robert DeNiro and Rob Riggle, Christopher Nolan’s “Tenet” and a thriller with Russell Crowe.
But it’s the oldies that tell the story of how the coronavirus pandemic has shaped the movie theater industry. The multiplex is showing classics like “The Shining,” “Hocus Pocus” and ” Monsters, Inc.,” all more than a quarter-century past their initial theater debuts.
The lack of new releases has been a major impediment for movie theaters, which have been uniquely ravaged by the pandemic as consumers avoid close contact with crowds, particularly indoors. And for two of the country’s largest movie theater chains, it’s becoming increasingly unclear how long they can survive the current climate.
Analysts say the nation’s largest theater chain, Leawood-based AMC Theatres, is nearing possible bankruptcy filing as it bleeds cash — a situation exacerbated by its financial position before the crisis.
Liberty, Mo.-based B&B Theatres, which operates 50 cinemas in seven states, has publicly acknowledged the possibility of a bankruptcy restructuring, but family members who run that privately held company say they’re more bullish on their future, particularly if they receive federal aid proposed to help smaller theater companies.
“As an industry we’re sort of still limping along,” said Bobbie Bagby Ford, executive vice president and a part-owner of the nation’s sixth-largest movie theater chain. “However, every week continues to get better.”
AMC did not respond to The Star’s questions about its future. But its recent financial filings, which portend a possible bankruptcy, have made clear that the company is teetering on insolvency.
“It’s amazing that AMC hasn’t filed bankruptcy yet,” said Garrick Brown, vice president of retail intelligence at national commercial real estate firm Cushman & Wakefield.
The crisis will reverberate beyond the entertainment industry: Any potential theater closures will further stress already-struggling malls and shopping centers that depend on chains like AMC as anchor tenants.
Brown said the United States is home to about 7,800 movie theaters.
“In a best case scenario forecast, we are looking at losing a quarter of those. And that’s the best case,” he said. “Things are going to get a lot worse before they get better.”
AMC’s race against the clock
AMC’s enemy is time. In a filing with the SEC, the company estimated that it had $417.9 million cash on hand.
The company announced in the same filing that it would sell shares to raise about $50 million to muster up more liquidity.
But $50 million may not go far in shoring up AMC’s liquidity crisis, given how much cash the company burns every month while the pandemic keeps customers away from theaters. AMC said in its filing that “it is very difficult to estimate our liquidity requirements and future cash burn rates.”
Investment bank Credit Suisse published a research note on Tuesday that estimated AMC will burn between $97 million and $135 million a month through the end of the year. That puts AMC on a course to run out of cash by January.
AMC has acknowledged it may run out of cash by the end of the year if conditions do not improve.
Credit Suisse’s analysts suggest that AMC needs $1 billion in liquidity to make it through 2021. The note says that’s “unlikely given the uncertainty around the theatrical attendance even if the film slate holds.”
Making matters worse is that customers will likely remain wary of a quick return to theaters in large numbers, even once the United States shows substantial improvement in its handling of the coronavirus pandemic.
AMC began reopening its theaters in late summer. The company said more than 520 of its 600 U.S. theaters were open as of mid-October.
Bruce Nash, president of the film analytics firm Nash Information Systems and publisher of The Numbers newsletter, said he watched how the theater industry rebounded in China, South Korea and Japan after those countries stabilized their coronavirus spread.
Nash estimated it would take about six months after conquering the coronavirus in the United States before film studios started releasing big-name movies to theaters to attract big crowds.
“For AMC that’s a very long time,” Nash said. “It’s a real squeeze for them and it will be very hard for them to survive without a really unexpected increase in business … or getting further cash to survive and figuring out how to do that.”
B&B was prepared for tough times
Babgy Ford, a fourth-generation member of the family behind B&B Theatres, said many consumers are ready to go back to the movies. B&B has implemented a slew of safety measures like employee temperature checks, mandated mask wearing and spaced out seating.
“We just need some fresh content,” she said.
While some new films have been released in recent weeks, they aren’t the big blockbusters backed with big marketing budgets like films in the “Wonder Woman” and “Star Wars” franchises, she said.
Earlier this month, competitor Regal cited the lack of new releases as part of the reason it elected to temporarily shutter all 536 of its U.S. theaters.
Aside from decreased consumer demand for live movie going, government mandated closures in New York City and Los Angeles, the nation’s two largest theater markets, have also pushed studios to hold back content.
Like other chains, B&B has had to get creative to keep money coming in. It’s showing classics like “The Nightmare Before Christmas” and 1978’s ” Halloween.” Its Independence drive-in theater saw big crowds over the summer months and the company is renting out individual theaters to smaller groups.
“I can’t think of a time you’d be able to rent one of our luxury auditoriums for $99,” Bagby Ford said. “That’s a pretty cool thing to do and a once-in-a-lifetime opportunity on some level. But it’s not enough.”
B&B, named for the Bills and Bagby families, employs about 2,100 people at 45 locations. The chain is not breaking even, but is losing less money keeping its doors open than if it were to close, Bagby Ford said.
No one ever expected this kind of downturn, but she said the company has relied on savings and cost-cutting measures to get through the pandemic. And so far, banks, vendors and landlords have been flexible and helpful.
“We had prepared for a rainy day,” she said. “We had always felt like it was important to be prepared because there are up years and down years.”
While B&B’s flagship location in Liberty included 12 auditoriums and one of the world’s largest screens when it opened two years ago, many of its locations are in smaller communities like Chanute, Kansas, and Bolivar, Missouri.
B&B received a $6 million Main Street loan, but Bagby Ford said its terms were not very favorable and offered little relief. She’s hopeful that Congress will pass the proposed Save Our Stages Act, which would offer grants to operators of live entertainment venues, along with smaller movie theater operations.
While she wants to see wider federal relief, Bagby Ford doesn’t foresee an industry wide implosion. Consumers still want to go to the movies, she said. And even if other chains like AMC go through bankruptcy or shutter some locations, she said chains like hers might step in and purchase them.
“I would hate to see that happen, though,” she said. “We really hope that no one has to go through that and that the government comes through and helps all of us.”
While bankruptcy could be in the cards for B&B, she said that’s so far unlikely. The company has not talked with a bankruptcy attorney and Bagby Ford said she remains optimistic about the company’s future.
“I think the question you want to ask is: Are we going to make it? And the answer is yes,” she said.
AMC’s problems before the pandemic
There’s little doubt that the coronavirus was a black swan event for chains like B&B and AMC. But AMC joined a number of other companies that entered the pandemic crisis already susceptible to its worst effects.
AMC lost money in 2017 and 2019, carried more than $4 billion in debt and had little cash on hand going into the pandemic.
“That was not a product of the pandemic. It was a product of the industry and also their specific performance within the industry,” said Nathan Mauck, an associate professor of finance at the University of Missouri-Kansas City. “You’re kind of playing with fire if you’re in that situation. Because if something happens, you have pretty limited options. And now something happened.”
China’s Dailan Wanda Group purchased AMC in 2016 for $2.6 billion. The chain in 2016 spent $1.2 billion to merge with domestic rival Carmike and spent another $1.2 billion to buy Europe’s largest theater outfit, transforming AMC into the largest theater chain in the world.
Mauck, who follows AMC’s financial performance and even assigns students to study the firm, compared AMC’s industry position to that of the Hertz rental car company, which filed for bankruptcy protection in May.
“The entire car rental industry got hit by the same COVID issues,” he said. “But some of the other companies came into it a little more profitable, with a little more cash and they so far have been able to avoid bankruptcy.”
AMC is now presented with few options, he said.
“We’ve seen this a lot during COVID where it’s kind of a race against the clock for a lot of companies,” Mauck said. “We got a pretty good sense of what their clock looks like before they have to do something.”
And Hollywood isn’t necessarily helping, choosing to hold back big blockbuster release dates or move content directly to streaming.
Mauck said he recently asked his 9-year-old daughter whether she felt safe going back to a theater. She said yes, but Mauck looked at local listings and didn’t see any new releases for children.
“There’s not a lot of compelling, new content,” he said. “It’s going to be very difficult without new content to get people back in big enough numbers.”
And that difficulty will spill over into the commercial real estate industry.
Malls and shopping centers have increasingly added food and entertainment options as more brick-and-mortar retail transitions to online sales, said Brown, the analyst with Cushman & Wakefield.
In 2005, about 10% of U.S. mall space was dedicated to food, beverage and entertainment. That share grew to 25% by 2019, he said.
“Everything that was working in retail was about experience. And now it’s over. Or it’s on pause. You see these stories about the retail apocalypse,” he said of coverage about the industry before the pandemic. “No, that wasn’t the retail apocalypse. This is the retail apocalypse.”
Already struggling before the pandemic, Kansas City’s malls have shuttered dozens of stores in the months since the virus arrived here. Brown noted that during 2019’s booming economy, the U.S. set a record for retail store closures: Nearly 13,000 chain stores closed last year, well above the 7,800 that closed in 2010 at the height of the fallout from the Great Recession.
The sheer size of movie theaters presents a unique challenge. They would be hard to redevelop for other retail uses. They might be best suited for industrial warehouse space, though they often occupy prime locations for retail traffic.
“Really, there comes a point where converting a building like that might be just as expensive as tearing it down and building a new building,” Brown said.
PricewaterhouseCoopers has predicted U.S. cinema revenue will fall to $3.9 billion this year, a 65% drop from the $11.4 billion in 2019, according to The Hollywood Reporter.
That kind of hit will put nearly every theater operation in jeopardy, Brown said. He said every major chain is probably at threat of bankruptcy. But even a wave of bankruptcies won’t necessarily spell the end of the industry.
“Someone will see the opportunity,” he said. “Even if you have these major players go bankrupt, if the price is right someone will buy them out of bankruptcy and wait for the reboot.”
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