Walter Williams on the Founding Fathers
As Americans celebrate Independence Day, there is renewed debate about the nature of that independence and of the men who declared it. The column below from the late Walter Williams…
AMC, one of the biggest movie theatres in the world, has announced that it has substantial doubt it will stay in business for a considerable amount of time after movie theatres reopen. Due to the coronavirus outbreak, the company had to cease operations globally. The company expects to have lost between $2.1bn and $2.4bn in the first quarter that ended March 31. The second quarter is expected to be worse for the company.
The company has announced they would need additional capital if they cannot reopen within the estimated timeline, which is this summer or later. The company would also require additional financing if a second outbreak occurred causing them to resuspend operations or if they did not generate enough revenue once they reopened.
To stay in business AMC took additional steps to cut costs and ensure liquidity and they would be able to open in the summer. But they are not sure about their liquidity beyond that. According to NBC,
AMC had previously sought to conserve cash by furloughing its in-theater employees, halting its operations through June and suspending its dividend payments and share repurchases. The company also has been working with landlords to defer rent payments and has cut the salaries of its corporate level employees.
However, as it seeks to reopen its theaters this summer, it has had to ramp up its cash spending. While AMC believes it has enough of a cash reserve to resume operations this summer, or perhaps a little later, its liquidity after that point remains in question.
This of course is very concerning especially after considering the fact that movie production companies will be reluctant to release movies in theatres. Universal Studios, for instance, has had success with the video demand release of Trolls: World Tour, so they might possibly pursue that path for future releases. Moviegoers may also need some time to be confident about resuming movie-going experiences. All of these taken into consideration shine a doubt on whether movie cinemas can weather the storm.
Movie theatre companies will, therefore, have to grapple with the possibility of exceptionally low levels of turnout. This will probably be so among the elderly populations. People over 50 makeup About 40% of ticket sales. This is bound to have a significant effect on their profitability.
Movie theatres like other businesses will probably have to follow social distancing measures. This would include things like removing some viewing seats in order to increase the distance between viewers. As of current most movie production companies have extended release dates for their movies, up until close to the end of the year which is when they are expected to be open.
How will the movie-going experience change?
It is hard to predict what would happen to the movie industry entirely but this is another clear casualty of the shutdown and it is bound to be a huge transformative period for the industry. It is possible that movie theatres will bounce back and things would go back to normal. It is also possible they might be bought out if they fail, which would leave much unchanged for the consumer. But it is also possible a new system would emerge in place of the traditional movie-going experience.
Whether be it a drive-in theater, or virtual movie-watching experiences, failing traditional theatres will create a gap for entrepreneurs and innovators to fill customer entertainment needs. Streaming services would have a competitive edge in this case as they already have platforms to virtually sell or rent new movies to customers.
But whatever the outcome, will depend on the preference of the consumer. Thus if customers flock to movie theatres to watch movies as soon as theatres open, this will leave the traditional movie theatre-going experience almost unchanged. But if customers prefer to rent online and watch in their own homes, other platforms might overtake movie theatres.