New AMC problem: not enough people are going back to the cinema

AMC Entertainment (NYSE: AMC) is counting on movie studios bringing blockbusters to the big screen this summer to bring moviegoers back to movie seats. So far, however, this has not quite happened, posing a big problem for the theater owner’s turnaround.

Even though AMC has used its stock of memes to raise hundreds of millions of dollars, all that money won’t do much if moviegoers don’t show up. It may not be AMC’s fault, but it doesn’t bode well for the company and its investors.

Image source: Getty Images.

A half full glass

Memorial Day was the hoped-for start of the revival as it has always featured prominently in cinema as the start of the blockbuster summer season.

That position has slipped in recent years, even before the COVID-19 pandemic, as studios have broadened their release schedules to include other times of the year. But this Memorial Day weekend was considered important simply because most states reopened and large swathes of the population were vaccinated.

Considering everything theaters had against them, it wasn’t a terrible projection. A quiet place II broke expectations with a $ 57 million open weekend. Yet that was also well over half of the cinema’s $ 100 million box office for the holidays and the industry’s biggest weekend since March 2020.

To put this in perspective, Walt disneythe live-action remake of the animated classic Aladdin – which received mixed critical reviews compared to the original – made $ 116 million on its Memorial Day weekend debut in 2019.

however, Aladdin also generated more than half of this year’s entire Memorial Day box office of $ 213 million, highlighting declining holiday fortunes to draw crowds. The release of just six new films this year also played against theaters, up from 11 two years ago, and only 72% of theaters were open this year, often with limited seats.

Are you not amused?

This is why many say the weekend was a success and read it as a win for AMC Entertainment.

Mobile device location data from analytics firm Placer.ai indicates that AMC’s pedestrian traffic over the holiday weekend is down 49% from 2019 and 46% from 2018, which is encouraging since the biggest cinema operator has been able to recover more than half of the lost moviegoers. to the pandemic.

He also did considerably better than his rival Cineworld (OTC: CNNW.F), whose Regal Theater channels fell more than 60% over Memorial Day weekend compared to 2019.

Of course, AMC was the first operator to reopen its theaters last year while Cineworld refused to do so until studios committed to releasing films in theaters again. Cineworld only started reopening after making a deal with AT&TThe Warner Bros. studio to have an exclusivity window for films and not date and date releases, when the films are released simultaneously in theaters and streaming services. And that only happened last March.

Image source: Place.ai.

Still, the analytics company has found that customers are increasingly comfortable returning to the movies.

Between April 19 and May 31, weekly visits to AMC theaters went from a drop of over 78% to a drop of 50% from 2019. Seen sequentially, they look even better with dropping visits 31% in the first week of May but up 159% higher. in the last week of the month.

So it looks like the release of a much-anticipated movie over a holiday weekend shows that there’s still a latent demand for big-screen entertainment, but it’s also worrying.

Summer is coming

July is another great time for the industry. This is usually the heart of the blockbuster summer season, and not only are there fewer big-budget movies hitting the market this year, but a number of releases are either exclusive to streaming services or released simultaneously in theaters and streaming.

ComcastUniversal Pictures, for example, will hit theaters on July 2 the next installment in its Purge franchise, The purge forever, But Amazon Chris Pratt’s feature film tentpole released on Prime Video that day The war of tomorrow.

Disney will release the origin story of the Marvel comics on July 9 Black Widow theaters and Disney +, and a number of other films from other studios will receive the same treatment. AMC and the rest of the theater industry must not only grapple with a reluctant audience, but also the threat of streaming services that siphon off moviegoers.

A hill too high to climb

AMC Entertainment ended the March quarter with $ 5.4 billion in long-term debt and an additional $ 4.9 billion in operating leases, for which it must make payments of $ 800 million for the rest of the year. It is due to release an additional $ 1 billion next year, which makes it a significant financial hurdle to overcome.

Many see Memorial Day weekend as a sign of a revival for the theater industry, but retail investors should instead see it for what it really is: too little, too late. And they should avoid the actions of AMC Entertainment like they would avoid a big budget flop.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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