Movie theater screens across the country faded to black nearly three months ago, and that means that exhibitors are fading to red. Market leader AMC (NYSE:AMC) is feeling the pain. The stock has more than doubled since AMC closed all of its multiplexes in mid-March, but that's just a convenient starting line. The shares have shed nearly a quarter of their value in 2020, 85% below the all-time highs set five years ago.
Earlier this week, it posted bleak preliminary results for the first quarter, and the current quarter is going to be brutal with most of its multiplexes still closed across the world. Even when there's a glimmer of hope -- Florida will allow movie theaters to open at 50% capacity through all but three counties on Monday -- there are larger concerns about what will be playing on the big screen and, more importantly, consumer appetite for the movie-going experience. Things seem pretty bad right now -- let's size up what the industry could look like in 2025. Spoiler alert: It won't be pretty.
Coming soon to a theater near you
Content is a problem right now. AMC is starting to open a handful of screens internationally, but studios are hesitant to release new movies until more theaters are open at higher capacities. The next big slated release -- Christopher Nolan's trippy time-twisting Tenet -- is still rolling out on July 17 according to the latest trailer put out two weeks ago, but it's not likely to happen unless a majority of movie theaters across the country are back in business.
The content situation will sort itself out in time, but the bigger question is how studios will approach theatrical release windows. Studios now have a growing market of consumers willing to pay as much as $20 to stream a new movie from home, and a recent survey concluded that just 13% of those polled would choose to see a movie at a theater if they could otherwise screen it from home. Another 17% of those polled weren't sure, but it still leaves 70% of consumers preferring the creature comforts of home.
The theater experience will have to change, and we're not just talking about reclining leather chairs and stadium seating. Theaters will need differentiated experiences and exclusive content. AMC has been trying to step up its game with mobile ordering to speed up concession lines and lobby bars to encourage extended visits, so don't be surprised if most -- not some -- of its locations offering a wider menu of meal offerings.
There will be a shakeout, and while AMC has some near-term liquidity concerns, it's probably not the next movie theater chain to fall. There will likely be fewer operators and multiplexes by 2025, but that's not a death sentence -- if the industry steps up its game. If chains are to survive they will have to evolve into more than just inconvenient versions of the consistently improving home theater experience. Movie theaters will have to become aspirational destinations again, and if that means that your local AMC 24 will become an AMC 192 with eight times as many smaller personalized cinemas with meal service and more in-building diversions, would that be so bad? Theaters have been embracing live concerts, celebrity presentations, and sports programming. If there are even more options on that front, would that be so dreadful?
It's hard to be optimistic right now. We're in the middle of a global pandemic and protests are taking place around the country as we barrel into an inevitable recession. Buying AMC now is risky because despite a recent debt offering there are no guarantees that it will be able to sidestep bankruptcy reorganization. However, the movie theater industry itself will get through this if it's able to disrupt itself. The risk is certainly there that today's AMC shareholders may not be there to enjoy the fruits of the transformation, but the rewards could be substantial for whoever is leading the way in out-of-home theatrical experiences come 2025.