For the few short weeks in early summer when it looked like the spread of the coronavirus contagion was slowing down, an investor could have given AMC Entertainment Holdings (AMC 9.56%) the benefit of the doubt. With the pandemic heating up again, though, it's likely there's little hope left for the theater chain. The fact that rival theater chain Cineworld (CNNW.F) is simply shuttering until further notice only underscores the industry's woes.

It's not just locally mandated shutdowns and social distancing concerns that will crush AMC, however. The film-making industry is mostly mothballed as well, leaving movie theaters without enough blockbusters to turn things around. It could take months to refill the movie pipeline with new flicks after it's safe to resume filming. AMC Entertainment just doesn't have the time.

Man in the distance looking through binoculars under a blue sky

Image source: Getty Images.

Troubles on top of troubles

The COVID-19 pandemic presents challenges for all consumers and corporations, but it strikes at the heart of what makes the film business tick -- crowding a bunch of people into the same room for a couple of hours. The Centers for Disease Control and Prevention (CDC) recently confirmed that the disease can be spread even without direct contact, which means movie viewings could be super-spreader events. Translation? Don't look for crowded theaters anytime soon.

Investors should bear in mind, however, that AMC Entertainment was in trouble well before the coronavirus pandemic upended the world. The theater chain ended 2019 with $4.7 billion in debt on its books, costing it around $292 million in interest payments per year. It was just enough to put and keep the company in the red after suffering a couple of years of stalled revenue growth and several years of waning profitability.

The company successfully refinanced that debt in July, reducing its burden by at least $460 million. But it's still not enough.

Remember, even before the pandemic took hold, AMC's deteriorating results only reflected years of weakening revenue growth and shrinking ticket sales for the entire theatrical movie business. The organization's (as well as the industry's) bigger existential problem also remains the same. That problem is streaming media alternatives that have materialized in a big way in just the past few months that help keep people out of theaters.

Empty theaters and underwhelming box office receipts

As of mid-August, according to a survey performed by Atom Tickets, 74% of movie fans who had been stuck with streaming films said they'd be ready to set foot in theaters again within a month. That was notably higher than May's figure of 59%, marking not only encouraging numbers but an encouraging trend.

When consumers had their chance to actually see a film on the silver screen, though, they mostly didn't. AT&T's (T 0.19%) film arm Warner Brothers finally debuted Tenet in overseas markets in August, and then in select theaters in the United States on Sept. 3. Its worldwide ticket sales didn't clear the $300 million mark until this month, and its to-date U.S. box office is a disappointing $45 million despite strong reviews. For perspective, Tenet cost $224 million to produce.

It's an ominous picture of the industry's actual health right now.

The new normal

People aren't necessarily giving up on movies, though. They're just giving up on how they watch them. Walt Disney (DIS -0.83%) decided to keep Mulan out of theaters altogether and sell it solely to Disney+ subscribers at an additional $30 a pop (or $20 outside of the U.S.). Although it probably would have fared better in different circumstances, 7Park data suggests Disney generated around $261 million worth of revenue using this approach. Disney also got to keep all of that revenue for itself, rather than splitting it with movie theater operators.

And it's not just Mulan. Comcast's (CMCSA -0.33%) Universal did well with its streaming-only release of Trolls World Tour. Warner's digital-only release of animated Scoob! has also done well as a premium video-on-demand release. On-demand subscription video management app developer Reelgood found that between the second and third quarters of this year, individually purchased TV shows and movies grew from 10.9% of its users' streams to 13.3%.

It's a picture of what's been, and what's to come. Now eight months into a pandemic that may see another wave of mandated stay-at-home orders, consumers seem to have finally grown accustomed to the idea of paying new-release prices to watch newly released movies at home.

The clock is ticking toward bankruptcy

Time spent in this new normal perhaps should be the biggest concern for AMC and its shareholders. Consumers already have eight months' worth of retraining under their belts, and with studios holding out for theater reopenings at the same time they're halting production of films that have already begun to shoot, it could be many more months before theaters have enough new films to profitably show. The aforementioned Cineworld, parent to Regal Cinemas, isn't even going to bother trying.

Given that it's making a point of staying open, AMC might fare better than Cineworld believes it was going to. That's a huge risk, though.

Remember, AMC was already losing money before COVID-19 came into existence, but operating losses surged to $472 million during the quarter ending in June, and to $2.46 billion year-to-date despite efforts to reduce expenses while its theaters were closed. (Rent and interest expenses are pretty consistent, even if other spending can be culled.) The company's got about half a billion dollars' worth of liquidity on its balance sheet, but it's also now servicing $5.5 billion worth of debt.

Unless its theater attendance tops pre-COVID levels -- and soon -- it's difficult to see AMC working its way out of the red anytime soon. A lack of new films and wary moviegoers starting to find other ways to entertain themselves is only going to exacerbate the challenge. A strategic bankruptcy actually makes a bit of sense here, if not a sale to a studio interested in more control of distribution in a post-COVID world.

Whatever's in the cards, AMC probably has a year or less to make it happen before it's too far gone to salvage.