Movie-theater operator AMC Entertainment Holdings (NYSE:AMC) is teetering on the edge of bankruptcy in 2020. The COVID-19 pandemic forced the company to close all of its screens for several months, and the major Hollywood studios are moving most of their expected box-office hits for the year into 2021 and beyond. Some are even choosing to shift long-awaited titles over to digital-streaming services right away, skipping the theaters altogether.

It's easy to point a finger at the health crisis as the root cause of AMC's financial trouble, but the real reason behind the company's impending doom actually started many years ago.

Photo of empty seats in a dark movie theater.

Image source: Getty Images.

Memories of an innovator

Once upon a time, AMC Theatres was an innovative force in the movie industry. The company was first to market with features such as stadium seating, the 20-screen multiplex, armrests with cup holders, and customer loyalty programs. But the creative juices started to ebb in the early 2000s, and the steady flow of viewer-friendly features was replaced by a more static movie-watching experience and rising ticket prices.

Chinese-conglomerate Wanda Group acquired AMC in 2012 for $2.6 billion and remains the company's controlling shareholder today. AMC entered the public stock market in 2013 and posted some impressive gains in the early going, but they didn't last long. Share prices collapsed in 2017, and a $10,000 AMC investment in 2013 would be worth just $1,650 today. Ouch.

AMC Chart

AMC data by YCharts.

What went wrong?

Always under pressure from Netflix and other digital-streaming services, AMC's business took a beating in 2017 when MoviePass introduced a subscription-style solution for cinema fans. AMC eventually introduced its own subscription program after it fought tooth and nail to stave off the unwelcome MoviePass idea.

And that's the real problem here. AMC stopped trying to push the movie industry forward many years ago, opting instead to fight for its own survival. Ticket sales never took off despite a steady stream of blockbuster titles, so AMC relied on higher prices and splashy acquisitions to keep its top-line growth going. When the company wanted to impress investors, a beefy round of share buybacks could always boost AMC's bottom-line earnings.

Silhouette of a businessman sitting on his briefcase, apparently in deep thought.

Image source: Getty Images.

Adapt to market changes, don't try to stop them

AMC saw the industry changing around it, and the company attempted to block that progress rather than change its own business plan. That's a recipe for disaster. All of this should have been obvious to AMC's management and board of directors from the start. Instead, the battle for survival continued until the novel coronavirus delivered the fatal blow.

Yes, COVID-19 was bad news for AMC. Sure, the health crisis is putting the final nail in AMC's coffin. Don't forget that the company was headed for this endgame anyhow, just a little bit faster than expected.

Forget about stale dinosaurs like AMC, whose battle to defend an obsolete business model always was doomed to fail in the long run. Invest in true innovators like Netflix, which dominated the DVD rental industry and then gave it all up in order to refocus on the larger and more lucrative streaming opportunity. Change is inevitable, so you might as well be the company that leads the way into the next big sea change.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.