This has historically been a seasonally potent time at your local multiplex. Movie studios make the most of the Thanksgiving holiday weekend, anchored by large family reunions that are full on leftovers but hungry for entertainment. Hollywood puts out potential blockbusters, wooing theater goers in large groups.
Things naturally are going to play out very differently year. Studios and patrons alike are steering clear of the movie house in the new normal. Science-abiding families are keeping their holiday reunions in check, if not virtual. Have you seen the Black Friday deals on dirt cheap gargantuan high-def TVs to flesh out your home theater?
It's fitting that the only film of note opening this holiday weekend is Comcast's (CMCSA 0.76%) The Croods: A New Age, an animated feature about a prehistoric family that wanders into a walled-in paradise that's evolved to the point where it meets most of their basic needs. We're the Croods in a new age. We're comfortable consuming entertainment at home now, and AMC Entertainment Holdings (AMC 3.16%) isn't going to shake us from this walled-in paradise that now comfortably meets most of our basic needs.
Fade to black
AMC Entertainment knows how this movie ends. The country's largest multiplex operator is doing everything it can to keep its projectors running -- staying open even after its largest rival Regal closed down, promoting aggressively priced private screenings, and raising money whenever its stock ticks higher. It's not going to be enough.
I've been to the movies three times since exhibitors started reopening this summer, and all three times it was at an AMC. Consumers aren't with me just yet. My wife and I were alone for one of those screenings. I want AMC to stay open, and I'm kicking some coin into the popcorn-specked collection tray to help the cause. I'm just not comfortable enough to take a chance as a shareholder because apparently, I'm more willing to take chances with my health than with my financial health.
The theater industry has changed dramatically this year, and not for the better if you're one the country's remaining exhibitors. Back in April, AMC was threatening to block screenings from one studio because it opted for premium digital delivery over waiting for a theatrical release. Do you remember that? The studio was Comcast's Universal, which happens to be the only movie mogul giving the industry a hand this holiday weekend with a new release.
It was only seven months ago that AMC had the kind of bargaining power to make such a demand of Hollywood and be taken seriously. Now, it's Hollywood calling the shots, dictating release windows with a penchant for controlling their own destiny. Studios want a combination of premium streaming releases coupled with theatrical runs when it's fiscally convenient. Audiences also appreciate the new choices. Your corner multiplex doesn't have a choice, and it stings.
AMC investors don't have to worry about the new normal. This is temporary. They need to be freaked out about the next normal. When AMC revenue plummeted 99% in the second quarter and 91% in the third quarter, no one was concerned. It was fine if analysts were expecting a better top-line showing. This is a transitory period, and Wall Street pros have been slow to tweak their estimates to account for the dreadful operating climate.
AMC has posted much larger-than-projected losses in each of the past four quarters -- predating the COVID-19 crisis -- and that's also not a deal breaker. Anyone who buys into AMC now is buying the dream that movie screenings are packed again a year from now. They believe in Hollywood endings, not Hollywood ending. (Spoiler alert: Hollywood is ending as multiplex operators know it. The media stocks that control film production are moving on on, following the consumers who moved on before COVID-19 was a thing.)
Let's set aside the fact that most speculators picking up the shares in the low single digits don't realize that AMC has had to increase its outstanding share count by more than 50% just to push out a bankruptcy filing into 2021. The stock is a depreciating asset, but the real problem here is that going to movies is a depreciating pastime.
AMC will do whatever it has to do to stay alive, and if it does survive, it's going to be a smarter company. It has made the most of the 2020 lull to expand mobile ordering and seat reservations.
The problem remains -- and its headstone will reveal -- that it needs both movie studios and audiences to come back, and right now, it seems as if neither one has any interest in going back in time. I hate to be crude, but it's a new age.