At the center of the recent box office comeback following the 2020 cinema slump triggered by the global pandemic, stands AMC Theatres, positioned to capitalize on the resurgence of box office hits. However, the giant’s next moves are shrouded by sceptical glances towards the main obstacle that may restrain its potential – a towering mountain of debt, which AMC incurred following the diving revenue streams in the pandemic era.
The leading movie chain navigated the menacing waves of the 2020 pandemic year by adding more debt to its balance sheet, as a strategy to keep afloat when virtually all of its more than 1,000 locations worldwide were shut down due to COVID-19. Such a decision has essentially become a double-edged sword, almost simultaneously paving the road for its possible recovery but also becoming its daunting challenge.
AMC’s leverage reached skyscraper-heights when the company declared a debt worth $5.7 billion in March 2021. This quiet ticking time bomb is collectively owed to various banks and bondholders, promising two outcomes – either AMC thrives by making good use of the borrowed funds or it crumbles under the crushing pressure of the accrued debt.
On the brighter side, AMC Theatres stands beautifully poised to capitalize on the box office rebound. With upcoming blockbusters like Godzilla vs. Kong, Black Widow, and Fast & Furious 9 promising a rich vein of box office gold, AMC appears to have the potential to tackle the debt issue head on. A key factor associated with AMC’s expected success is the movie-goers’ pent-up demand and their longing desire for collective cinema experiences, which have been postponed due to safety regulations.
But will the box office rebound be enough to take AMC out of its financial quagmire? It is left for industry watchers to speculate. A report by MoffettNathanson suggests that AMC would need an annual box office of $6 billion on average, for three consecutive years, to save the company from bankruptcy. It is, however, not easy to reach such numbers – even in 2019, a year touted as the second-best box office year ever, domestic box office only reached $5.4 billion.
With such gaping financial uncertainties lingering, AMC continues to rely heavily on few prominent films to boost its revenue. Although this strategy has paid off in the past, the landscape is different in post-COVID, where streamers like Netflix, Amazon Prime Video, and Disney+ have carved their own niche, providing theatre-like experiences in the comfort of audiences’ homes.
AMC Theatres seems to be at the juncture of a tricky gamble – on one hand, the appealing box office rebound is an encouraging prospect for recovery, but on the other, the daunting debt scenario looms large like an albatross around its neck. While the future looks simultaneously promising and perilous, it will need a powerful combination of smash blockbuster hits, savvy financial management, and the return of audiences to cinemas en masse to successfully overcome the tribulations posed by their monumental debt.