AMC’s financial challenges and recovery initiatives
AMC Theatres has been traversing a difficult financial environment since the onset of the Covid-19 pandemic, which led to the closure of countless theatres worldwide, notably in major markets such as the U.S. and Australia. The corporation suffered billions in lost income and was compelled to execute widespread layoffs to maintain operations. Just as AMC started to exhibit signs of recovery, it faced another significant setback in 2023 when Hollywood was brought to a standstill due to two extended strikes affecting writers and actors. These strikes disrupted numerous film productions, further exacerbating AMC’s already tenuous financial status.
Although the strikes wrapped up late last year, the repercussions are still resonating. AMC’s CEO, Adam Aron, recently discussed the company’s persistent obstacles during its third-quarter 2024 earnings call. Even with some encouraging news, including a few box office successes, the company is still struggling with declining attendance and financial deficits. Aron recognized that while AMC has made progress, the path to recovery is still steep.
In the third quarter of 2024, AMC reported a 9% decline in year-over-year theatre attendance in the U.S., a worrying trend for a business that heavily depends on foot traffic. Adding to this predicament, AMC’s total revenues dropped by 4% compared to the same timeframe in 2023, and the company recorded a net loss of $58.7 million, a stark contrast to the $24.3 million in net earnings it achieved in the same quarter the previous year.
Aron pointed to the performance of specific films in key metropolitan markets, particularly in cities like New York and Los Angeles where AMC has a notable presence, as a factor in the attendance drop. He mentioned that the film lineup during the third quarter did not cater to major urban centers, with films such as “Twisters,” “Despicable Me 4,” and “Beetlejuice Beetlejuice” not performing well in these regions. This geographical disparity in film success has played a role in AMC’s ongoing difficulties.
In spite of these hurdles, AMC was able to slightly raise its average ticket prices. In the U.S., the average ticket price in the third quarter reached $10.19, reflecting a 6% increase from the same period in 2023. While this price increase provided a slight uplift to revenues, it was insufficient to counterbalance the overall decline in attendance and financial performance.
future perspective and expected film launches
Looking forward, AMC is banking on a strong lineup of upcoming film releases to stimulate a rebound in attendance and revenue. CEO Adam Aron has articulated optimism that the fourth quarter of 2024 will witness a significant rise in box office results, with several major films scheduled for release. Among the most awaited titles are Disney’s “Mufasa: The Lion King,” “Moana 2,” and the highly anticipated adaptation of the musical “Wicked.” Aron is confident these films will not only attract large audiences but also assist AMC in reclaiming some of the ground lost during the pandemic and Hollywood strikes.
For Australian investors and stakeholders, the success of these films will be pivotal in assessing AMC’s ability to stabilize its financial standing. Although the Australian market is smaller than the U.S., it remains a crucial area for AMC, especially as the company seeks to diversify its revenue sources and tap into international box office growth. With the global film sector gradually recovering, the success of these blockbuster films could deliver a much-needed uplift to AMC’s financial health, both domestically and internationally.
Beyond 2024, Aron is also cautiously looking towards 2025. Next year’s film slate is brimming with potential blockbusters, including “Mission: Impossible 8,” “Jurassic World 4,” “Captain America,” “Snow White,” and James Cameron’s eagerly awaited “Avatar 3.” These films are projected to yield substantial box office returns, and AMC is relying on their success to recover from the financial challenges it has encountered in recent years. For Australian investors, the success of these films will serve as a crucial benchmark for AMC’s ability to navigate its ongoing challenges and return to profitability.
However, it’s essential to recognize that while a strong film lineup is vital, it may not suffice on its own to fully resolve AMC’s financial difficulties. The company must continue to seek alternative growth avenues, including potential partnerships, innovative revenue streams, and cost-reduction strategies. In the Australian market, where the competition with streaming services is intense, AMC will need to devise creative methods to entice audiences back to cinemas. Whether through improved cinema experiences, loyalty programs, or exclusive content, the company’s capability to adjust to evolving consumer preferences will be critical to its long-term success.
