US cinemas: the last picture show

The tug of war for power between motion picture studios and cinemas is a story as old as Hollywood. In 1948, the US Supreme Court held that the powerhouses who made movies could not exhibit them as well. Today, amid a pandemic, consolidation in Hollywood and the rise of streaming technology, the movie exhibition business is rockier than ever.

Earlier this week, AMC Entertainment announced an agreement with Comcast’s Universal studio operation to shorten the exclusivity period granted to AMC screens. The window will narrow from about three months to as little as 17 days.

A new movie can appear on Netflix or another streaming service less than three weeks from its theatrical debut. Streaming services have been plotting this land grab for years. The precise terms were not disclosed but AMC said it would still share in the revenues from films viewed on-demand.

AMC’s shares are down 43 per cent this year. Most of its locations have been temporarily shuttered. After hitting $5.5bn of revenue in 2019, its 2021 revenue is projected by analysts to be just $4.6bn. Much of the last four months have been spent haggling with creditors such as Silver Lake Partners and Apollo Global. It has raised hundreds of millions in fresh cash while knocking hundreds of millions of dollars from debt balances.

Unlike restaurants or airlines, AMC’s business was already in secular decline. Its shares fell about 80 per cent between the end of 2016 and 2019. Annual US box office revenues between 2010 and 2019 went from $10.6bn to $11.4bn — the modest nominal increase driven by higher ticket prices, according to the National Association of Theatre Owners.

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AMC believes the theatre experience is alluring enough for Americans to come back when it is safe. If they prefer to stay on their sofas they will not have to wait long for hot new movies to keep them entertained. Only Hollywood script writers can come up with a plot twist sufficient to save the weakest local picture houses.

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