AMC Entertainment CEO Adam Aron has set an optimistic target for the domestic box office in 2021.
During an earnings call Monday, Aron said AMC could post theater-level positive cash flow as early as the fourth quarter if the domestic box office hits at least $5.2 billion. This means that the AMC’s theaters would generate enough money to cover all operating costs.
However, industry insiders aren’t convinced the goal is achievable, especially as a new Covid-19 variant has forced local governments to reinstate health and safety measures such as mask mandates. Experts are also well aware that the availability of many major blockbusters on streaming platforms and simultaneously with theaters has affected ticket sales.
As of Sunday, the domestic box office has counted $1.76 billion in ticket sales, according to Comscore data. This means Hollywood should generate about $3.4 billion in revenue in the last 20 weeks of the year — a feat many box office analysts believe is overly optimistic.
By comparison, during the last 20 weeks of 2019, the box office generated approximately $4 billion from titles such as “Joker”, “It: Chapter 2”, “Frozen II”, “Jumanji: The Next Level” and “Star Wars: The De rise of Skywalker.”
The last four months of this year are filled with some highly anticipated movies. However, movies such as “Matrix 4”, “Dune” and “Venom: Let There Be Carnage” will debut in cinemas and on streaming on the same day, which could squeeze ticket sales. Others, such as “No Time to Die”, “Eternals”, “Top Gun: Maverick” and “Spider-Man: No Way Home” will have exclusive theatrical releases.
“The closing months of 2021 have more potential than any previous period to move closer to pre-pandemic business levels,” said Shawn Robbins, chief analyst at Boxoffice.com. “But it all depends on the state of variants and the comfort level of the public, a higher proportion of people vaccinated and of course studios sticking to their existing release schedules. Everything is fluid now and probably will be for the foreseeable future.”
Robbins said $5 billion is a possible but “optimistic” target.
Wedbush’s Alicia Reese said her company’s estimate for the 2021 domestic box office at the end of July was $4.9 billion. However, in recent weeks there has been more headwinds, which Reese expects will make moviegoers reconsider going to the cinema.
“Studios may think more about daily releases for the fourth quarter, or maybe push their releases again if things get worse during the holiday season,” she said. “There are still many variables that make the domestic box office for 2021 a moving target, but it seems unlikely that the domestic box office will reach $5.2 billion for the full year as of early August.”
Cracking the numbers
Comscore’s senior media analyst, Paul Dergarabedian, analyzed receipts week-by-week for the past three years and determined that for the 2021 list to hit that figure, it would need a “perfect rest of the year.” “
“Autumn should act like a summer to bring us to a number close to $5 billion,” Dergarabedian said. “It seems like an incredibly heavy burden right now to even approach such a benchmark by the end of the year.”
Between May and August 2019, the box office generated $4.3 billion from titles such as “Avengers: Endgame”, “Aladdin”, “Godzilla: King of the Monsters”, “Toy Story 4”, “Spider-Man: Far From Home” and “The Lion King.”
“It takes some searching, but it’s possible,” said Eric Wold, senior analyst at B. Riley Securities.
Wold noted that his company is not currently projecting the box office to achieve this goal. After all, the domestic box office is currently down 75% from 2019 levels and the third quarter is expected to fall by about 50% compared to the pre-pandemic period.
He predicts that the domestic box office for all of 2021 will be between $4.4 billion and $4.5 billion.
“This would mean that [fourth-quarter] box office should be equal to or just 5% lower than in 2019 to reach $5.2 billion for the year,” he said. “We think this is unlikely at this point, given the lingering near-term traffic uncertainties. .”
Right now, only about 85% of North American theaters are open to the public, compared to 2019 levels. Some have imposed capacity restrictions, which can limit movie theaters per showing. Theaters that are closed are either completely closed due to the pandemic or waiting for more favorable conditions to reopen.
Higher ticket prices, more theaters
At the end of June, all of AMC’s 593 U.S. theaters were open to the public and 335 of its international theaters, or about 95%, were operational.
Approximately 22 million guests attended AMC’s theaters during the quarter, far more than the 7 million who attended the first quarter. However, it is a long way from the company’s all-time record of 97 million in Q2 2019.
The public is returning, which has helped the chain’s revenues in recent months, but the public has not yet returned to pre-pandemic levels.
“We are still losing money,” Aron said during the call on Monday. “We’re still burning cash. We’re burning less of it. But we’re using cash and don’t generate money.”
In the second quarter, AMC recorded its sixth loss in a row. This means the losses go back to the third quarter of 2019 – before Covid-19 spread around the world and studios started focusing on new streaming services.
Sales have been stable since AMC bought rivals Carmike and Nordic Cinema Group in 2016 and 2017, despite investments in high-end theater armchairs and dining options. These efforts weighed heavily on the operating result and cash flow.
AMC has raised more than $1.8 billion in cash, primarily from the sale of stock, which it uses to further upgrade its theaters and lease new venues. But payments on his massive debt, which is more than $5 billion, have been pushed out. It has no expiration dates until 2023.
The chain has attempted to increase sales by raising ticket prices by 5%, or about 50 cents per ticket, in some US theaters last week. The hope is that raising prices and adding locations will benefit AMC as more movies arrive in theaters and studios, away from the daily streaming releases.
“As we look to 2022, when vaccine distribution should be wider and, most importantly, studios return to exclusive theater windows, we predict only a decline in the percentage in the domestic box office in the teens from 2019 levels – which would easily return the exhibition group to positive [adjusted earnings before interest, taxes, depreciation and amortization] and cash flow,” said Wold of B. Riley Securities. “And given the strong cash balance that AMC has right now, they’re well positioned to get to that point and beyond.”