When COVID-19 first arrived on American shores, our infrastructure was ill-prepared to receive it, let alone our businesses. It was particularly industries whose daily operations necessitated the housing of large groups of customers. Restaurants, music halls, and many clothing stores found their locations shuddered depending on the severity of their local quarantine laws. However, no industry has suffered quite like movie theaters that find themselves in the precarious situation of accumulating debt due to still existing costs while not generating any profits.
Before the pandemic, the recent wave of multi-genre blockbuster hits that characterized the last decade helped the industry generate unparalleled amounts of wealth. So much so that many speculated that major cinemas like AMC and Regal could sustain themselves should the quarantine be short. However, months had gone by with no end in sight; most movie houses had rent to pay for theater houses that played no new films due to Hollywood’s halting of releases. Major cinema companies looked to federal assistance, downsize, furlough staff, or borrow heavily with no tickets being sold.
According to Variety, these efforts have left these theaters with higher levels of already existing debts. Regal-Cineworld clocked in close to $3.5 billion in debt while AMC Entertainment had already been in the ballpark of $5 billion in debt by the end of 2019, expecting to borrow half a billion more by November.
Should things continue as they are, the best available option would be to declare bankruptcy once cash reserves have all but dissipated. According to Variety, this would put the major cinema companies on the market to be bought; however, many doubt that a heavily indebted company would prove a profitable investment or an attractive buy.
Another immediate danger may be that major films being directly released to at-home streaming services may prove more convenient to consumers well after the quarantine is over. Disney has already begun the trend by releasing major live-action projects like Mulan on Disney+, leaving many to question whether going to a local cinema is an affordable option when the country still suffers from a Recession. Theaters were notorious for charging exorbitant prices for snacks and other supplemental goods other than the actual tickets, making it the less attractive option due to its value being only experienced based.
Given the new Biden administration may heavily mimic that of the previous Obama years, there is a chance that federal bailouts of major American industries are to come, giving cinemas another silver-lining.