On Thursday morning, AMC, the world’s largest cinema chain, had a drastic warning for its investors.
Announcing plans to raise up to $844m (£628m) by selling shares — the fourth time it has had to raise cash in just four months — the company warned that failure to top up its cash could mean existing shareholders being wiped out. “Our ability to obtain additional liquidity… if not realised” would lead to a restructuring that would see shareholders “suffer a total loss of their investment”, AMC said.
It says a lot about the state of cinemas in 2020 that AMC’s desperate cash call was not the day’s worst piece of news. Hours later, Warner Media, the owner of “big five” studio Warner Bros, announced that all of its blockbuster films in 2021 will be streamed directly to US households. The studio’s entire slate of 17 movies — among them The Matrix 4, the long-awaited sci-fi adaptation Dune, and a Suicide Squad sequel — will be available on the Warner-owned streaming service HBO Max, on the same day they come to theatres.
The news is the biggest death knell yet for the "theatrical window", the once sacred season in which films are exclusively available in the cinema before a wider release on DVD, download or streaming.
Few industries have suffered more from the pandemic than cinemas. Lockdowns have seen theatres shut or restricted to limited capacity, sometimes with bans on food and drink in an effort to limit the virus’s spread. And those that have been able to open have been faced with the problem of what to show, with many of 2020’s top blockbusters delayed at least once.
UK-listed Cineworld, the world’s second-biggest chain, has also had to secure cash to stay afloat during the pandemic. Having the financial cushion to ride out the virus until a vaccine comes along is one thing. What cinemas fear more is a permanent shift in habits in which online streaming makes them obsolete.
Cineworld by numbers
Warner is not the first studio to bypass the cinema for its blockbuster releases. As early as April, Universal Pictures made its animated release Trolls World Tour available for digital rentals. In weeks, it made more money for the company than its prequel did over several months in the cinema.
And in August, Disney put Mulan, once destined for the big screen, on its own streaming service, Disney Plus. Warner Bros itself had already announced that its upcoming Wonder Woman film would be released on HBO Max on Christmas Day.
But these were isolated releases, and in the case of Mulan and Trolls, users were charged at least the price of going to the theatre to watch at home. But the $15-a-month Warner charges for HBO Max is equivalent to a single cinema ticket. Not only will movie-goers not have to leave their house, queue up and sit next to a stranger, they will pay less to do so.
Warner’s chief executive itself Jason Kilar said the move gave consumers choice: go to the cinema, or stay at home. “We see an opportunity to do something firmly focused on the fans,” he said. But the company may also feel it can benefit. The success of Netflix has shown the financial advantages of keeping consumers on monthly subscriptions, rather than Hollywood’s irregular, hits-driven approach.
Though consumers will pay less than they might have at the cinema, the media giant will keep all the revenue, rather than sharing it with operators.
However, the company’s move is not necessarily permanent. It applies only in the US, and only for 2021, a year in which the pandemic will continue to keep cinema visits subdued. If it is not deemed a success, it could return to the old model. Warner Bros is also just one studio, and its rivals do not have struggling streaming services. It is unclear whether others will follow, although Disney has planned an investor day for next week in which it is expected to make its own announcements about the future of its streaming business.
After Warner’s announcement, AMC shares fell heavily and its chief executive Adam Aron slammed the move, saying Warner was subsidising HBO Max at great cost to its own studio business. “As for AMC,” he added, “we will do all in our power to ensure that Warner does not do so at our expense. We will aggressively pursue economic terms that preserve our business.”
If Warner’s strategy fails, it may decide it needs cinemas after all. The question is how many will be left by then.
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