Most cinemas in the U.S. are closed, major summer films have been pushed back indefinitely, and studios keep selling their movies to Netflix. But Adam Aron, CEO of AMC Theatres, struck an optimistic note on a call with investors and analysts shortly after the world’s largest exhibition chain reported that it had lost more than half a billion dollars in its most recent financial quarter.
“I think we’ve survived the corona crisis and now we’ve just got to get back to running the company really well,” Aron said of a public health catastrophe that has brought the theater business to its knees, while raising questions about AMC’s liquidity.
Aron was in an expansive and magnanimous frame of mind during the hour-long question and answer session. He trumpeted the fact that AMC, which has been seen as bankruptcy risk, has renegotiated its debt and added cash to its balance sheet, while noting that the company had put stringent cleaning measures in place so it will be able to safely welcome guests back this month. And he was particularly eager to take a victory lap when it came to AMC’s recent deal with Universal, which will allow the studio to release movies in the home as early as 17 days after they open in theaters. Under the pact, Universal can rent its films for a 48-hour period for at least $20 a pop. In return, AMC gets a cut of the revenue that Universal makes.
“I’m expecting that this is going to become an industry standard,” said Aron. “I expect that some of our competitors will do this, if not all.”
Publicly, AMC’s rivals have struck a different posture. Cineworld, Regal’s parent company, called the pact the “wrong move at the wrong time,” and Cinemark expressed doubts about its viability.
“I do realize that some of our competitors are anxious about this change,” said Aron. “Change is always difficult for some to cope with.”
He added: “We’ve researched it, we’ve modeled it, we’ve thought about it, we’ve argued about it, we’ve debated it, and we’re sure that we’re coming out ahead.”
Aron did not disclose how the deal with Universal was structured. However, he said the company would be compensated for every rental, not just the ones that happen in zip codes where AMC has theaters. Aron also clarified that Universal won’t be allowed to disclose when a film is going to be released on other distribution channels, meaning premium video-on-demand platforms, until after it has been in theaters for 10 days. Aron pushed back at suggestions that making Universal titles available to rent earlier will discourage movie fans from going to cinemas.
“There are certain advantages to watching a film on a 40-foot screen to watching it on a 40-inch screen,” said Aron. “If the pandemic has taught us anything, it’s that people will do anything to get out of their house or their apartment. If you told me right now I could go spend three hours at a hardware store, I would tell you that’s an exciting afternoon.”
The Walt Disney Company recently roiled some movie theater owners when it announced that rather than release “Mulan” in theaters, it was going to make it available to rent on Disney Plus. Aron declined to criticize Disney, arguing that the studio’s decision illustrated the wisdom of AMC’s pact with Universal.
“Just like AMC is under duress, Disney’s under pressure too, and at some point they’ve got to monetize their movie product,” said Aron.
He said he hoped that Disney would think about adopting a model similar to Universal, in which it had the flexibility to show movies in theaters for a shorter run before launching them on streaming. Aron’s attitude is markedly different from his stance on early VOD last March. When COVID-19 closed theaters and Universal opted to release “Trolls World Tour” on-demand, AMC threatened to stop showing the studio’s films. Now, Aron is a full-on convert to the idea of smashing windows, the industry term for the amount of time a movie shows exclusively in theaters.
“We would not have signed on to an economic program that we thought was a negative,” Aron said. He went on to argue that because AMC was the first major exhibitor to agree to early on-demand, its deal would be richer.
“You should assume that we got a first mover advantage,” said Aron.
Aron also praised Warner Bros. for committing to releasing “Tenet” in theaters this fall. The Christopher Nolan thriller was initially slated for July and was later moved to August, but its premiere was postponed when coronavirus cases in the U.S. surged last month. The film is now expected to open in select domestic cities over Labor Day weekend.
“I think Warner Bros. is doing something heroic for the exhibition industry by releasing ‘Tenet’ in a few weeks,” he said. “Assuming it doesn’t slip.”
Aron did drop one interesting item. He noted that AMC’s new safety and cleaning procedures will be expensive and that the costs will be “passed on to the consumers.” That could mean higher ticket prices or that popcorn gets to be more of a luxury snack food.
Ultimately, Aron closed a brutal quarter, one that he had labelled one of the hardest in AMC’s 100-year history, by predicting that the marquee lights will soon flicker back on and that moviegoers will return to cinemas.
“We are very close to theaters opening soon in the United States,” said Aron. “See you at the movies. See you at AMC.”