• AMC Theatres Looks at Alternative Cash Generators, From Tokens to Sports, As Moviegoers Return

    AMC Theatres reported its third-quarter net loss narrowed as revenue rose significantly from a year earlier. (Getty Images)
    AMC Theatres reported its third-quarter net loss narrowed as revenue rose significantly from a year earlier. (Getty Images)
    By Lou Hirsh
    CoStar News

    James Bond and Marvel superheroes are bringing patrons back to AMC Theatres after its properties remained empty for much of the past year as the world’s largest cinema chain is looking for other ways to draw customers.
    The company added live music concerts, NFL games, UFC and pro boxing matches to its screened entertainment options in the third quarter, and last week it announced plans to open its own popcorn and snack-selling stores and kiosks starting around mid-2022. It's also considering the sale of digital souvenirs.

    CEO Adam Aron told analysts Monday the company’s box office tallies improved greatly from a year earlier, as nearly all of the Leawood, Kansas-based company’s 950 theaters were fully open for the full quarter for the first time since late 2019. Top grossing movies in October included "Venom: Let There Be Carnage," produced in part by Marvel Entertainment, and the Bond film "No Time to Die."

    The better attendance is largely welcome news for retail landlords. Movie theaters are significant traffic generators for nearby stores and restaurants, and theater landlords are closely watching the pace of the industry recovery. Analysts are still not expecting a full return to pre-pandemic box office levels until at least 2023.

    “We are still assuming within our models that both attendance and overall box office in 2022 remain below 2019,” analyst Eric Wold said in a report last month from equity research firm B. Riley Securities. “However, we increasingly believe this is a conservative move as opposed to reality, given the trends we are seeing in recent months.”

    Cinema performance also affects the financial viability of properties. According to data from Bank of America Securities and CoStar Group, there were about $24 billion in U.S. commercial loans backing retail properties, with theaters among their top five revenue-generating tenants as of June 30. About 29% of that total backed properties housing an AMC location, while 18% contained a location of Regal Cinemas, and 12% housed a Cinemark Theatres venue.

    The largest theater companies are steadily weaning themselves from rent deferments and other temporary allowances granted by landlords during the darkest days of the pandemic. Realty Income Corp., a large nationwide real estate investment trust with movie theaters in 79 of its properties, reported last week that its theater tenants paid approximately 99.6% of contractual rent during the third quarter — up significantly from the 38% collection rate in the second quarter.

    “We continue to be encouraged by the strong box-office performance of recent blockbuster releases, which we believe signals the long-term viability of the theater industry,” said Christie Kelly, Realty Income’s chief financial officer, during a Nov. 2 earnings call.

    Revenue Surges

    Still, while AMC's revenue for the third quarter ended Sept. 30 reached $763.2 million — more than six times revenue for the year-earlier period — the company still posted a net loss of $224.2 million, though that was an improvement from the $905.8 million net loss a year ago.

    “No one should have any illusions. There is more challenge ahead of us still to be met,” Aron told analysts. “ The virus continues to be with us. We need to sell more tickets in future quarters than we did in the most recent quarter.”

    During the AMC Theatres call Monday, Chief Financial Officer Sean Goodman said the company paid off about $100 million in deferred rent to landlords during the past two quarters. Its deferred rent balance, dating to the earliest days of the pandemic when it sought extended payment terms from landlords while theaters nationwide stood empty, is now at $376 million.

    Similar to its Dallas-based rival Cinemark Theatres, the nation’s third-largest cinema chain, AMC is also exploring ways to make use of its theaters to host video-gaming and e-sports tournaments.

    In addition to the planned popcorn and snack stores slated to open next year — executives did not disclose the size of the rollout or specific locations — Aron said AMC is in talks with “several major studios” to potentially create nonfungible tokens, a type of digital asset, to sell to customers. Made through blockchain technologies, these NFTs have become increasingly lucrative in some collector circles, and AMC's could take the form of commemorative tickets or other artwork tied to future movie releases.

    This is in addition to planned expansion of its own theater real estate footprint. Aron reiterated a prior announcement that the company is in the process of acquiring at least seven closed U.S. locations of ArcLight Cinemas and reopen them under the AMC banner, though locations and timetables were not divulged.

    Aron said the two former mall-based Pacific Theaters opened during the third quarter as AMC locations, The Grove in Los Angeles that's now the eighth-highest grossing theater in the United States and the Americana at Brand in nearby Glendale, California, which is the 34th-top U.S. grossing cinema.

    Source: CoStar Group, www.costar.com