AMC: From Golden Age of Moving Pictures to the Uncertain Future of Entertainment

If you’re a movie lover, and not many people would claim otherwise, you’ve likely heard of the company AMC. Their theaters are in multiple countries and they are the largest movie theater chain. You’ve likely sat in one of their theaters, watching a newly released film with excitement, eating that buttery popcorn, and having to do the awkward half-standing position as someone squeezes by you to get to an empty seat. Some go regularly and some only on special occasions or when a movie they consider truly spectacular is released. When the pandemic hit, many felt the absence of the movie theater experience. Seeing a picture on the big screen is thrilling for kids, romantic for those on a date, and enjoyable for everyone. It’s no wonder AMC pulled in $1.24 billion in their 2020 fiscal year, despite the problems and closures caused by Covid-19.

History

It was a time of exciting music like ragtime and jazz, swing and blues. A time when women felt freer and wore far less restricting styles. When men wore slim suits and a fedora. The overall culture and mindset had changed and there was an intensity in the air as the world was rebuilding itself after the war. The younger crowd danced the nights away and the older crowd listened to the radio. Despite the familiar and seemingly permanent differences in preference to music and style between the older generation and the younger generation, there was one thing everyone loved. Going to the movie theater and watching the newest film with Charlie Chaplin pantomiming an often hilarious and heartfelt story, or the beautiful Mary Pickford with her iconic curls.

Moving pictures were all the rage and many wanted to take part in this new and interesting art form. Some wanted to act themselves and become a star, some wanted to create using this new medium of expression, most were happy to just soak up the fun, but some wanted to build these picture palaces and sell the tickets. Three brothers by the names of Maurice, Edward, and Barney Dubinsky were keen on the prospect of building a business in movie theaters. They had spent a few years traveling around and performing in tent shows, being actors and entertainers themselves.

They decided to buy the Regent Theater in Kansas City, Missouri in 1920, wanting something more settled than the traveling life and knowing the movies were a great way to stay in entertainment. Only nine years later, Maurice would pass away on August 25th, 1929. Not long after in 1936, Barney, the youngest who often portrayed the more innocent and juvenile characters on stage, was injured in a vehicle accident and could no longer work in the same capacity, so he retired.

Edward needed help with the business, so when the son came home after World War II, he joined the business with his father. Stanley, Edward’s son, was able to convince his father to open drive up theaters in 1945. The Dubinsky father and son duo, like so many in show business, changed their name. Deciding on Durwood, they started a chain called Durwood Theaters.

Growth and Acquisitions

In 1947, Durwood Theater bought Liberty Theater in Kansas City and renamed it Roxy. Things seemed to be moving in their favor and they even won an antitrust lawsuit. They continued to buy the rest of Kansas City’s movie theaters with the purchase of The Empire Theater, the Capri Theatre, the Midland Theatre, and the Paramount Theatre. In 1949, Barney died leaving only Edward and his son Stanley to continue with the business.

Stanely would become the CEO of Durwood Theaters in 1961 after his father passed away. He decided to follow the example of other pioneering theaters and built a twin theater in 1963 called Parkway Twin theater. Although there were other twin theaters, Stanley liked to take credit for the multiplex idea and AMC still claims that they built the first. This was a massive success and Stanley knew that this would be the best step towards the future of the movies. He quickly went on to build the Country Club Plaza with three screens, the four screened Metro Plaza in 1966 and the even more impressive theater in 1969 in Omaha that hosted six screens. The ability to host more customers and play multiple movies quickly became the norm for movie theaters.

In 1968, Stanley renamed Durwood Theaters to American Royal Cinema, copying the American Royal livestock and horse show. However, this created an issue and Stanley changed the name to American Multi-Cinema, Inc. Eventually this would be shortened to AMC. Throughout the 1970s, movie theaters continued to be one of the most popular forms of entertainment. In 1983 the company had its Initial Public Opening and in 1985 it went international with a ten screen theater in the United Kingdom. Things were expanding in the UK and in October of 1988, AMC announced they were teaming up with United Artists and Cinema International Corporation for their combined UK locations, but only a few months later they pulled out of the deal and sold their UK locations and assets to another company who now goes by United Cinemas International. This sale was for $98 million and AMC stepped back from the UK.

Instead, AMC put their focus into developing and opening their megaplex buildings and in 1996 they branched out to Japan. AMC’s leadership changed hands in 1999 when Stanley passed away and Peter Brown took the reins. In 2002 they once again opened a theater in the UK. Two years later AMC was acquired by Marquee Holdings Inc. and in 2006 it announced a new IPO with a predicted value of $789 million. However, just like their first steps into the UK, things didn’t turn out as expected and the company withdrew the offer in 2007.

In 2009, the head of the company once again changed Gerardo I. Lopez took the place of Peter Brown. That same year, the company made two leaps into better technology, announcing the replacement of 1,500 projectors with RealD projectors and making a deal with Sony to replace their older reel projectors with digital projectors, a deal totaling $315 million. They completed this process in 2012. This same year, AMC was acquired by Wanda Group for $2.6 billion. The Chinese conglomerate gained 1,048 screens and 347 theaters in America and Canada. With this, Wanda Group became the largest cinema chain in the world. Wanda Group CEO announced they planned to spend $500 million in theater renovations. This wasn’t the only ownership change to hit AMC in 2012. AMC had eight theaters in Canada and sold four of these theaters to Cineplex Entertainment, two of the theaters to Empire Theatres, and the last two theaters ended up closing.

In August of 2015, Gerardo I. Lopez resigned as CEO and Craig Ramsey filled the role as interim CEO. A few months later, the position was taken by Adam Aron who became the president, CEO, and a member of the board of directors.

In 2016, AMC acquired Carmike Cinemas, becoming the largest cinema chain in America. With this acquisition, AMC decided to rebrand its various locations. Along with renaming the Carmike Cinema locations to AMC, theaters with kitchen service were titled AMC Dine-In and smaller theaters were called AMC Classic.

In 2017, AMC decided to cut expenses by $30 million. They wanted to reach this goal by the end of the year and reduced hours, staffing, and other means to do so. The following year, in an effort to gain back some of the stock purchased by the Wanda Group, Silver Lake Partners invested $600 million into AMC Theaters. They were able to buy 32% of the class B common stock, though Wanda Group maintained their control over the board of directors.

In 2019, AMC joined others in offering On Demand entertainment for digital film. Their AMC Theaters On Demand offered movies to rent and purchase. Due to a group of people on the popular site called Reddit, a series of short squeezes and AMC’s own efforts to reduce their stock caused Wanda Group to convert its Class B shares into Class A share to make them sellable. Because Class A shares are only allowed one vote, Wanda Group lost its majority voting power in 2021.

Challenges

Covid-19

One of the hardest hit industries, when the pandemic swept across the world, was movie theaters. With lockdowns and quarantines, going to see a film was out of the question. AMC was already walking a tight line between expenses and profit. With the closure of their theaters in March of 2020, they were forced to furlough all of their corporate employees, including Adam Aron. This was some 600 employees, yet they were able to maintain all their health benefits and their active employee status. As different companies tried to find ways to accommodate the paying public during this challenging time, some studios chose to release films On Demand and in theaters on the same date, ultimately hurting the movie theater business. In response, AMC stated on April, 28th, 2020 they wouldn’t carry movies released by Universal Pictures. They threatened that any other studios that did this without discussing the matter first.

In June, AMC revealed that it was unlikely to stay open. The financial and uncertain issues of the pandemic were weighing too heavily on the company. A bright spot came the following month when AMC was able to reconcile their problems with Universal Pictures by meeting in the middle and having a theatrical release 17 days prior to On Demand releases. In August, the company was able to start reopening while following certain health based restrictions. The strain of the pandemic still weighed heavily on AMC Theaters, and in October of 2020, AMC admitted that their cash resources would be severely impacted.

Stock Surges

In January of 2021, AMC was able to raise $917 million in funding. This included $506 million in new common shares and equity, as well as debt financing commitments of $411 million. With this, AMC felt that it would be able to continue on through the pandemic and overcome the financial strain they had felt. The very next day, as part of the Reddit group inspired short squeezes, AMC’s share jumped by 300%, the price rising to $20.36. This caused the convertible bonds held by Silver Lake Partners to turn and they made an agreement with AMC that $600 million of its debts would roll into equity. This share increase also earned Mudrick Capital Management around $200 million due to its holdings on AMC debts. Along with this, the surge contributed to a change in the Wanda Group’s hold over AMC Theaters.

On February 5th, the Wanda Group changed their Class B stock into Class A shares to be able to sell them. This change, along with AMC successfully lowering its stake to get it below 37%, resulted in Wanda Group losing its majority control.

This up and down financial roller coaster continues. AMC called their fourth quarter earnings in March of 2012 and Aron revealed that AMC’s revenue had fallen by 88%. He recognized that this was easily the most challenging moment the company has faced, but he was hopeful for the future as pandemic restrictions are lessened and they’re able to return to normal business.

Adam Aron

Aron was born on September 20 of 1954 to a Jewish family. He grew up in Philadelphia, Pennsylvania in a simple suburban neighborhood and attended Harvard University after graduating from Abington Senior High School. He had a mind for business and a knack for understanding what people wanted. He graduated cum laude with a Master of Business Administration with distinction from Business School and a bachelor’s in government. He went on to become a successful businessman, becoming CEO of Vail Resorts and of the Norwegian Cruise Line. Vail Resorts was the second largest ski resort operator in the world and the Norwegian Cruise Line was the fourth largest cruise company in the world. Another of his accomplishments was becoming the Senior Vice President of Marketing for United Airlines and for Hyatt Hotels Corporation.

This background in business and his education in government gave him the experience needed to be a delegate to President Clinton’s White House Conference on Travel and Tourism. He was chosen as a participant in the Joint Civilian Orientation Conference of 2004 by the US Secretary of Defense. He was also selected to be on the board of directors for the National Forest Foundation by the US Secretary of Agriculture. He served in that role from 2000 to 2006. All this has given him over 35 years of experience in handling leisure industries and companies related to travel. His skills have earned him multiple awards and appearances in magazines.

He received some backlash in 2020 when he announced that they wouldn’t mandate mask wearing in their theaters, but would encourage it. This was because he didn’t want to discourage those who can’t wear a mask for medical reasons or those who strongly feel opposed to it from coming to the movies. This announcement caused those in strong favor of mask wearing to voice their concern and Aron retracted his decision and stated that the response made it clear that enough people wanted the mandated mask policy.

Despite the series of hardships the company has faced in recent times, Aron is optimistic that it can pull through and make it.

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