Movie exhibition giant Cineworld is reportedly filing for bankruptcy, according to multiple industry reports, another warning sign of how fraught the movie theater model still is, even more than two years into the COVID-19 pandemic. Cineworld is the owner of the second largest theater chain in the U.S., Regal Cinemas, next in prominence only to AMC. Perhaps unsurprisingly, the primary reason cited for the upcoming bankruptcy was an unsustainably low level of movie admissions from paying customers.
“Cineworld is expected to file a chapter 11 petition in the U.S. and is considering filing an insolvency proceeding in the U.K.,” according to the Wall Street Journal. This follows the Wednesday reveal of lower than expected cinema admissions in the preceding period, which could lead to equity dilution.
“Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations,” said the statement from Cineworld. “These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group’s liquidity position in the near term.”
The company went on to say that it is “taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions. This includes significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity. The group believes these steps are required to optimize its ability to maximize enterprise value as part of the recovery in the cinema industry.”
That’s all well and good, but U.S. consumer have to be wondering if the move could signal the closures of some low-performing theaters in the U.S., which could potentially result in areas no longer having access to their most prominent movie theater chain. Cineworld, as an entity, recording a loss of $708.3 million for the year ending in Dec. 31, 2021, which was a big step in the right direction after the utter devastation of 2020, in which the company lost in the neighborhood of $3 billion. Unfortunately, net debt for Cineworld has also risen in this period, to roughly $4.84 billion.
More than ever, it simply feels like traditional theatrical distribution may have become an increasingly untenable industry, one in the process of being fully supplanted by home video and streaming consumption. The outcome of this story may play a role in deciding the fate of theatrical distribution going forward.