AMC Entertainment (NYSE:AMC) stock did not react much to the news that screenwriters are going on strike. But should it?
CEO Adam Aron tweeted that while a short strike will only impact TV production, a prolonged strike will reduce the supply of movies to his theaters.
AMC stock was due to open May 2 at about $5.70 per share, up almost 4% from where it opened May 1. The market capitalization at that price is $4.5 billion after 2022 revenue of $3.9 billion.
Striving for Normalcy
After three years of fighting the Covid-19 pandemic with stock sales, AMC stock seemed ready to fly before the strike hit. Just last month, Aron settled a suit over the stock sales, which included preferred shares called APE. He also released a branded credit card.
The company did nearly $5.5 billion in business during the pre-Covid year of 2019. Its main rival, Cineworld, declared bankruptcy in April as a casualty of the pandemic.
Movie studios responded by increasing their reliance on streaming. But streaming has yet to show a profit for anyone. According to the union, networks have squeezed workers into a “gig economy” environment. They say the average writer-producer pay has dropped 23% after accounting for inflation. Streaming shows have fewer episodes, and residual income from re-runs has dried up. Writers are also worried about studios using artificial intelligence (AI) programs to reduce their need for staff.
The last writers’ strike in 2007 lasted 100 days and delayed Hollywood productions. Nine of the top 10 grossing movies of 2007 were released in the summer before the strike started. Three of 2008’s top 10 movies were released in November after the strike had ended.
AMC Stock: What Happens Next?
The movie industry can’t afford for AMC to go broke. The longer the strike lasts, the greater that possibility becomes.
On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
