CMX Cinemas has become the first major exhibition circuit in North America to file for bankruptcy protection and reorganization under Chapter 11 since the onset of the COVID-19 crisis.
CMX is the U.S. subsidiary of Mexico’s Cinemex, the second-largest circuit in its home country.
“We did so as a result of the economic crisis precipitated by the coronavirus pandemic. This filing will help ensure the long-term viability of our business, including our ability to protect our employees,” read a statement provided by CMX Cinemas. “We are in a state of complete uncertainty as to when we can re-open our theaters and when our customers will feel safe and secure in returning to them given that there is presently no vaccine against the virus. We cannot forecast when — if ever — customer numbers will return to pre-crisis levels.”
CMX Cinemas made a splash when it entered the U.S. market with its first location in Miami, Florida in April 2017. Only six months later, it became a Top 10 circuit in the North American (U.S./Canada) market with the acquisition of Cobb Theatres.
Most recently, CMX announced its intent to acquire Texas-based dine-in circuit Star Cinema Grill, which would have made it the seventh largest circuit in the North American market and sixth largest in the United States.
“This unprecedented crisis has resulted in the total suspension of our business. We are not generating any revenues while having to pay high fixed costs. Even prior to filing for bankruptcy, we were spending over 30 percent of our revenues on lease-related expenses while studios ended up with 60 percent of every ticket sold,” reads a statement provided by CMX. “We tried in good faith to negotiate with our creditors — who notwithstanding the crisis were seeking full payment and filing liens — to no avail. The studios, landlords and theater companies must take this as an opportunity to place the industry on a sound, long-term financial footing. To do so, there needs to be a rebalancing of the current economic arrangements, which disproportionately benefit the studios and landlords at the expense of the theater companies. The industry will not survive absent such an economic rebalancing. The studios will continue to need the revenues and publicity generated by theater companies notwithstanding digital distribution, and mall landlords will become even more reliant on movie theaters as retailers continue to migrate to the internet. We resorted to opening restaurants and bars in our theaters to compensate for such a disproportionate distribution of revenues, but even more diversification will not save the industry absent a rebalancing.”
The statement from CMX cites a multi-step approach to achieve the re-balancing it seeks in order to return to business. This includes a 40 percent cap of theater revenues going to studios, and for cinemas to receive rental terms from mall landlords than those currently extended to anchor tenants.
“With the industry’s support, the aim is to restructure our company while protecting our employees and to emerge in a strong and viable long-term financial condition to continue to serve our loyal customers.”