As AMC reopens the doors to most of its theaters by mid-July, it is betting heavily on a key constituency. Consumers who previously signed up for the company's A-List subscription service will be targeted with special promotional material, CEO Adam Aron revealed.

"That A-List population is a very important part of our customer base," Aron said during the company's Q1 earnings call Tuesday. "We'll take a lot of action to make them happy … to give them benefits that hopefully will propel them to come right back into our theaters."

Like other theater chains, AMC introduced A-List as a defensive move against theater ticket subscription startup MoviePass in 2018. But while MoviePass was very much despised by the industry, theaters have since come to love subscriptions. And now they're betting they can use them as a key pillar of their economic recovery — a strategy that other brick-and-mortar businesses may be able to learn from.

From optimism to 'kaboom'

AMC's leadership didn't mince words about the company's struggles during the earnings call. "We've got the worst health problems since 1918, we've got the worst economic crisis since the 1930s, and we have the biggest social unrest in the United States since the 1960s," Aron said, rhetorically asking analysts on the call if there was possibly anything else looming on the horizon.

The nation's biggest theater chain was already facing some significant financial challenges going into 2020. The first two months of the year were actually looking up, Aron said, adding: "But then … kaboom."

AMC closed all of its 1,000 theaters worldwide by mid-March. Since then, it has put its entire workforce of 35,000 people on furloughs, while instituting pay reductions starting at 20%. It renegotiated rents for most of its facilities, deferred some of the payments for up to six years, and raised $500 million debt in April.

Now, AMC is looking to open up again in time for "Tenet" and "Mulan," which are scheduled to be released on July 17 and 24, respectively. "Our current plan is to have almost all of our theaters globally open in July," Aron said. Depending on local requirements, theaters will open at 25% to 50% capacity, and the company is still waiting on guidance in key markets, including New York, Los Angeles and San Francisco. "This entire situation is fluid," Aron admitted. "Many things can change between now and July."

After pausing monthly payments for its A-List subscription service in March, AMC wants to use the coming weeks to finalize and release details on restarting the service.

A premium on predictability

The theater chain introduced A-List in the summer of 2018 as a way to fend off MoviePass. Priced at $19.95 a month, A-List allows customers to watch up to three films a week and is closely tied to the company's rewards program. AMC had some 900,000 A-List subscribers at the beginning of the year, equaling around 15% of the company's total customer base and making a significant financial contribution to the bottom line, according to Aron.

Moreover, A-List provided AMC with a bit of predictability in a highly volatile business that is largely dependent on the success of a few tentpole releases. "We are very much a church built for Easter Sunday," Aron said, noting that in 2019 the company sold only 17% of its seats. Because of this volatility, someone who commits to spending $20 a month, every month, is a valuable customer, especially considering that roughly a third of AMC's revenue is generated by food and beverage sales.

"Subscriptions generate a predictable recurring revenue stream," explained Recurly CEO Dan Burkhart, whose company offers billing services for subscription businesses. "Recurring revenue and activity also provide ongoing insights from the data generated each month from the convergence of subscriber, billing and marketing events — insights not so easily gained from a one-time commerce model."

Subscription services like AMC's A-List benefit from the growing popularity of Netflix and its competitors, which have conditioned consumers to move from transactional business models to recurring payments. Already, other industries are looking to jump on the subscription train, including Volvo with cars and Urban Outfitters with its Nuuly service. "Subscriptions have become part of the fabric of our daily lives," Burkhart said.

At the same time, there are significant challenges ahead for AMC. Ultimately, the success of A-List, and AMC's recovery in general, will depend both on consumers feeling safe and comfortable to go to theaters again and a slate of movies that moves them to do so.

The latter could be in danger if studios shift more of their output online, as Universal and Disney have done during the pandemic. "The future of theatrical exhibition looks grim at best," said Lightshed analyst Richard Greenfield in a recent blog post. "Movie theaters simply cannot survive on 15-20 superhero/animated/event pictures a year, they need a steady flow of films of all sizes and genres."

Aron seemed to be clear-eyed about the challenges ahead. "The whole of the economy will be operating in a demand-limited environment," he said, admitting that no one knows whether things will return to normal in six weeks or six years. "Revenues will be harder to come by, which means cost will have to be cut."