Tag Archives: AMC Entertainment

Daily Cinema Digest – Tuesday 8 July 2014

Gerry Lopez, CEO of AMC Entertainment

Gerry Lopez, CEO of AMC Entertainment

Today’s big news is AMC spending USD $600 million on upgrading its cinemas, primarily introducing bigger and more comfortable seats. The strategy has been flagged before but now everyone is following. It is effectively an admission of defeat in terms of ever hoping that attendance figures will improve. Now it is about extracting as much revenue from the few people that still go to the cinemas (NB: though attendance is up in the renovated screens, but unlikely to boost overall national figures). WSJ has a good analysis:

The nation’s second-largest movie theater chain is spending hundreds of millions of dollars outfitting a number of theaters with La-Z-Boy-type seats that fully recline—a conversion that removes up to two-thirds of a given auditorium’s seating capacity. It’s a less-is-more approach to a business that has long thought bigger was better.

But AMC’s counterintuitive success with the program has converted skeptical competitors and become integral to the company’s pitch to new investors.

The conversions are AMC’s highest-profile campaign since it was purchased for $2.6 billion by China-based Dalian Wanda Group Corp. in 2012 and went public last December. The company plans to spend about $600 million over the next five years to “reseat” 1,800 of its nearly 5,000 screens. The renovations typically cost $350,000 to $500,000 per auditorium, with landlords often shouldering some of the cost. LINK

The WSJ blog also has a good point that you wio’t be finding this in the biggest cities (NYC and LA) as rent is too high already.

The conversions highlight a liability facing the country’s biggest film exhibitors: a supply of outdated theaters that rarely sell out, yet would be costly to tear down and rebuild.

Attendance in renovated AMC auditoriums has leapt 80%, on average, despite the drastic reduction in capacity to sometimes fewer than 70 seats. The company declined to say what the average before-and-after attendance numbers were, though Mr. Lopez acknowledged that the biggest attendance boosts would come in theaters that were weak performers, some of which were losing money. LINK

Event Cinema

Argentina: As the World Cup approaches its conclusion, one country is going all out to show the key game on the big screen. No, not the UK, but rather its old foe Argentina in their game against Germany tonight.

Over 100,000 people across Argentina have watched their national team compete in the 2014 World Cup at movie halls, which broadcast the games.

The National Cinema and Visual Arts Institute (INCAA) said in a statement that it has made 38 movie halls available for screenings of national team matches, featuring star footballer Lionel Messi, Xinhua reported.
Argentina Saturday defeated Belgium 1-0 to advance to the semifinals against the Netherlands in Sao Paulo Wednesday. The two nations haven’t disputed a World Cup semifinal since the 1990 edition in Italy. LINK.

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Daily Cinema Digest – Thursday 5 June 2014

AMC Fork&Screen

Don’t go short on AMC! If you only read one cinema-related article this week (other than one of ours) make it this one. Heck, forward or print it out and give it to your colleagues.

This is one of the best pieces of analysis that I have read about any exhibitor in a very long time. It looks at every aspect of AMC’s strategy, but the lessons to be drawn are universal.

The condensed version is that AMC is slowly but deliberately moving in the right direction that anticipates changes in the exhibition business, though its re-seating program, MacGuffins lounges and Dine-In Theatres, AMC Stubs loyalty program and more. Here is an excerpt on the re-seating program for shrinking the number of seats while increasing their size (and price). Genius!

After a specific remodel is completed, over approximately the first year it goes through a trial period where the company watches the attendance numbers; waiting to see how much they increase, as well as how quickly it takes to get there.

Once the jump in attendance approaches targeted levels, which has been taking about a year to reach, the company boosts its average ticket price (ATP) at the specific theater moderately afterwards. When the company sees the change in behavior taking place and holding, it then more aggressively increases ATP a little later in the second year.

The key is getting customers to get used to the better seating. When that is accomplished, along with a smaller price increase, the customers enjoy a much better experience and aren’t resistant to the larger increase that comes a little later in the process.

How the company determines when to implement the price increase is when the theater approaches attendance capacity. At that time the customer is deemed ready to accept paying more for the better seating and service.  LINK

Come back and read the rest of the Daily when you’ve finished reading this article. You will thank me, and even more so, thank analyst Gary Bourgeault who wrote it. [Disclaimer: none of the above constitutes investment advice, of course. But you knew that already.]

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Is It Time To Go Short on AMC’s Shares?

AMC logo

It has been close to six months since the initial public offering (IPO) of AMC Entertainment, meaning that senior management will soon be allowed to start selling shares that they hold in the company. Seeking Alpha therefor asks if the time is right to go short on AMC.

The question of whether AMC managers and officers will start selling shares from 15th of June onwards is an interesting one, because it partly points towards the belief in the company and its future value by those closes to it that know it best, as well as to a larger extent about the prospects for the industry as a whole.

The article ‘AMC: June 15th Lockup Expiration From IPO Could Be A Preview To A Larger Short Play In December‘ summarizes the situation as follows:

  • AMC’s 180-day lockup period will come to an end on June 15th, freeing up 361,348 shares, held by the firm’s directors and officers.
  • An additional 77.8 million shares of AMC stock held by Wanda America will remain bound by lockup agreements until December 17, 2014.
  • While the larger short opportunity for AMC could be in December, the impending June lockup expiration could provide a small window for a short play as well.

While the article says that AMC shares have experienced ‘Unsteady Gains After Disappointing IPO’, the facts are that the shares were priced at USD $18 for the IPO on 17 December 2013. This many have been on the low end of expectations, but the shares have climbed to USD $23 in less than six months, peaking at $25.47 on 7 March.

While this may not be outperforming meteoric shares like Tesla, it is in line with the solid growth of the stock market as a whole this year.

More importantly, it should be remembered that the exhibition sector’s stock market performance was significantly better than the box office itself, as we noted in our February article ‘2013 – Bad Year for Film; Great Year for Exhibitor Share Price.’

Last year was also the first year that cinemas could not count on 3D films’ ticket price hike to boost admissions takings, but had to rely more on advertising, concessions, premium large format (notably Imax) and luxury dining and seating to improve the bottom line.

Seeking Alpha acknowledges that AMC has done a particularly good job of extracting more spending from cinema goers.

Solid First Quarter Results

AMC’s report for the quarter ended March 31 indicated a number of hopeful metrics for the venerable firm. Total revenues grew 7.8% on a year-over-year basis, and admissions revenues-considered amongst the most important metrics for movie theater chains-were up 6.8%. Food and beverage revenues also grew and impressive 8.2%.

AMC also benefits from the significant degree of consolidation in the US exhibition market that has seen the share of box office revenue taken by the four largest exhibitors increase from 35% in 2000 to 62% in 2012. This consolidation process is still underway and we are likely to see the Big Four cinema chains collect two out of every three dollars spent at the box office within the next two years.

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What Wanda’s IPO Prospectus Tell Us About China’s Cinema Market

Wanda Cinemas

No less than 30 Chinese companies are looking to list on US stock exchanges this year, led by Internet giants such as JD.com and Alibaba. The reason for choosing the likes of Nasdaq is because unlike their Chinese counterparts they don’t require three years of profitability as well as US regulations that allow for different classes of voting stock. In total some USD $36.6 billion has been raised by 140 Chinese companies through U.S.-based initial public offerings (IPOs) since 2000. But one Chinese company that isn’t going down this route is Wanda Cinemas.

As we have already reported, Wanda is planning a two billion yuan (USD $321 million) IPO ahead of a listing on the Shenzhen Stock Exchange. This is likely to make it China’s biggest domestic IPO in 2014, even if it is overshadowed internationally by Alibaba’s U.S. listing. The smaller film distributor and exhibitor Shanghai Film Co. has also announced plans for a 969 million yuan (USD $145 million) IPO. But it is Wanda that we will focus on as it is more of a bellwether on the state of the Chinese exhibition industry.

It is important to remember that one of the reasons Wanda is not seeking a U.S.-based IPO is because it has already listed AMC Entertainment Holdings, which controls the second largest North American cinema chain. This listing raised USD $314 million, i.e. almost as much as the Wanda’s China IPO aims for. The stock done very well since being listed, with shares rising from USD $18.81 to $22.39, after reaching a high of $26.68 in the brief six-month time span in which it has been trading.

Wanda Cinema’s IPO: the Basics

By way of quick recap, WSJ tells us that:

Wanda Cinema Line is controlled by commercial-property conglomerate Dalian Wanda Group, which always installs cinemas in the shopping complexes it develops. With that support, Wanda Cinema has expanded into smaller Chinese cities. Dalian Wanda is controlled by its chairman, tycoon Wang Jianlin, who is the country’s richest man. Wanda Cinema Line owned 142 cinemas in 73 cities with 1,247 screens at the end of 2013, its preliminary prospectus said. Its net profit in 2013 rose 55% to 603 million yuan from 388 million yuan in 2012, while revenue rose to 4.02 billion yuan, up 33% from 3.03 billion yuan.

It is worth flagging again the concerns raised in the risk factors section of the prospectus, as highlighted by the WSJ:

China’s largest cinema chain takes a dim view of the domestic movie industry. In the risk factors section, the prospectus notes that “While Chinese films have achieved a certain volume, there are relatively few films of commercial value” and regulations limit foreign film imports. Therefore, Wanda faces risks resulting from the “lack of quality films in China that can really win good praise and reviews and completely satisfy market needs and the cultural demands of viewers.”

So while everyone is celebrating the success of “X-Men: Days of future Past” and “The Monkey King” in the first half of this year, local action epic “The Iceman 3D” underperformed and had to be split into two releases in order to get a decent return on its runaway budget.  Meanwhile, even Hollywood flops like “Transcendence” didn’t perform much better in China. We have also previously flagged up on this site the very real risk of a crash that the Chinese cinema business faces. Read More »

Fathom Events New CEO John Rubey Provides Both Experience and Leadership

John Rubey

John Rubey, CEO of Fathom Events

When National CineMedia (NCM) spun off its alternative content division, NCM Fathom Events, into a completely separate business entity at the end of 2013, it did not identify a chief executive officer for the newly formed company. Kurt Hall, the chairman and CEO of NCM, stayed with the cinema advertising network, and Fathom went off to find a suitable senior executive to fill its open leadership position. Their search came to an end earlier this month when it was announced John Rubey would become the stand-alone Fathom Events first CEO.

If Rubey’s name sounds vaguely familiar there’s a good reason why. Rubey comes to Fathom after spending the last 14 years as the President of AEG Network Live, the concert promoter’s in-house multimedia production company. While with AEG he helped produce some of the earliest noteworthy events in the nascent alternative content industry by beaming concerts into cinemas from the likes of Bon Jovi, Dave Matthews Band, Garth Brooks and Phish.

This is a great hire for Fathom as Rubey brings a lot to the table. He’s got more than two decades of experience working in one form or another on content and marketing for big-ticket entertainment events. Before signing on with AEG, Rubey founded and owned Spring Communications which specialized in pay-per-view events. He has a working knowledge and practical experience in multiple forms of media production, entertainment marketing, alternative content and working with exhibitors. His relationships and ties to key players in the concert and entertainment industries run deep.

The whole purpose of AEG Networks Live is to “eventize” a concert, a tour, an arena or sports, generating marketing opportunities and actual revenue. These goals are identical or complimentary to most alternative content releases. To help him achieve these objectives during his tenure at AEG, Rubey worked with content aggregators and distributors such as Hulu, MySpace, Vevo and YouTube. Thus, he’s no stranger to digital content distribution and its many intricacies.

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Chris McGurk Says Cinedigm’s Future Is In Software And Content

Chris McGurk

Cinedigm's Chris McGurk

Not sure if you noticed, but over the past week Cinedigm’s stock price jumped over 33% from USD $1.50 to USD $2.00. It closed Friday out at USD $1.88. The sudden price increase in Cinedigm’s stock is likely due to a number of factors, rather than a single reason.

It has been a busy year so far for North America’s largest digital cinema deployment entity. In January industry veteran Chris McGurk (formerly with Overture Films and MGM) joined Cinedigm as it’s new chairman and CEO. In February the company announced improved financial results for the third quarter for fiscal 2011, hired back David Gajda as the chairman of their software division and signed Southern Theatres to a d-cinema deployment contract.

Last week AMC, the second largest U.S. theatre chain, selected Cinedigm’s Exhibition Management Solution to handle such head office tasks as film rental and revenue auditing. This was a day after the third annual Gabelli & Company Movie Industry Conference, where Cinedigm was represented by McGurk, whose presentation on maintaining theatrical film windows was reportedly well received.

In the following conversation, which took place on the eve of the first annual CinemaCon convention in Las Vegas, McGurk openly discusses the company’s stock price, digital Cinema, and most importantly, Cinedgim’s future business direction.

Celluloid Junkie: So, as someone who has attended ShoWest in the past as a studio executive, how does it feel to be heading to Las Vegas for CinemaCon as the head of a digital cinema deployment entity?

Chris McGurk: There’s a little bit of a difference but I think it’s kind of great because we’re positioned right in the middle. We’re not on the studio side and we’re not on the exhibition side, but we’re basically a facilitator for what both sides are trying to do and right now that’s a great position to be in. I was just at the Gabelli Conference last week in New York where we presented and listened to everyone talk for six hours. It seems the level of tension that exists between studios and exhibitors right now is higher than it’s ever been, primarily because of windowing. But I think a company like Cinedigm, a digital services provider, a provider of alternative content and software solutions, I think we’re in kind of a unique position to sort of get in the middle of all that and help find some solutions to make things work.

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Travis Reid Departs DCIP To Head Up Screenvision

Travis Reid - Screenvision.jpg

Travis Reid

Last Thursday Digital Cinema Implementation Partners (DCIP) announced that Travis Reid, their CEO, had resigned. That same day on-screen advertising giant Screenvision announced that Shamrock Capital Advisors, a private equity fund founded by the late Roy Disney, had finalized the $160 million purchase of the company and had appointed Reid as its new CEO.

At ShowEast, which was just wrapping up at the time, many industry folks I spoke with were surprised to hear the news, though looking at it objectively, the move is somewhat inevitable.

Reid has had a long career in motion picture exhibition that includes his stint as the President and CEO of Loews Cineplex for which he worked from 1991 until 2005 when the chain was acquired by AMC Entertainment. In 2007 he joined DCIP, the deployment entity formed and owned by North America’s largest exhibitors; AMC, Regal Entertainment and Cinemark. Reid has also sat on the boards of Cineplex Galaxy, Yelmo and Fandango among others. As Shamrock’s Managing Director Steve Royer said in Screenvision’s press release:

“Travis has an over thirty-year history in the exhibition space having operated chains and most recently, pioneering the digital revolution for the cinema exhibition industry. He was our ideal candidate.”

Reid led DCIP through a challenging period in its formation and development. Not only did he successfully oversee the companies protracted negotiations with major studios for virtual print fees (VPFs), but just as it seemed digital cinema was taking off, the financial meltdown caused funding for rollouts to dry up for more than a year. Reid and DCIP persevered and in March of this year he secured $660 million in funding from a consortium of banks.

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Sony Expands In Europe With National Amusements, AMC, And Dealer Partnerships

Sony's SRX-R320 Projector

Sony's SRX-R320 Projector

If Sony wanted to make a big splash at Cinema Expo in Amsterdam this past week then they did one heck of a job. On Tuesday, the second day of the conference, Sony announced two exhibitor agreements with National Amusements and AMC Entertainment’s United Kingdom based theatres for digital conversions. The company, known for its 4K digital cinema solution, also struck up partnerships with three European digital cinema dealers.

National Amusements
The biggest of these announcements had to be the news that National Amusements had chosen Sony as their integrator. The theatre chainis one of the largest in the world, operating 950 screens across venues in the U.K., United States and Latin America. National Amusements is the fifth largest theatre chain in North America.

Under their existing virtual print fee (VPF) agreements with Hollywood studios, Sony will install their 4K digital cinema projectors on all of National Amusements’ screens. They will start immediately with Showcase Cinemas, National Amusements’ U.K. theatre chain where Sony Digital Cinema 4K systems will be deployed on all 276 screens. In an effort to quickly ramp up the number of 3D screens at the circuits disposal, Sony will install the first 24 systems before the end of July.

There was no mention when installation of d-cinema equipment would begin in the U.S. or South America.  In fact the press release seemed purposefully non-committal, referring to the deal as an “expected global exhibitor agreement”. One could read into the use of the word “expected” or assume that Sony will be deploying equipment to the 450 screens National Amusements has in Connecticut, Massachusetts, New Jersey, New York, Ohio and Rhode Island. The theatre chain owns 16 theatres in South America which would probably be included in any worldwide rollout.

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AMC To Shutter First U.S. Megaplex

The Grand 24.jpgHave you ever wondered what the difference was between a multiplex and a megaplex? It’s not a question that keeps me up at night, but every so often I’ll read about a theatre which is described as a megaplex and it will cross my mind. I mean, how many screens does a theatre need to have in order to be considered a megaplex? Fifteen? Eighteen? Or is it anything over 20 screens?

This rhetorical question was answered last week when AMC Entertainment announced they would not be renewing their lease on The Grand 24 in Dallas, TX., the first megaplex ever built in the United States. Several news stories, including one in the Los Angeles Times, defined a megaplex as any theatre with 14 or more auditoriums.

I could be faulted for burying the lead here, which is that AMC will be closing the historic venue after it couldn’t reach new lease terms with the property owner Entertainment Properties Trust. In a written statement Gerry Lopez, Chief Executive of AMC, the nation’s second largest theatre chain, said of the venue’s closure:

“It’s disappointing that we have not come to terms on a historical, and to us, a somewhat sentimental property. But in our opinion, the proposal advanced by EPT is simply untenable. We continue to negotiate with EPT on several other properties and will see where those discussions take us.”

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DCIP Closer To D-Cinema Funding

The announcement the entire exhibition and distribution industry has been waiting for has finally happened; Digital Cinema Implementation Partners (DCIP) will finally get funding to roll out d-cinema equipment on over 15,000 screens at U.S. exhibitors AMC, Regal and Cinemark.  Some may view it as a non-announcement as this doesn’t mean the money is in the bank yet.  At the very least though, DCIP’s financing is looking more probable than it did earlier this year when the global financial meltdown was holding up any potential funding.

The Hollywood Reporter is stating that investment bank J.P. Morgan has set out to raise $525 million from brand name lenders before seeking additional sources of cash from private equity firms and the exhibitors themselves. So, while funding is not readily at hand, with a heavyweight such as J.P. Morgan in their corner it hopefully won’t be long before DCIP will be seeing some cash to jump start its efforts. Read More »