AMC Theatres Stock Skyrockets on Amazon Buy Scuttlebutt

Shares of AMC Entertainment, parent of fiscally challenged AMC Theatres, are up nearly 30% in pre-market trading May 11 following news Amazon has been kicking the tires about a possible acquisition.

Amazon’s acquisition interest, first reported by The Daily Mail citing sources, would give the e-commerce behemoth greater control of the global box office. Amazon, unlike Netflix, remains a believer in the theatrical window — a stance some observers contend helped its 2016 movie, Manchester by the Sea, win Oscars for Best Actor (Casey Affleck) and Best Screenplay (Kenneth Lonergan).

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AMC, the world’s largest movie exhibitor, is owned by China’s Wanda Group and is reportedly facing bankruptcy since the chain (with 11,000 screens) was shuttered in March due to the coronavirus. With zero revenue and about $4.7 billion in debt, many analysts believe the chain won’t survive in the post-COVID-19 economy amid social distancing.

Amazon, which reported profit of $2.5 billion in its most-recent fiscal period, has shown interest in non-tech, old-school businesses such as acquiring Whole Foods and the Washington Post.

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In 2018, Amazon (and Netflix) reportedly had interest in Mark Cuban’s Landmark Theatres chain, which ultimately was sold to Cohen Media Group.

Meanwhile, U.K. Prime Minister Boris Johnson just announced new coronavirus guidelines, which include easing lockdown restrictions by July on hospitality businesses such as Odeon Cinemas — which is owned by AMC.

AMC CEO Adam Aron, who remains furloughed along with 600 other executives, has publicly expressed a wish that the chain could be operational by July.

In Georgia, despite Gov. Brian Kemp allowing exhibitors to re-open April 27, most major chains remain shuttered due to new studio movie releases being pushed back and a lack of theater staffing.

Regardless, Michael Pachter, media analyst with Wedbush Securities in Los Angeles, contends the acquisition rumor is just that.

“The price is [would be] $10 billion, not a few hundred million,” Pachter said in an email. “I don’t see Amazon buying the biggest theater chain in the world when they can accomplish the same thing buying a much smaller chain. It just doesn’t make sense.”

NBCUniversal’s Jeff Shell: ‘Not Realistic’ to Ignore PVOD

After setting off an industry firestorm saying Universal Pictures would pursue a movie-release strategy combining theatrical and premium video-on-demand, NBCUniversal CEO Jeff Shell doubled down on his previous comments to The Wall Street Journal after Universal Pictures animated feature film, Trolls World Tour, generated $100 million in PVOD sales.

Speaking April 29 on the Comcast fiscal call, Shell said PVOD would continue as a “complementary offer” to consumers when theaters re-open to the public — and consumers attend.

He said the Trolls had been primed and marketed for a March 20 theatrical bow, and when the coronavirus shut down theaters, going direct-to-consumer on April 10 with a “desperately” needed children’s title during the pandemic was the only option.

“The majority of our movies, whether we like it or not, are being consumed at home,” Shell said. “It’s not realistic to assume that we’re not going to change, that this part of the business isn’t going to change like all parts of the business are going to change.”

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The executive said it remains to be seen what the distribution model will look like post-COVID-19. While he expects a gradual return to the cineplex, which he said Universal would be part of, he also expects PVOD to be a part of the business model.

“[PVOD is] not a replacement,” Shell said. “We’re just going to have to see how long [a return to theatrical] takes and where it takes us.”

AMC Theatres, trade group National Association of Theatre Owners and Regal Cinemas have blasted Universal for pledging to bypass the traditional 90-day theatrical window. Both exhibitors have said they would not distribute any Universal — or other studio — title earmarked for simultaneous in-home digital release.

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With the exception of Georgia and Texas, movie theaters in most states remain shuttered due to the coronavirus. The industry and studios are projected to lose billions in box office revenue to the shutdowns.

Comcast CFO Michael Cavanagh said future PVOD releases would be determined on a “title-by-title” basis.

AMC Theatres Threatens to Drop Distribution of Universal Pictures Movies; Studio Responds

The world’s largest movie theater chain is fighting back against NBCUniversal’s plans to release at least some movies simultaneously to theaters and to homes.

On the heels of Universal Pictures’ animated feature film Trolls World Tour generating upwards of $100 million from premium video-on-demand and other digital channels in less than three weeks of release, NBCUniversal CEO Jeff Shell April 28 told The Wall Street Journal the studio would pursue a simultaneous theatrical/home entertainment release strategy going forward.

“The results for Trolls World Tour exceeded our expectations and demonstrated the viability of PVOD,” Shell said. “As soon as theaters reopen, we expect to release movies on both formats.”

AMC Theatres CEO Adam Aron promptly fired off a letter to the studio’s chairwoman, Donna Langley, saying it would no longer screen Universal movies if it turns a cold shoulder to the traditional 90-day theatrical window.

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“This radical change by Universal to the business model that currently exists between our two companies represents nothing but downside for us and is categorically unacceptable to AMC Entertainment,” Aron wrote in the letter. “Going forward, AMC will not license any Universal movies in any of our 1,000 theaters globally on these terms.”

AMC’s strategy mirrors exhibitor sentiment that has shunned Netflix original movies since the subscription streaming video behemoth releases its movies concurrently with any theatrical distribution.

Aron, along with 600 AMC executives, has been furloughed as the chain saw its business literally shuttered over night to help curb spread of the coronavirus. He said Shell’s comments suggest Universal is moving away from a long-term business model between AMC and Universal.

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Aron said the chain, which remains largely closed despite governors in select states authorizing the re-opening of theaters, would not distribute Universal — or any other studio’s content — globally if they stray away from the “theaters first” doctrine.

The executive said theatrical releases is a segue for future retail distribution, including boosting publicity, positive word-of-mouth, critical acclaim and downstream revenue. Aron said Universal wants to have its cake and eat it too by combining distribution channels.

“[Universal] assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on how its actions affect us,” Aron said.

He said AMC has invested significant time and energy with Universal executives over the past few years trying to figure out a new distribution models that would be beneficial both parties. Aron has previously mentioned helping studios distribute movies on its website and in theaters — the latter through packaged media.

“AMC is willing to sit down with Universal to discuss different windows strategies and different economic models between your company and ours,” Aron wrote. “However, in the absence of such discussions, and an acceptable conclusion thereto, our decades of incredibly successful business activity together has sadly come to an end.”

Universal Pictures, in a statement, called Aron’s letter disappointing. It said the decision to release Trolls World Tour on PVOD was done to offer consumers sheltering in home an alternative entertainment option.

“Based on the enthusiastic response to the film, we believe we made the right move,” Universal said. “In fact, given the choice of not releasing Trolls World Tour, which would not only have prevented consumers from experiencing the movie but also negatively impacted our partners and employees, the decision was clear.”

The studio said it still believes in the theatrical business model and said it has made no comment to contrary. It said it always seeks to make its movies available to as wide an audience as possible.

“We look forward to having additional private conversations with our exhibition partners, but are disappointed by this seemingly coordinated attempt from AMC and [trade group National Association of Theatre Owners] to confuse our position and our actions,” Universal said.

AMC Theatres Seeks $500 Million Lifeline

Coronavirus-challenged AMC Theatres April 16 said it plans to raise $500 million in private equity funds. The world’s largest theatrical chain has seen its 11,000 screens worldwide go dark since the pandemic forced businesses catering to large group gatherings to shutter.

With zero revenue coming in and weekly expenses topping $30 million, AMC furloughed 600 corporate jobs, including CEO Adam Aron. With its stock cratering and management telling landlords it wouldn’t rent, Wall Street began circling the wagons in anticipation of a Chapter 11 bankruptcy filing.

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With about $300 million in cash reserves at the end of March, and exhibitors not high on anyone’s essential business list (except their own), the proposed funding should keep the wolves at bay for awhile.

“Due to significant actions taken by the company, we believe our current cash balance is sufficient to withstand a global suspension of operations until a partial reopening in July,” AMC said in a regulatory filing. “After giving effect to the proposed notes offering, we believe the company will have sufficient liquidity to withstand a global suspension of operations until a partial reopening ahead of Thanksgiving.”

The news sent AMC shares up 37% in after-hours trading.

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Pachter: Movie Theaters Can Profit on 20% Capacity; Industry to Lose $2.25 Billion in 2020

With movie theaters worldwide shuttered due to the coronavirus, domestic exhibitors in the second quarter are expected to lose upwards of 92% of their revenue in the current fiscal quarter compared with the previous-year period, according to Michael Pachter, media analyst with Wedbush Securities in Los Angeles. The industry is projected to lose $2.25 billion in 2020.

The analyst contends the industry is facing a “perfect storm” of challenges that render it a sitting duck without some kind of government assistance. Buy how essential movie theaters are in a world of digital distribution and streaming remains to be seen.

“Those screens that open as early as June will likely show classic tent-poles at a discount to drive attendance,” Pachter wrote in an April 15 note.

Major summer titles are slated to hit theaters beginning in mid-July. Several films have yet to be rescheduled, and it is not yet clear which will be pushed to later in the year, 2021 or later. It’s also not clear how many titles will move straight to SVOD facing a dearth of content as productions have halted across the industry with stay-at-home orders in place.

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Citing Cinemark’s investor call, Pachter said the chain (and possibly the industry as well) has received positive news from theater landlords willing to “negotiate a deferral of rent under a variety of contract agreements.”

Indeed, media reports say AMC Theatres has already told landlords it cannot pay the rent on its 11,000 screens worldwide. The chain is reportedly in early Chapter 11 discussions.

“This could be a significant positive as the exhibitors’ ability to weather the closures depends to varying degrees on the flexibility of landlords,” Pachter wrote.

The analyst contends that when theaters re-open and social distancing seating is mandated, exhibitors could still be profitable with theater utilization as low as 20% to 30%.

“That’s tertiary positive, at least for Cinemark if not for the group, which bodes well in the case where social distancing is upheld for an extended period,” Pachter wrote.

Analyst: AMC Theatres Bankruptcy ‘Likely’

Don’t count on Wall Street being a friend during the coronavirus pandemic if you’re a movie exhibitor.

Longtime analyst Eric Handler with MKM Partners April 9 issued a note with a “sell” rating on AMC Entertainment shares, contending the parent to AMC Theatres — the nation’s largest exhibitor — is likely headed toward bankruptcy.

“Based on our view that theaters will be closed until at least August and our belief that AMC lacks the liquidity to stay afloat during that time, we expect the company will soon be faced with filing for bankruptcy,” Handler wrote. “Further fueling our liquidity concerns is AMC’s decision to stop paying rents to landlords.”

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AMC, which operates 1,000 theaters and about 11,000 screens worldwide, has seen its business literally shutdown overnight as fears about the coronavirus spread resulted in state governments banning groups of more than 10 people.

AMC shares have rebounded slightly to more than $3 after falling to $2 per share on April 3.

At the outset of the pandemic, AMC reportedly had about $600 million in assets, which have steadily evaporated as the chain spends upwards of tens of millions of dollars weekly on overhead expenses with zero revenue coming in.

CEO Adam Aron has called on assistance from the recently passed $2.2 trillion relief package from Congress. “We don’t need a bailout, we just need loans, which we will be able to pay back with interest when we re-open and revenues start coming back in the door,” Aron said on March 21.

Four days later, Aron and 600 other AMC executives were furloughed by the parent company. Aron continues to sound positive, telling CNBC on March 31 he thought theaters could be back operating by mid-June.

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Disney, which has dominated the box office in recent year, has Pixar Animation’s Soul slated to bow in June with live-action Mulan rescheduled for July 24 from its original March 27 debut.

Disney executive chairman Bob Iger told Barron’s the studio’s tentpole titles have been put on hold, but other movies could be headed for early release on subscription streaming video platform Disney+.

“In terms of movies going ahead after [Artemis Fowl] there may be a few more that we end up putting directly onto Disney+, but for the most part a lot of the big tentpole Disney films, we’ll simply wait for slots,” Iger said. “In some cases, we’ve announced new ones already, but later on in the calendar.”

Michael Pachter with Wedbush Securities in Los Angeles, doubts AMC will default on its debt until they breach year-end covenants or stop paying debt service.

“Their landlords could force them into bankruptcy, but it doesn’t really make sense for them to do so, since there isn’t going to be a ton of demand for the real estate when everyone else is closed,” Pachter said in an email.

The analyst believes the situation underscores why some AMC creditors are seeking legal counsel to see if they could force bankruptcy sooner.

“[Bankruptcy] is unlikely till year-end without an external trigger,” Pachter said. “The company might choose to file for a restructuring [Chapter 11], which is what the creditors are hoping for.”

CEO: AMC Theatres Hoping for Mid-June Re-Opening

AMC Theatres, the world’s largest exhibitor with 1,000 theaters and 11,000 screens, hopes to re-open domestic screens by mid-June, CEO Adam Aron told CNBC.

Speaking March 31, Aron said the industry remained on “uncharted times in our lifetimes,” while admitting to wishful thinking as the chain has seen revenue plummet to zero as local and state governments banned group gatherings of 10 or more people.

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“The summer has always been one of the biggest movie seasons of the year … and Christmas,” Aron said. “I would love to think that America will be enjoying summer movie season again. But nobody knows.”

Aron said America needs to get on the “other side of this virus” as a country. “So many businesses have been temporarily shuttered. People want to get out of the house and get back to normal. But that’s not going to happen in the next few days or the next few weeks.”

China had initiated limited theatrical openings only to reverse the decision the next day when new cases of coronavirus popped up. Beijing’s Film Bureau ordered the 600 re-opened Shanghai theaters shuttered on March 27.

Aron said China’s reopening just 60 days after the virus broke out seemed “a little too tight,” when compared with AMC’s decision to shutter all screens on March 17 for six to 12 weeks.

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The CEO said he saluted Congress for passing the $2.2 trillion relief bill, which he said would provide relief for AMC employees and “our communities.”

Aron believes the entertainment industry will bounce back quickly because “people want to be entertained.”

“The country is going to come back,” he said. “America will be normal again. We’re just going through an interruption. How quickly nobody knows. We’re all going to learn together.”

 

AMC Theatres Furloughs 600 Corporate Employees, Including CEO Adam Aron

Facing a disastrous business climate, AMC Theatres March 25 announced it was furloughing 600 employees at its corporate office in Leawood, Kan., including CEO Adam Aron.

The move is to save available cash, which the world’s largest movie exhibitor is hemorrhaging as its screens remain dark due to the global threat of the coronavirus.

“At this time, AMC is not terminating any of its corporate employees, however, we were forced under the circumstances to implement a furlough plan, which is absolutely necessary to preserve cash and to ensure that AMC can reopen our doors once this health crisis has dissipated,” AMC said in a statement.

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In a previous interview, Aron said AMC doesn’t want bailout money. Instead he said the chain wants loans that banks are unwilling to give due to the current uncertainty of the theatrical business model.

AMC rival Regal Cinemas, which operates more than 7,000 screens,  has reportedly furloughed about 90% of its workforce.

With a formal vote in the U.S. Senate ratifying a $2 trillion stimulus bill that would give families, small and large businesses, and some industries a fiscal lifeline still to come, AMC, Regal and other exhibitors have their backs to the wall trying to reduce overhead.

“The furlough plan calls for reduced working hours at reduced pay, or no working hours at no pay, for the hopefully short period of time when AMC’s theaters are all closed,” read the statement. “This action impacts every corporate AMC employee, including all those at the highest executive levels and including AMC’s chief executive officer.”

The National Association of Theater Owners, an industry trade/lobbying group, contends the theatrical business qualifies as a “distressed industry,” thus qualifying for federal assistance.

Roku, AMC Theatres, Discovery Tap Credit Lines — For Different Reasons

Movie exhibitors, media companies and some home entertainment tech brands are tapping into lines of credit as the drastic change in business due to coronavirus upend traditional revenue patterns and operations.

Discovery, parent to myriad entertainment brands including HGTV, Food Network and Eurosport, said it borrowed $500 million to help it get through the unprecedented fiscal uncertainties, according to a regulatory filing.

“On March 12, the company drew down $500 million under the credit facility to increase its cash position and maximize flexibility in light of the current uncertainty surrounding the impact of COVID-19,” read the SEC filing. “The company has upcoming corporate debt maturities in June of $600 million and in June 2021 of $640 million.”

Disney March 20 disclosed it was selling $6 billion in bond debt to hold it over during the crisis. “We have closed our theme parks; suspended our cruises and theatrical shows; delayed theatrical distribution of films both domestically and internationally; and experienced supply chain disruption and ad sales impacts,” the company reported in a filing.

AMC Theatres, the world’s largest movie exhibitor, March 20 increased its borrowings under its “revolving credit facilities” as a precautionary measure in order to increase its available cash and preserve financial flexibility during the ongoing global shutdown resulting from the COVID-19 outbreak.

As of March 24, the exhibitor had borrowed $215 million under the credit facility and £89.2 million under the Odeon Credit Facility in the United Kingdom, which constitutes all AMC’s remaining available amounts of available credit.

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Wall Street’s MKM Partners has estimated AMC Theatres has a four-month window to survive in a zero-revenue environment when factoring in its lines of credit.

With word the U.S. Senate would vote March 26 for the third time on a $2 billion stimulus bill, AMC Entertainment shares ended March 25 up about 13%.

Meanwhile, Roku, which co-created the streaming video market with Netflix, borrowed $69.6 million from its credit facility, according to a March 24 regualtory filing.

The Los Gatos, Calif.-based company did not disclose what it intended to do with the funds, but media reports suggest the company is ramping up CE production to meet the demands of quarantined consumers.

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Amazon reportedly has shortages of select Roku and Amazon Fire TV streaming devices. The e-commerce behemoth reports the $39 Roku Premiere streaming player will be in stock April 1, and the $24 Roku Express device would be in stock March 29. Amazon’s standard $23 Fire TV stick is slated to be in stock April 5.

Roku is likely seeing strong active user and streaming activity growth as the pandemic runs it course. The company’s shares finished the day up 8% and gaining 16.1% March 24 following a positive note from Needham analyst Laura Martin.

At the same time, the Roku continues to struggle making a profit. While it is well-positioned to benefit from the rise of streaming services and cord cutting globally, Roku’s path to profitability is unclear, as Roku continues to expand its workforce to support its next leg of growth, according to Wedbush Securities media analyst Michael Pachter.

“Achieving profitability in Roku’s international markets will take time,” Pachter wrote in a March 25 note. “The recent share price decline reined in Roku’s usually lofty valuation, so we are taking this time to lower our price target. As shares are trading within 10% of our price target, we reiterate our ‘neutral’ rating.”

Coronavirus Stimulus Bill Fails First Vote in the Senate

A whirlwind weekend effort by Senate lawmakers to push through nearly $2 trillion in fiscal aid to businesses and people adversely affected by shutdowns in response to the coronavirus failed to garner the necessary 60 votes to close debate on the bill to send it to a vote.

The 47-47 vote March 22 on the $1.8 trillion stimulus package, which would create loans to small and large businesses, in addition to $3,000 in cash to families and expanded unemployment benefits, reportedly faced pushback by some Democrats who complained the fiscal package offered too much assistance to corporations compared with direct aid to citizens.

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Senate majority leader Mitch McConnell voted against the bill, a procedural maneuver that would allow him to ask for a re-vote at a later time. The bill voted on was described as a “shell” representing the concept of what the the final negotiated bill would off, presented to clear the procedural cloture vote to speed up the process of passing the final version once it is ready.

In addition, five Senate Republicans, including Rand Paul and Mitt Romney, were unable to vote due to self-quarantine. Paul earlier in the day announced he tested positive for the virus, the first senator to do so.

Senate Democrats were reportedly ready to move ahead with the bill until House Speaker Nancy Pelosi demanded changes, indicating House Democrats would compose their own stimulus bill, a duplication of effort that could further complicate efforts to bring fiscal relief to American workers and businesses.

The impasse is a setback to movie theater operators who have pleaded for immediate loan funding to stave off possible bankruptcy. The world’s cineplexes remain shuttered, including all 1,000 AMC Theatres, including 11,000 screens, and Regal Cinemas’ 7,300 screens.

“We don’t have a penny of revenue coming in,” AMC CEO Adam Aron told CNN on March 20.

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