Hollywood probably won’t introduce a premium video on demand (PVOD) movie window in the U.S. this year, AMC Entertainment CEO Adam Aron told analysts today following a series of what he called “emergency meetings” with five major studio chiefs over the last eight weeks to discuss the idea.
“I can tell you categorically that no one is close to resolution of this matter,” he says about the idea of offering releases to home viewers in the 90 day period when theaters typically offer them exclusively. “There is no industry consensus.”
Investors have worried that PVOD would encourage some movie-goers to stay home, depriving theaters of ticket and concession sales. Aron says the prospect drove many Wall Streeters “bonkers.”
Exhibition chains have warned that they might not show releases offered elsewhere during the first 90-days of a release. That has led to talks with studios eager to wring more sales from releases after the first two or three weeks.
In the end, Aron says, “the odds of whatever happening being good for exhibitors has a higher probability of happening than for it being bad for exhibitors.”
Still, he acknowledged — as Yogi Berra once said — that “it aint over until it’s over” although “it’s not moving to a speedy implementation.”
Aron was on the hot seat after AMC this week unexpectedly released disappointing financial estimates for Q2, with lower than expected forecasts. That resulted in a 25% drop in the company’s market value.
As part of his effort to reassure investors, Aron says AMC has called a “dead stop” to additional theater acquisitions following a Q2 that he calls “a bust.”
The company, owned by China’s Dalian Wanda Group, has been the world’s most eager buyer of movie theaters: It became the world’s largest exhibition chain this year following its purchases of Carmike Cinemas, UK’s Odeon and UCI Cinemas, and Nordic Cinema Group.
But it’s determined to reduce its debt. And “at the current share price we can not, and will not, use our stock as acquisition currency,” Aron says.
He also says that there’s no pressure on AMC due to the Chinese government’s recent restrictions on Wanda’s overseas investments.
“AMC operates as a standalone company with its own balance sheet and management team,” Aron says. “There has been so much misreporting and wild speculation in recent weeks…By far the most likely outcome is the status quo.”
He vowed to sell $200 million worth of non-strategic assets, in addition to $200 million he expects to see from the sale of most of AMC’s stock in cinema ad sales company National CineMedia.
He declined to comment on a Wall Street Journal report that Open Road Films — co-owned by AMC and Regal Entertainment — is close to an agreement to sell to Tang Media Partners.
Still, “if it were to happen it would bring cash into the door,” he says.
But the CEO said that AMC might be able to see $100 million or more by selling real estate at many of its theaters.
The company plans spending cuts, although Aron says it will come from many discreet changes as opposed to ax-wielding. For example, the company won’t hire people for 50 open positions at corporate headquarters.
Another plan: “There are theaters that have a lot of show times, and if industry box office is down…you may not need to have as many showtimes. Instead of opening a movie theater at 11:00 in the morning, maybe you open at 1:00 in the afternoon. Then you’ll save two hours of electricity, air conditioning, and some of the part time workers who are staffing that movie theater — instead of punching in at 11:00 they’ll punch in at 1:00.”
When it comes to box office sales, Aron says that “the trauma of Q2 pains us and Q3 will be no picnic.”
He’s upbeat about Q4, and not just due to optimism about Star Wars: The Last Jedi — which he calls “the gift from heaven.”
But Aron declined to characterize what the 2018 box office will look like, although the people who book AMC theaters are “excited on the whole array of titles coming out.”
He learned his lesson early this year when he upped spending plans for the summer when Q2 was “billed to be a blockbuster quarter.” Instead, “a record April became a hard May and margin pressure immediately became evident.”
He’s gun shy about forecasting 2018 since “people in April couldn’t accurately predict May.”
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