Exhibition Stocks Battered On Report Studios Plan PVOD Without A Deal

When it rains on exhibition stocks, it pours. Major theater owners’ shares are getting walloped today following a Bloomberg report that says Warner Bros and Universal Pictures are talking to Apple and Comcast about introducing premium video on demand on their own — without making a deal with exhibitors.

They could introduce the changes “as soon as early next year” the news service says, citing “people familiar with the matter.”

The three major exhibition chains each touched a new 52-week low this morning. AMC Entertainment — the world’s largest — is down 5.7%. It’s followed by Regal Entertainment, -5.1%, and Cinemark Holdings, -2.9%.

Investors soured on the sector following a weaker-than-expected Q2 box office, and signs of continued industry weakness — as well as fears about PVOD.

The studios have special incentives to promote home viewing of new releases within the 90 day period when theaters typically have them exclusively.

Warner Bros will be part of the No. 1 TV distributor, AT&T, when the telco (which owns DirecTV) closes its $85 billion acquisition of Time Warner. And Universal is already owned by Comcast, the No. 2 TV distributor.

In addition to the PVOD report, AMC — owned by China’s Dalian Wanda Group — was buffeted by news that China’s State Council will officially restrict what it called “irrational” overseas acquisitions in industries including entertainment.

AMC  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 AMC CEO Adam Aron told investors early this month that the theater giant is inoculated from the rules affecting Wanda: AMC “operates as a standalone company with its own balance sheet and management team.”

He also sought to assure them that PVOD is “not moving to a speedy implementation.”

“I can tell you categorically that no one is close to resolution of this matter,” he said. “There is no industry consensus.”

He acknowledged, though, citing Yogi Berra, that “it aint over until it’s over.”

Exhibitors could retaliate against a studio that introduces PVOD on its own by refusing to run its movies, or relegating them to venues with few seats. For example, most of the major chains refuse to offer Netflix-produced films that also premiere on the streaming service.

Studios and theater owners have been negotiating revenue-sharing arrangements that might satisfy both sides.