What does AMC's billion-dollar acquisition of Odeon mean for the future of theatrical distribution?
AMC Theatres has revealed that it spent $1.2 billion (GBP £921 million) to acquire the 242 theaters owned by British exhibitor Odeon and UCI Cinema Group. The implications of this deal for global film are vast, considering that US-based AMC is owned by China's largest cinema operator, Wanda Cinema Line. Here's what we know— and what you should, too.
Brexit helped seal the deal
As you may be well aware, the British pound crashed in the wake of the Brexit referendum. Meanwhile, the US dollar is going strong. This means that the deal came at the perfect time; it's what AMC CEO and President Adam Aron called an "opportunistic transaction," a "once-in-a-generation opportunity to acquire Europe's leading cinema chain."
The biggest box office in the world?
AMC is a subsidiary of Wanda Cinema Line, a Chinese-based theatrical titan. So why did the deal go through AMC and not Wanda? First of all, in the same way that the British pound crashed because of Brexit, the Chinese Renminbi is down nearly 10%. By using US dollars instead of Renminbi, the price went down drastically in Wanda and AMC's favor.
This acquisition is unprecedented in modern theatrical distribution.
Second, theatrical distribution of motion pictures hit a new record last year when the Hollywood global box office hit $38 billion dollars. While Odeon and UCI don't have theaters in growing markets in Eastern Europe, they do in the UK, Ireland, Spain, Italy, and Austria. With the currency break, AMC will see a huge profit. Aron told investors that the company has picked out 50 Odeon and UCI theaters which are "ripe for an AMC-style overhaul." (AMC has been a proponent of a "luxury" model of film viewing.)
Meanwhile, the tightly-regulated Chinese box office grew an astonishing 48.7% last year to $6.78 billion dollars, making Wanda even more formidable. By 2017 the country is projected to surpass the US as the biggest film market in the world.
Celluloid Junkie speculates that by structuring the deal in such a way as to make AMC the parent company of record instead of Wanda, there were several ancillary benefits. AMC is headquartered in Kansas and Odeon is based in London and Manchester. Besides geographic and cultural proximity to Hollywood, one unnamed executive added that Wanda might have wanted to downplay its involvement due to geopolitical tensions. The setup also keeps Odeon and UCI "closer to LA when it comes to negotiating film rental terms with Hollywood studios, Atlanta when it comes to doing business with Coca-Cola, and really close to Wood Dale, Illinois, home to popcorn major Cretors."
According to Deadline, AMC is the largest owner of IMAX venues in the US: "Aron sees at least 40 Odeon and UCI locations that can accommodate the large screens."
"Synergies" and big data
This deal is more than a way for AMC to consolidate its (and Wanda's) power, measured in concessions and eyes on screens. Aron has previously boasted about the "synergies" the deal would bring. In this case, the deal also impacts AMC's looming acquisition of Carmike, giving the company more leverage. Aron was coy, though. "Once you start moving into discussions about film rents and purchasing synergies, we’re starting to tread on the sensitivities of our partners," he said. "Just be highly confident that we will deliver the synergies we told you we would and let us go about achieving them in a classy manner…Sunshine is not always the best disinfectant. Sometimes sunshine is pouring gasoline onto a fire."
The major studios will be adding even more tentpole blockbusters.
Celluloid Junkie took this sphinx-like statement to mean, roughly, "we’ll be squeezing all our suppliers for better rates, but don’t want to brag about it publicly." This could come down to a reciprocal arrangement, with AMC providing studios with "data sharing and access to customer insights" that allows studios to "target their own marketing spending."
A historic deal for distribution
This acquisition is unprecedented in modern theatrical distribution. For the first time in a globalized film industry, there's going to be one major theatrical distribution chain, which is ironic given the historic state of affairs between studios and distributors in the US.
Furthermore, the studios will be dealing more and more with China (albeit through a US proxy). The effects of this tectonic power shift on Hollywood have yet to be seen, but it's a near certainty that the major studios will be adding even more tentpole blockbusters to their calendars; a global market demands films that resonate with a global audience, and these films tend to be of the "less talk, more rock" variety.
At the moment, any information beyond facts and figures is speculation. We'll keep you posted on these developments in the film business—and more importantly, what they could mean for filmmakers.