Box Office Bummer: Why Movie Theater Companies Like AMC Just Lost $1.3 Billion
Second-quarter revenues were surprisingly weak — and fall isn’t looking promising
Matt Pressberg | August 9, 2017 @ 5:15 PM
Last Updated: August 9, 2017 @ 9:22 PM
AMC
Last week, AMC Theatres fired the shot heard ’round the popcorn machine — and erased more than $1.3 billion in market value for the four biggest movie theater chains in North America.
AMC, which has been aggressively buying up cinema chains and adding recliners and fancy food options to its theaters, announced plans on August 1 to cut costs and previewed brutal second-quarter earnings. After a profit of 7 cents a share in the first quarter, the world’s largest exhibitor reported a massive loss of $1.35 a share.
That sent the company’s stock plunging more than 25 percent — and signaled trouble for the entire exhibition industry. Weak box office proved to a drain for Regal, Cinemark and Canadian chain Cineplex as well. All three reported disappointing second quarter revenues and all saw their share prices drop, though not as a steep AMC’s.
Second-quarter box office was down 1 percent compared to last year — with hits like Warner Bros.’ “Wonder Woman” failing to match last summer’s string of global blockbusters like Disney/Pixar’s “Finding Dory,” Disney/Marvel’s “Captain America: Civil War” or Disney’s “The Jungle Book.”
And the next three months look brutal compared to last year’s $2.95 billion-grossing third quarter — including Universal’s “The Secret Life of Pets” and Warner Bros. “Suicide Squad,” which each grossed more than $300 million domestically, as well as surprise hits like Sony’s “Sausage Party” and Sony/Screen Gems’ “Lights Out.”
Through August 9 this year, the third quarter box office has added up to just $838 million — and the upcoming release schedule is pretty bare as far as guaranteed nine-figure films.
The box office slowdown comes at a particularly bad time for AMC in particular. The company made three separate billion-dollar acquisitions last year, picking up U.S. exhibitor Carmike and European chains Odeon & UCI and Nordic.
As a result, AMC has about $4.9 billion in total debt as of June 30 — and it is now pausing acquisitions to try to reduce that burden.
3. High overhead
AMC plans to cut staff and introduce strategic pricing to help fill seats. “The company has embarked on a domestic cost reduction and revenue enhancement plan to better align operating expenses with theatre attendance in its markets and reduce general and administrative costs for the balance of 2017 and into 2018,” AMC said in an August 1 release.
In addition, AMC and Regal recently agreed to sell Open Road Films, the distributor of Best Picture winner “Spotlight” co-owned by the two exhibitors, to Tang Media Partners. The goal: shedding more non-core assets. (The companies previously announced that the venture had cost them each $49 million in losses.)
While domestic box office is down 4 percent from a record-breaking 2016 at this point, it’s flat compared to 2015 and up from 2014.
And even if the third quarter proves to be lackluster, the movie business has a way of delivering twists. Most people didn’t expect much from horror film last winter’s “Don’t Breathe,” but it rolled to nearly $90 million domestically on a sub-$10 million budget.
Disney/Marvel’s “Thor: Ragnarok” should get things back on track in November, and the year ends with a new “Star Wars” film, which could be the savior the cinema world needs.
“The Force Awakens” pushed the 2015 box office over the $11 billion mark and helped it set a new record when it looked like a much longer shot just weeks before. Can “The Last Jedi” save 2017’s bacon? Theater chains sure hope the Force will be with them.
10 Biggest Billion-Dollar Entertainment Deals in 2016 (Photos)
Media and entertainment dealmakers returned in full force this year after a quiet 2015, as there were nine mergers and acquisitions valued at more than $1 billion -- from Chinese buyers such as the Dalian Wanda Group to AT&T, which agreed to acquire Time Warner for $85 billion. Here's a rundown of the biggest.
Various
10. Disney buys a minority stake in BAMTech
Price tag: $1 billion
In August, the Mouse House announced that it paid $1 billion for a 33 percent stake in streaming video technology company BAMTech, which was spun off from Major League Baseball’s MLB Advanced Media. Disney plans to use BAMTech’s technology to launch a standalone ESPN streaming service – but without the same content as linear ESPN.
The real estate and entertainment conglomerate owned by China’s richest man continues to snap up showbiz companies by the billion, acquiring the Golden Globes and American Music Awards producer for a cool $1 billion earlier this month.
Dick Clark Productions
8. Rovi acquires TiVo
Price tag: $1.1 billion
Video technology firm Rovi Corp., bought the pioneering live-TV recording tech company for $1.1 billion in a deal that was finalized in September. After the deal was complete, Rovi adopted the better-known TiVo name.
Getty Images
7. AMC Theatres buys Carmike Cinemas
Price tag: $1.2 billion
Wanda-owned AMC Theatres acquired Carmike, the U.S.’ fourth-largest exhibitor, forming the biggest theater chain in the country with more than 600 theaters. That surpasses Regal Entertainment, which operates 565 locations.
AMC/Carmike
6. AMC Theatres buys Odeon & UCI Cinemas
Price tag: $1.2 billion
AMC also added Odeon & UCI Cinemas, Europe's biggest chain, to its ever-expanding suite of cinemas. AMC will rename the company to Odeon Cinemas Group and maintain its London headquarters.
AMC/Odeon & UCI
5. Dalian Wanda Group buys Legendary Entertainment
Price tag: $3.5 billion
Wanda was responsible for the first megadeal of 2016, when it acquired the “Jurassic World” production company for $3.5 billion. Legendary lost $500 million in 2015, but its action-packed fare such as “Warcraft” is popular in China’s fast-growing movie market.
Legendary/Wanda
4. Comcast's NBCUniversal buys DreamWorks
Price tag: $3.8 billion
The blowout success of animated films like “Zootopia” and “Finding Dory” was one of the stories of 2016, and NBCU doubled down on the genre by adding the “Kung Fu Panda” and “Shrek” studio to its fold.
DreamWorks
3. Lionsgate merges with Starz
Price tag: $4.4 billion
The “Hunger Games” studio and premium cable channel announced their merger plans in June, a year after telecom billionaire and major Starz shareholder John Malone bought a stake in Lionsgate. Starz will become an independently run subsidiary of Lionsgate once the deal is officially approved.
Lionsgate/Starz
2. Verizon buys Yahoo
Price tag: $4.8 billion – or maybe less
The embattled Internet 1.0 company finally found its lifeboat, selling its core business to Verizon for $4.8 billion in July, eight years after rejecting a $45 billion bid from Microsoft. But after the extent of Yahoo’s 2014 hack was revealed, Verizon was pushing for a $1 billion discount, and has been taking a second look at the deal.
Verizon/Yahoo
1. AT&T agrees to acquire Time Warner
Price tag: $85.4 billion
AT&T agreed to buy Time Warner, combining two century-old companies to create a content and distribution powerhouse in the biggest media deal since the ill-fated 2000 AOL-Time Warner merger. One caveat: Donald Trump, who has been an outspoken critic of Time Warner’s CNN, had threatened to block the deal. However, a Wall Street-friendly Republican Congress could provide a smoother path.
AT&T/Time Warner
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Rewind 2016: From China’s Dalian Wanda Group to AT&T, deep-pocketed buyers were chasing content all year
Media and entertainment dealmakers returned in full force this year after a quiet 2015, as there were nine mergers and acquisitions valued at more than $1 billion -- from Chinese buyers such as the Dalian Wanda Group to AT&T, which agreed to acquire Time Warner for $85 billion. Here's a rundown of the biggest.