With Cinemas On The Edge, Paramount Decision Topples, A Symbolic Thumb In The Eye – Deadline

A court ruling today that allows film studios to buy theaters (or not – and they probably won’t) is the latest snub for a sector rattled by change for years, particularly since March and COVID -19.

Exhibition has not been put under pressure in a century. When the Spanish flu theaters hit in 1918, many permanent, studios saw an opportunity and seized it, and ruled the company until the Paramount Decisions in 1948 broke them up. More than 70 years later, it is no surprise that the law toasts. The landscape is very different and a handful of Hollywood majors, including Disney and new royalty like Netflix and Amazon were at least exempt from that.

But it’s ironic that the ruling – by U.S. District Judge Analisa Torres of New York’s Southern District – struck as the nation faces another massive health crisis that is pushing the exposition. PVOD is likely to tip the balance in studios, as Wall Street and major credit bureaus are struggling to assess milestones such as AMC’s deal with Universal and Disney’s decision to release Mulan directly to Disney +.

What is clear is that studios are not sweeping this time around to buy the necessary possessions. Sources tell Deadline that major film studios have no plans to get into the show. With their focus on streaming – including major streaming-focused restructuring this week at NBCUniversal and Warner Bros. alone – they’d rather spend billions building their own services than worrying about local staff members, leases, property taxes and city judgments coming with the execution of a theater. Let us also not forget that many have already been and have done so – ie Warner Bros. with cinemas that once had it abroad, and Sony with Loews in the mid-1990s.

At least one big chain, AMC Entertainment, could consider its own asset sales if business continues to go south, its CEO said yesterday.

Netflix and Amazon are the lone strategic buyers who are rumored to be on and off to be interested in buying a chain. Netflix bought The Egyptian in Hollywood and Paris in New York City. But those were for the most part vain plays. Sources at Netflix have indicated that the streamer would never jump into the circus business because it is great at what it does and not that exposure is necessary for an extra risk.

Still, AMC Entertainment released theatrical shares Friday, with some speculating that they could become group purchasing targets.

In Friday’s trading, AMC stock rose ($ 4.75, + 14.7%), Cinemark also rose ($ 11.06, + 5.3%), as did Marcus ($ 13.47, + 6.57%), Imax ($ 11.86, + 3.3%) and National CineMedia ($ 2.97), + 2.4%)

The ruling came as S&P warned that AMC needed the stars to address this particular pandemic to prevent another money crunch. The nation’s largest chain reported for the most part irrelevant second-quarter finances yesterday with almost no revenue. But performers were optimistic about the pace of international theater recordings. They offer some details – not enough, because they are confidential – of the Universal deal, and an overview of the chain’s strengthened cash position that they say it can carry in 2012, even when theaters close to stay.

“We survived coronavirus,” said CEO Adam Aron.

Not so fast, others said.

“AMC’s risk profile remains very high with a still very high debt level and a dubious FCF [free cash flow] outlook, ”according to analyst Eric Handler of MKM Partners.

If the chain were to delay its U.S. opening behind the current third quarter, S&P said, it would “likely need to secure additional capital to cover its cash consumption or run risks of running out of cash before working at a profitable level.” “AMC has enough cash to stay closed for another seven to eight months and has unused loan capacity of $ 100 million,” it said. Hereinafter, “may be compelled to rely on increase of assets as increase of shares.”

Aron said, during a Q&A on the call yesterday, international asset sales were a possibility set in conventions from its just-concluded debt restructuring.

‘Yes … there are opportunities to sell assets. We allowed that. There are certain restrictions on the cash flows from those asset sales in terms of what percentage goes to repay debt and what percentage remains in the company. But we have the ability to sell some assets, and we have the ability to keep some of the proceeds, ‘he said.

While AMC has plans this month to open rest of its overseas theaters and its US locations, it should hope that studios do not continue to delay films if the pandemic does not subside and that the presence will be respectable, despite health concerns. The same goes for other chains.

AMC announced the Universal Deal, but analysts said it may not have much of an impact unless other chains follow suit. Regal has gone out against the pact and Cinemark does not seem interested. AMC has about 25% of the market. It is rumored that Warner Bros. is looking for its own beautiful window PVOD as a streaming package with large exhibition.

“Currently, Universal would have to abandon the release of a movie in about 75% of U.S. screens” to use this flexible window, Handler noted. He and others also want to know how and how much Universal has agreed to compensate AMC.

S&P, meanwhile, sees a real potential threat in Walt Disney’s plan to release Mulan directly to PVOD on its Disney + in the US instead of waiting for theaters to open.

‘Disney has made that very clear Mulan is a one-time event, but … If Mulan has a successful PVOD launch, it could embolden Disney and other studios to tour the theaters and distribute ever-larger movies directly to PVOD. We would see this scenario as a fundamental change in the competitive position of theaters. ”