Amazon doesn’t need AMC, but they could use some more movie theaters

Don’t buy the hype that Amazon might actually buy AMC. Look at AMC’s burning balance sheet. It’s a huge money-making business, but not a very profitable one for movie theater owners.

Yesterday, we saw the news that Amazon is reportedly talking with AMC about a possible buyout. Maybe by now you’ve seen and heard the reports too.

It sounds enticing. Amazon Studios wanting to get more of their movies on the big screens being suddenly the #1 biggest movie chain in the world? Oh, the possibilities. The extra income …

… until you hear the price tag. That brutal thing known as overhead.

Amazon thrives on reducing overhead. Seeing them in a business where they can’t use drones instead of people to deliver popcorn to moviegoers? Don’t laugh. It might be possible someday to have drones deliver concessions in movie theaters 😉

Right now, today, I don’t see how or why it makes any business or financial sense for a hugely profitable company like Amazon to absorb billions in AMC debt. Instead, they could, should and probably will let them fold and buy the theaters — the actual physical locations — they want in a fire sale. Some AMC theaters are in locations that might need immediate shutdown (see: Florida Landlord Sues AMC for Rent – 7.5 million – Meanwhile, they won’t open until there are “new” movies to show?)

AMC needs Amazon’s help much more. Of course the stocks of both companies are jumping on the mere mention of talks.

Shares of AMC were up more than 18% in premarket trading on Monday after the U.K.’s Daily Mail newspaper reported that Amazon has held talks with the world’s largest cinema-chain owner, which runs movie theaters globally under the AMC and Odeon names in the U.K., the U.S. and Canada, among other locations.

Amazon Reportedly Expresses Buyout Interest in AMC – TheStreet

Amazon already owns some smaller theaters and it makes total sense for them to expand their movie theater presence — assuming they believe in physical movie theaters — just as they bought Whole Foods to expand their grocery business.

I’m not sure Amazon believes, at least on a giant, global scale, that movie theaters will be as dominant in the future as they’ve been in the past. That’s the billion dollar question. I’m not arguing that movie theaters won’t continue to play some important part in the future of movie watching and that Amazon would like to have that distribution arm for their films being friendlier (say goodbye to most if not all of the theatrical window if Amazon buys AMC).

A more wise business decision for Amazon is to wait and see what happens.

Let the big three movie chains suffer financially and then swoop in and cherry pick the physical locations. They don’t need AMC corporate and NATO (National Association of Theater Owners), but could benefit from owning some of the better physical locations. Those will be for sale without the beleaguered companies and their obsoleted theatrical window rules.

My guess is that’s what Jeff Bezos and company said in their talks, if they even had any according to the rumor and alleged news reports. We’ll buy some of your locations but we want to run them our way. Yes, our way or the highway, AMC. Indeed, that’s what a business overflowing with cash in the black says to a company deep in the red.

AMC, if they have any choice, will not slice up their company for Amazon. I don’t see a deal happening yet. Could it happen someday? Sure, but it isn’t in Amazon’s favor at the present time. Regardless the outcome, I do see Amazon picking up more physical theaters. In fact, I’ve already said this was a strong possibility in past posts here.

And while we’re speculating. Disney, Universal, all the major studios should be staking claim to buying more movie theaters that may soon be on the market. Since the age old laws were lifted preventing them from doing so (see: Studios To Regain Powers Due to 1948 Paramount Consent Being Overturned), it’s a golden opportunity for them to own locations they can exhibit their movies. Competition is good and I don’t see how any three giant corporations owning almost all the movie theaters is as good as a half dozen major studios owning chains of theaters.

Strap in, grab your popcorn, the future of movie theater ownership is headed for change.

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