A curious thing happened Monday morning: Shares of struggling AMC Theatres leapt by as much as 56%, to $6.41, after a report circulated that Amazon held talks with the movie chain over a potential takeover.
The report’s controversial publisher, the U.K.’s Daily Mail, said it was unclear if the discussions were still active or if they would lead to a deal, citing unnamed sources. (Neither AMC nor Amazon responded to Fortune’s request for comment, though Amazon told others that it does not comment on speculation.) Whatever the report’s veracity, the impact the speculation had on AMC’s stock was very much real, and a fascinating development for the world’s largest movie theater chain given its recent fortunes.
AMC, like all movie theater companies and virtually the entire entertainment industry, has been hit hard by the novel coronavirus pandemic. In mid-April, the Leawood, Kan. company’s stock was down a staggering 70% year to date. AMC also has been the subject of several reports stating that its bankruptcy was not a matter of if, but when. And the company recently engaged in a public row with Universal Pictures after the studio successfully released Trolls World Tour on demand and touted the viability of digital releases even after theaters reopen—a perceived insult to its once-happy partner.
Then came the Amazon report. At a time of struggle and uncertainty, would an AMC takeover by the Jeff Bezos behemoth be so farfetched or unwelcome? After all, Amazon is already in the movie business. Its Amazon Studios unit produces original films and television shows. The e-commerce giant has pulled off a large acquisition before, nabbing upscale grocer Whole Foods for $13.7 billion in 2017. It may serve as an example: After that deal, Amazon linked its Prime membership to perks for the grocer’s brick-and-mortar experience—and vice versa—and began integrating Whole Foods into Amazon’s online shopping platform.
So what might AMC look like under Amazon management? How would one of the world’s largest technology companies improve a century-old theater enterprise? Allow us to speculate:
Ticket prices drop
With billions in Amazon’s war chest and its famed “growth at the cost of profits” approach, Amazon could drop the average price of tickets by a couple of bucks, much as it did to key products—such as fresh produce and dairy—at Whole Foods. The discount would give Amazon-branded theaters an immediate competitive advantage in luring consumers from national competition like Regal and Cinemark. And just like other Whole Foods categories—e.g. bread or snacks—one can imagine concessions seeing a price increase, helping offset the ticketing discount.
Movie memberships become an Amazon Prime perk
AMC’s Stubs A-List program, in which subscribers can see up to three movies a week for a monthly fee (around $20 to $25, depending on region), would make plenty of sense within Amazon Prime, which already offers free two-day shipping, weekly deals at Whole Foods, and of course, access to Amazon’s video streaming library. Nor is it farfetched to imagine Prime members gaining access to discounted tickets at AMC, Odeon, and UCI Cinemas.
Amazon renews its Hollywood talent shopping spree
What’s it mean to be the largest theater chain on Earth? Roughly 1,000 cinemas and 11,000 screens in fifteen countries. With so many venues added to its portfolio, Amazon could conceivably kick off a new mission to recruit Hollywood’s top directors, writers, and actors. The pitch: We are no longer a streaming-first company with an occasional indie hit that plays in theaters for two weeks for Oscar consideration; join us and we’ll play your work each night across the largest network in the world. (And better yet, we’ll prioritize it over everyone else’s work for months—then make it available on Prime Video right after.)
Amazon original movies get a bricks-and-mortar upgrade
With AMC’s extensive theater portfolio on hand, Amazon could decide to exclusively premiere its studio originals—now featuring even better talent!—in its own theaters for a short window, giving audiences a more engaging option than their own living rooms. In this scenario Amazon needn’t carve off a slice of ticket sales to rival theater chains nor be terribly bothered by the long-term trend of streaming movies cutting into theatrical revenues—after all, it would control both parts of the pie.
Sound illegal? Under current legal precedent, it is. A 1948 Supreme Court ruling, United States v. Paramount Pictures, Inc., bars film studios from owning their own theaters in the name of antitrust. Yet in late November, the Justice Department’s antitrust chief, Makan Delrahim, announced his intention to terminate those rules, describing them as no longer needed. If that decision were to come to pass—there would be a two-year sunset period, Delrahim said—Amazon could begin to capitalize on AMC’s footprint in new ways.
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