Movie theater chain deal would make largest operator

Annie Baxter Mar 4, 2016
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Movie goers stand outside an AMC theater waiting to buy tickets. Chris Hondros/Getty Images

Movie theater chain deal would make largest operator

Annie Baxter Mar 4, 2016
Movie goers stand outside an AMC theater waiting to buy tickets. Chris Hondros/Getty Images
HTML EMBED:
COPY

AMC Theaters is acquiring another chain, Carmike Cinemas, for more than a billion dollars, pending antitrust review. The deal would make AMC the largest movie theater operator in the U.S., merging AMC’s 5,426 screens with Carmike’s nearly 3,000 screens, giving them a 25 percent market share of the business.

The tie-up could result in as much as $35 million in annual cost savings, in part through consolidation of back-office operations.

Industry observers said the combined company could potentially even reduce costs with concessions vendors, allowing theaters to score better prices on the popcorn and soda they sell at huge mark-ups to moviegoers.  

But the bigger leverage might come with film studios, which charge steep rental rates for movies, eating up more than half of box office receipts. A combined AMC/Carmike might have an easier time repelling rate hikes from studios like Disney. 

“You see them coming to the negotiating table and asking a much higher rate,” Piper Jaffray analyst Stan Meyers said.

The combined chain could also use its size as leverage with studios when a big film like Star Wars comes along, according to Columbia University professor Ira Deutchman. 

“One of the secrets of the business that most people don’t understand is that they do not allow theaters that are nearby to book the same films,” he said. “And so getting a Star Wars run in a particular zone in the country is what everyone is after.”

Deutchman said the big chains could pressure the studios to give them as many runs as possible, putting smaller chains at a disadvantage. 

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