Amazon Goes To The Movies – Forbes
Shares in the largest movie theater chain in the world, AMC, which has been hard hit by the lockdown, have risen 30% following rumors of conversations with Amazon regarding a possible acquisition.
The financial health of AMC, which now has a debt of $4.9 billion, has long been in question, and several analysts claimed that bankruptcy was simply a matter of time, which would put Amazon in the position of a white knight coming to its rescue. AMC is currently valued at under $500 million, invites speculation compared to recent past deals such as the acquisition of Whole Foods, which was worth around $13.7 billion, in June 2017.
For the moment, it’s all speculation. But why would Amazon want to buy the world’s largest movie theater chain? In the first place, Amazon already produce a lot of content through Prime Video, so taking over outlets to show that content could make sense. Until a few months ago, US antitrust rules prevented studios from acquiring movie theater chains, so as to prevent a single player controlling the entire value chain, but in November 2019, the Justice Department announced that the rule, which had been in place since the 1940s, would be revised due to the increasing complexity and presence of new players in the industry, such as streaming companies.
It is important to note that content created by companies such as Amazon or Netflix, for example, is restricted from competing in awards and competitions such as the Oscars if it hasn’t been exhibited in movie theaters, restrictions that could easily be removed if the company itself controls the largest network in the world. In addition, it could also work as an incentive to attract and retain creative talent along the lines of “sign with me and you can show your content first in my theaters, then on Prime Video.”
An interest in physical premises, on the other hand, is not new for a digital channel dominator like Amazon, which has already made inroads into distribution with up to seven different types of stores. Movie chains could also be used to attract more users to its Amazon Prime subscription model — one of the company’s most profitable businesses — in the same way that the company does with its content, including, for example, the possibility of going to its movie theaters to watch a certain number of movies each month. For Amazon, the subscription model is extremely profitable since every person that joins the club, typically starts to consume more, and the company understands that model extremely well: they sweeten the deal and the number of things you can do with your subscription until there’s no chance you could consider quitting.
We are talking about a business, content exhibition, which has been venturing into the digital environment for some time now, but which could undoubtedly benefit greatly from the synergies created with what is also the world’s largest competitor in cloud computing: you create your film, you put it on the cloud, and it will automatically be available on 2,200 screens in 244 cinemas in Europe and more than 8,200 screens in 661 cinemas in the US.
Is the world’s richest man about to acquire the world’s largest cinema chain, a move that for him would be about as expensive as buying a bag of popcorn is for us when we go to the movies?
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