Big-screen blockbuster: Chinese conglomerate gobbles up AMC chain
In what some are calling a $2.6 billion prestige play, China's big fish Wanda is swallowing AMC to create the world's largest theater chain despite the steady decline in the US industry.
An AMC theatre in Santa Clara, California. The US movie chain is being purchased by the China-based Dalian Wanda Group.
Paul Sakuma/AP
Los Angeles
In the largest single Chinese investment in a US business to date, a Chinese real听estate and entertainment conglomerate called Dalian Wanda Group has just purchased AMC, the second-largest听US movie theater chain with more than 5,000 screens in the US and Canada.
The $2.6 billion purchase, which makes Wanda the world鈥檚 largest theater chain owner with nearly 5,800 screens and more cinema-chain purchases under consideration, has many wondering it will mean for moviegoers.
鈥淚t offers a lot of possibilities,鈥� says Paul Dergarabedian, box office analyst for Hollywood.com, of the acquisition of Kansas City-based AMC, which was a year in the making.
鈥淭his transaction will help make Wanda a truly global cinema owner, with theaters and technology that enhance the movie-going experience for audiences in the world鈥檚 two largest markets," said Wang Jianlin, Wanda's chairman and president, in the Los Angeles Times.
鈥淭hey intend to put a lot听of money into expansion and improvements,鈥� says Dergarabedian, some $500 million according to the company鈥檚 statements.
The purchase, he says, shows a lot of confidence in the theatrical sector:听鈥淵ou don鈥檛 put that kind of money into something that is not relevant.鈥�
This commitment could show up in such items as more reserved seating and higher-quality or more varied concession items. 鈥淢aybe even some different kinds of food,鈥� adds Dergarabedian with a laugh, 鈥渁lthough I鈥檓 sure they will always sell popcorn,听who knows if听some of their own听treats might be a big seller.鈥�
Don鈥檛听look for听these听amenities in every market, however,听says Steve Herz,听an听entertainment attorney and founder of IF Management, a talent agency in Manhattan.
鈥淚 think they will in specific markets,鈥� he says via email, mentioning New York and Los Angeles. But only if the听economics make sense, he adds, with sufficient 鈥渃onsumer demand and willingness to spend $25 on a movie ticket or more.鈥�
Some experts cautiously suggest this听deal could听create more openness in a听relationship historically marred by听conflicts听over听Chinese censorship and piracy of US films.
Indeed, eyeing the potential of the vast Chinese marketplace, Hollywood is moving ahead full steam, points out Dergarabedian.听This deal comes on the heels of听several听recent moves. According to the Los Angeles Times, Chinese film distributor Bona Film Group announced it had agreed to sell News Corp. a roughly 20 percent stake.
Walt Disney Co. of Burbank and DreamWorks Animation Studios in Glendale also have recently announced joint ventures in China. And IMAX is in the midst of a contract to build new screens in China.
鈥淭his deal could help all of that,鈥澨齭ays Dergarabedian, by increasing the two-way flow between the markets.
The acquisition of AMC鈥檚 screens in the US and Canada may also hand Wanda听new outlets for听Chinese films听in听two of the world鈥檚 largest film markets.
But potential benefits overlook the underlying flaws听in the whole arrangement, says Howard Suber, professor emeritus in the producers program at UCLA鈥檚 School of Theater, Film and Television.听The acquisition, he points out, comes after a long,听steady, decline in听theater attendance in the US 鈥� ticket sales in 2011 were down some 10 percent from the previous year.
The question, he says, is why do this in the midst of an industry that is struggling for revenues. The answer, he says,听鈥渋s prestige.鈥澨� He likens it to the era, more than two decades ago, when Sony scooped up Columbia Pictures and Matsushita purchased MCA, parent company of Universal Pictures.
鈥�Japan was at the top of the economic heap and it got cocky,鈥� he said, 鈥渁nd then when the bottom fell out, as it so often does, they dumped the properties at a fraction of the price they paid for them.鈥�
But as this is a matter of cultural pride for China, he suggests听that there may be an influx of films from China over the next 2-1/2 years.
鈥淭hey may try this for the first year and find out that they do not sell well in these markets,鈥� he says, and they will continue for听an additional year, 鈥渏ust to give听the strategy a chance to succeed.鈥�
But听then, he predicts, they will accept the inevitable that subtitles do not sell well in mainstream American markets, adding: 鈥淭his whole听idea is just dumb.鈥�