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.
In the largest single Chinese investment in a US business to date, a Chinese realÂ estate and entertainment conglomerate called Dalian Wanda Group has just purchased AMC, the second-largestÂ US movie theater chain with more than 5,000 screens in the US and Canada.
The $2.6 billion purchase, which makes Wanda the worldâ€™s largest theater chain owner with nearly 5,800 screens and more cinema-chain purchases under consideration, has many wondering it will mean for moviegoers.
â€śThis transaction will help make Wanda a truly global cinema owner, with theaters and technology that enhance the movie-going experience for audiences in the worldâ€™s two largest markets," said Wang Jianlin, Wanda's chairman and president, in the Los Angeles Times.
â€śThey intend to put a lotÂ of money into expansion and improvements,â€ť says Dergarabedian, some $500 million according to the companyâ€™s statements.
The purchase, he says, shows a lot of confidence in the theatrical sector:Â â€śYou donâ€™t put that kind of money into something that is not relevant.â€ť
This commitment could show up in such items as more reserved seating and higher-quality or more varied concession items. â€śMaybe even some different kinds of food,â€ť adds Dergarabedian with a laugh, â€śalthough Iâ€™m sure they will always sell popcorn,Â who knows ifÂ some of their ownÂ treats might be a big seller.â€ť
Donâ€™tÂ look forÂ theseÂ amenities in every market, however,Â says Steve Herz,Â anÂ entertainment attorney and founder of IF Management, a talent agency in Manhattan.
â€śI think they will in specific markets,â€ť he says via email, mentioning New York and Los Angeles. But only if theÂ economics make sense, he adds, with sufficient â€śconsumer demand and willingness to spend $25 on a movie ticket or more.â€ť
Some experts cautiously suggest thisÂ deal couldÂ create more openness in aÂ relationship historically marred byÂ conflictsÂ overÂ 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.Â This deal comes on the heels ofÂ severalÂ 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.
â€śThis deal could help all of that,â€ťÂ says Dergarabedian, by increasing the two-way flow between the markets.
The acquisition of AMCâ€™s screens in the US and Canada may also hand WandaÂ new outlets forÂ Chinese filmsÂ inÂ two of the worldâ€™s largest film markets.
But potential benefits overlook the underlying flawsÂ in the whole arrangement, says Howard Suber, professor emeritus in the producers program at UCLAâ€™s School of Theater, Film and Television.Â The acquisition, he points out, comes after a long,Â steady, decline inÂ theater attendance in the US â€“ 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,Â â€śis prestige.â€ťÂ 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.
â€śJapan was at the top of the economic heap and it got cocky,â€ť he said, â€śand 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.â€ť
But as this is a matter of cultural pride for China, he suggestsÂ that there may be an influx of films from China over the next 2-1/2 years.
â€śThey may try this for the first year and find out that they do not sell well in these markets,â€ť he says, and they will continue forÂ an additional year, â€śjust to giveÂ the strategy a chance to succeed.â€ť
ButÂ then, he predicts, they will accept the inevitable that subtitles do not sell well in mainstream American markets, adding: â€śThis wholeÂ idea is just dumb.â€ť