It’s either a big risk or an amazing opportunity, but there are indications that Amazon.com Inc. is looking to acquire AMC Entertainment Holdings Inc., reports S&P Global, Market Intelligence. With most of its movie theaters closed during the pandemic and a highly-leveraged balance sheet, AMC is ripe for a savior.
But why would Amazon want to venture into the movie theater business and buy a troubled company during coronavirus? Besides picking up a bargain, Amazon might be looking at providing theater goers with a “tech-heavy” experience for its content and selling tickets to its Prime members, Tom Forte, an analyst with D.A. Davidson, told S&P Global.
Justin Begnaud, managing partner at film finance and management company Kirin Media, told S&P Global that Amazon is in a unique position to “leverage its experience in digital retail and streaming to innovate the film and event space.”
This is not the first time that Amazon has dipped its toes in the movie theater space.
In 2018, Amazon and Netflix Inc. reportedly considered acquiring the Landmark Theatres chain. Though both Netflix and Amazon are making more films, many critically acclaimed, they’ve had trouble distributing them to theaters—which poses a problem for Academy Award eligibility. (The Academy of Motion Picture Arts and Sciences requires studio releases be shown in theaters for a certain number of days for eligibility.)
Though Amazon has incentive to enter the movie theater business, analysts are skeptical that it makes business sense to acquire an entire chain.
“I have a hard time believing that they would be considering this unless they thought that the price tag was dirt-cheap,” Forte told S&P. “It would have to be gift-wrapped and fall in their lap.”
But Amazon might see AMC as that gift. “Exhibitors are trading at discounted multiples, especially after the coronavirus sell-off,” reports S&P. “AMC’s revenue has ground to a halt amid the theater closures, and the company is straining under a heavy debt load.”
The other hitch in the potential deal: There’s the 70-year old Paramount Consent Decrees that prevent major movie studios from owning theater chains. However, the Department of Justice has indicated it might lift the restrictions, Jeff Bock, senior analyst at Exhibitor Relations, told S&P. “[The] business might not be capable of surviving without deep-pocket support,” Bock said.