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AMC and Regal forming new venture to acquire and release movies

February 10, 2011 |  1:58 pm

The nation's two largest movie theater chains are about to encroach on Hollywood  studios' turf.

Regal Entertainment Group and AMC Entertainment Inc. are close to launching a joint venture to acquire and release independent movies, according to people familiar with the situation, a part of the business historically dominated by the Hollywood studios.

The move potentially disrupts the longtime and delicate business relationship between theater operators and studios, in which they have acted as partners and divided a movie's box office ticket sales. Instead, the venture would essentially thrust theaters into the studio's role of distributor, turning a partner into a rival as the theaters' own movies compete for screens against those from the studios.

It also is occurring against a backdrop of increasingly strained relations between theaters and studios as the latter are looking to release movies directly into the home through video-on-demand shortly after they have appeared in theaters. Theater operators fear that will dissuade people from going to the movies.

The still unnamed company has yet to acquire any movies. However, the partners have hired a chief executive: Tom Ortenberg, a former senior executive for the Weinstein Co. and Lions Gate Entertainment Corp., who has been working as an independent consultant since 2009.

AMC and Regal hope in part that by acquiring their own movies for distribution they will fill the supply-and-demand gap created by Hollywood's downshift in movie making. From 2007 to 2010, the number of movie releases in the U.S. dropped 16%, according to Box Office Mojo. At the same time, the theater industry's trade group estimates that the number of screens in the country has risen 3%, making fewer pictures available for a larger number of screens.

And with attendance flat over the last five years and down 5% in 2010, theater owners have been experimenting with ways to draw more people into their venues, such as showing live sports events and concerts.

Some chains have already taken steps to promote independent movies. AMC currently runs a program called AMC Independent that helps market independent films that play in its theaters. However, the company does not buy distribution rights to the pictures as its joint venture with Regal would.

People familiar with the plan said the joint venture will not compete with the studios by acquiring big-budget event films. Instead, the new company will seek out independently financed movies that may not otherwise make it into theaters, such as low-budget dramas, comedies and horror pictures.

Independent or specialty films have been largely eschewed by the studios in recent years but are experiencing a resurgence thanks to such broad-appeal movies as Oscar contenders "Black Swan" and "The King's Speech."

The venture's movies will have automatic access to theaters owned by AMC and Regal, which together control 31% of the nation's nearly 40,000 screens, but will also be offered to other cinemas. AMC and Regal also will aim to release movies on DVD, television and the Internet, which would also provide new sources of revenue that theater companies sorely need.

While a 1948 U.S. Supreme Court consent decree barred the major studios from owning movie theaters, the federal government has relaxed the rules over the last two decades. In 1996, MCA Inc., the former owner of Universal Pictures, bought a large stake in theater company Cineplex Odeon. Also, the parent company of Sony Pictures Entertainment previously owned Loews Theaters.

Currently, the Massachusetts theater chain National Amusements Inc., is privately held by Sumner Redstone, the controlling shareholder in Paramount Pictures parent Viacom Inc. And, the largest shareholder of Regal, Philip Anschutz, also owns the movie production company Walden Media.

In addition, independent film financiers such as Mark Cuban own small movie companies and theater chains.

Ortenberg did not respond to a request for comment, nor did a representative for Regal. An AMC spokeswoman declined to comment.

-- Ben Fritz and Richard Verrier

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