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AMC and Regal forming new venture to acquire and release movies

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

 
Comments () | Archives (10)

Have I not been calling for something like this for the last few years? Yes, I have.

Now, if AMC-Regal are smart, they'll also adopt a better tiered ticket price system - a few bucks less for 'independent' films guarantees more butts in the seats (and, hence, more concession sales,) and more traditional retail sales promos, like 2-4-1 and BOGO specials, discount coupons for indys with Corporate Studio Product ticket purchases, etc.

And, if they're really visionary, AMC-Regal might consider financing smaller film productions, too, in exchange for exclusive distribution rights or whatnot...

Kudos to you, frank1569! I agree with everything you said. I think other theater chains should follow AMC-Regal's lead. Why not? Isn't competition among the studios and theaters good for the theater goer?!

It's nice to see that movie theaters aren't going to lie down and take it anymore, as if they really had a choice. This sounds like great news.

MCA initially purchased a large interest in Cineplex Odeon in 1986.

I think the article over-states the case. There is no scenario where these two companies will compete with major studios, upon which they depend for product. Further there are no economies of scale in dealing with smaller independent movies. Regardless of their possible aesthetic merit it is very difficult to pull them through the exhibition system and generate sufficient consumer demand at a sensible level of investment for marketing, prints, advertising, etc. The article's premise this will absorb excess capacity, or even face antitrust questions, is highly dubious. Most likely this venture will vanish by the end of the year. DK

How many of these bad production/distribution deals are there going to be? Remember Red Envelope? No? Of course not, because Netflix folded it after it was a complete disaster. Everyone thinks they can distribute movies cheaper/better/faster, but it turns out to be a really hard job. Not gonna work this time either.

Meta, your argument is unconvincing and uninspiring. To paraphrase, some people have tried to straddle production and distribution of movies in the past and failed; therefore, AMC and Regal must also fail. You dismiss the efforts of the people at AMC and Regal by implying that these efforts are nothing more than wishful thinking. You fail to provide evidence or the suggestion of evidence particular to this case to support your claim. The lesson I take away from your post is that because a challenge is difficult and others' efforts have failed attempting it in the past, you should give up your efforts or (even better) not make an effort in the first place.

@ DK, I agree but that's whats not being discussed. P/A money would still have to be in place for this distribution model to work. The filmmaker should be encouraged because the traditional studio-distrib's 50/50 cut with the exhibitor is non existent. Instead that cut is now being made with the exhibitor. I've actually spoken with folks at amc and regal and they want more product (that the studio passes on regularly). Without really knowing all details, looks like a smart move.

BRAVO REGAL & AMC!

This is a great thing for indie filmmakers. Over the last several years I have been working on a business model that is similar to this. Having worked extensively with theatre chains & the beginning of the Digital Projection, getting more entertainment to the theatres is a must. Anyone who follows this industry can see that there has been a huge decline of product by the studios. Alternative content, indie movies, etc. will help these theatre chains make better profits on ticket sales, while also filling the movie release gaps.
There is a huge community of talented indie filmmakers who can benefit from this. It is time for a new generation to step forward and claim there place among the giants of the industry. Since returning to the creative aspect of movie making, my goal has been to get my work to the big screen. With this, it can be achieved.

Interesting news. With the growth of online resources, it's going to become far easier to go direct to creators to find movies. So cinemas could, for example, decide to focus on new Italian movies, do a special dragster weekend or God knows what else.

The idea is not so much to promote indie cinema as to connect with latent demand or tie in with something topical.

Not so sure about them financing movies, though. Seems like the margins in theatrical are tight enough without investing in high risk production.


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