With cinemas on the brink, the supreme decree falls, a symbolic thumb in the eye – Deadline

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A court ruling abandoned today allowing movie studios to buy theaters (whether they like it or not – and it probably isn’t) is the latest snub to an industry that is shaken by change for years, especially since March and COVID-19.The exhibition has not been in such a rush for a century. When the Spanish Flu of 1918 shut theaters, many permanently, the studios saw an opportunity and seized them, running the business until the Paramount decrees in 1948 shattered them. More than 70 years later, it’s no surprise that the law is toasting. The landscape is very different and a handful of Hollywood majors, including Disney and new royalties like Netflix and Amazon, were exempt from it anyway.

But it’s ironic that the decision – by U.S. District Judge Analisa Torres of the Southern District of New York – was struck as the country suffers another massive health crisis that locks the door. PVOD arguably tilts the scales in the studios as Wall Street and the major credit rating agencies struggle to assess milestones like AMC’s deal with Universal and Disney’s decision to publish. Mulan directly to Disney +.

Federal judge gives green light to rescind paramount consent decrees

What is clear is that this time around the studios are not rushing to buy the struggling assets. Sources tell Deadline that major movie studios have no plans to participate in the show. By focusing on streaming – including the big streaming-focused restructuring this week only at NBCUniversal and Warner Bros. – they’d rather spend billions to build their own services than worry about local staffing, leases. , property taxes and municipal ordinances that accompany the management of a theater. Let’s also not forget that many have been there before and have done so – namely Warner Bros. with theaters he owned abroad, and Sony with Loews in the mid-1990s.

At least one major chain, AMC Entertainment, could consider selling its own assets if things continue to go wrong, its CEO said yesterday.

Netflix and Amazon are the only strategic buyers who are rumored to be interested in purchasing a channel. Netflix bought the Egyptian in Hollywood and Paris in New York. But these are largely vanity games. Netflix sources have insisted the streamer would never go into the circuit business because he is great at what he does and doesn’t need that side risk exposure.

Still, AMC Entertainment led theater shares higher on Friday, with some speculating their group could become acquisition targets.

In Friday’s trading, AMC stock rose ($ 4.75, + 14.7%), Cinemark also rose ($ 11.06, + 5.3%), as did Marcus ($ 13.47 , + 6.57%), Imax ($ 11.86, + 3.3%) and National CineMedia ($ 2.97), + 2.4%)

The move came as S&P warned that AMC needed the stars to properly align this pandemic to avoid another cash flow crisis. The country’s largest chain yesterday reported largely irrelevant second quarter financial data with almost no income. But executives have been optimistic about the pace of international theater openings. They offered a few details – not enough, as they are confidential – of the Universal deal, and a glimpse into the chain’s strengthened cash position which they say can carry it through 2012 even if theaters remain closed. .

Saudi Minister of Culture and Information Awwad Alawwad with Adam Aron, CEO of AMC Entertainment
Images AP

“We survived the coronavirus,” said CEO Adam Aron.

No so quickly, others said.

“AMC’s risk profile remains very high with a still high level of debt and a questionable FCF [free cash flow] perspectives, ”according to analyst Eric Handler of MKM Partners.

If the chain is to delay its reopening in the United States beyond the current third quarter, S&P said, it “will likely need to raise additional capital to cover its cash consumption or risk running out of cash before moving up to a level. profitable operation. ” AMC has enough liquidity to remain closed for another seven to eight months and an untapped borrowing capacity of $ 100 million, ”he said. After that, he “may be forced to rely on asset sales or capital increases”.

Aron, in a question-and-answer session yesterday, said international asset sales was a possibility spelled out in the covenants of his recently completed debt restructuring.

“Yes… there are opportunities to sell assets. We are authorized to do so. There are certain restrictions on the cash flow from these asset sales in terms of the percentage of debt repayment and the percentage that remains in the business. But we have the ability to sell some assets and we have the ability to keep some of the proceeds, ”he said.

While AMC plans to open the rest of its overseas theaters and US locations this month, it is to be hoped that the studios will not continue to delay films if the pandemic does not abate and the attendance will be respectable despite health problems. The same goes for other channels.

Mulan

The owner of Cinepal takes a bat to his “Mulan” pop-up artwrk.
@destinationcine on Twitter

AMC on the call touted its Universal deal, but analysts said it might not have much of an impact unless other channels follow suit. Regal has spoken out against the pact and Cinemark does not seem interested. AMC has around 25% of the market. There are rumors that Warner Bros. was looking for its own windows-PVOD or streaming pact with great exposure.

“Right now, Universal would have to forgo releasing a movie on about 75% of US screens” to use that flexible window, Handler noted. He and others also want to know how and how much Universal agreed to compensate AMC.

S&P, meanwhile, sees real potential threat in Walt Disney’s exit plan Mulan directly to PVOD on its Disney + in the United States instead of waiting for theaters to open.

“Disney has been very clear that Mulan is a one-off event but … If Mulan has a successful PVOD launch, it could embolden Disney and other studios to bypass theaters and distribute more and more great movies directly to PVOD. We would view this scenario as a fundamental change in the competitive position of cinemas. “



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