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AMC Theatres Launching Digital, Physical Movie Sales

6 Nov, 2017 By: Erik Gruenwedel

Retail strategy includes movie-themed merchandise

Facing a challenging box office, AMC Entertainment Nov. 6 announced it would begin selling digital and physical movies on the AMC website in 2018. The move is the first by a national theatrical chain, and underscores the importance studios continue to place on retail sales.

“We have strong studio support to be participants in the significant home entertainment business where various websites sell [digital movies] and physical copies of movie DVDs,” CEO Adam Aron said on the fiscal call.

Aron said the chain would implement retail movie sales by partnering on a white label basis with existing third-party vendors so development costs will be “minimal.”

The executive quickly pivoted to premium video-on-demand, saying strategic moves toward content ownership doesn’t imply support for PVOD, which enables consumers early access in the home to new-release theatrical movies at a premium price.

“Either PVOD simply will not happen in the U.S. anytime soon … or, if it does happen, it will happen in a way that is agreed to by AMC and profitable for AMC even when taking into account cannibalization from people watching movies outside of our theatres,” Aron said.

Michael Pachter, senior media analyst with Wedbush Securities in Los Angeles, contends AMC is preparing for the possibility of PVOD with the expansion of its online capabilities.

"By setting up its website to sell movie streaming, movie downloads, and physical copies of DVDs, AMC is in effect betting on a PVOD landscape. This would lead many investors to assume that AMC has moved forward with negotiations or plans to do so over the next year or so. If it does happen, AMC will benefit from it," Pachter wrote in a Nov. 7 note.

AMC's digital strategies come as it posted a third-quarter (ended Sept. 30) loss of $42.7 million, compared with a profit of $30.4 million during the previous-year period. Revenue increased 51% to nearly $1.2 billion — largely due to the acquisitions of Odeon Cinemas Group and Nordic Cinema Group. Revenue reached $780 million during the previous-year period.

“We have been predicting weakness in the third quarter industry box office, due to the quantity and subject matter of the films that were scheduled to be released. Not surprisingly, our foreshadow was accurate,” Aron said in a statement.

To combat secular industry changes at the box office, AMC is “very quietly” implementing $1 ticket price hike in 150 AMC Theatres on Friday and Saturday night shows.

With AMC claiming to attract 20 million visitors monthly to theaters, in addition to 15 million unique visitors online and more than 10 million AMC Stubs loyalty members, the chain is also launching movie-themed merchandise sales in 35 theaters in 2018.

“If successful, we will roll out throughout our system nationally later in the year,” Aron said. “We think AMC therefore can participate in a bigger slice of movie-related revenue in this country.”

About the Author: Erik Gruenwedel

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