AMC spikes 56% on reports Amazon may be considering a takeover (AMZN, AMC).
- AMC spiked as much as 56% Monday following a report from The Daily Mail that suggests Amazon is eyeing a takeover of the beleaguered movie theater chain.
- Amazon's video streaming ambitions have already left its mark on Hollywood, but the company's original movies are still shut out of major movie theater chains if it doesn't agree to a 3-month exclusivity window.
- While the report cautioned that it's not clear if discussions between the two companies are still active, a potential acquisition by Amazon would likely open the door for Amazon Prime original movies to be shown in major theater chains and streamed at home at the same time.
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AMC Entertainment spiked as much as 56% Monday after The Daily Mail reported that Amazon is eyeing a takeover of the beleaguered movie theater chain.
According to The Daily Mail's sources, "The duo are thought to have held talks about a potential takeover of AMC by Amazon. However, it is not clear if the discussions are still active or if they will lead to a deal," the report said.
AMC was recently the subject of bankruptcy rumors as the chain's liquidity position worsened as movie theaters shut down across the country due to the coronavirus pandemic.
The company raised $500 million in debt in mid-April to help boost its cash balance and ride out the current period of lockdown orders.
If the report is accurate, the move would represent a strategic shift for Amazon as it continues to expand its physical brick-and-mortar foot print and boost its Hollywood exposure.
Major movie theater chains often require a 3-month exclusivity window for movies shown in their locations, which means a film distributor cannot allow consumers to stream or rent its content until 3 months after it has left movie theaters.
For the most part, because of this rule, Amazon has been foregoing theatrical releases for its content and instead opting for a direct-to-consumer streaming release on its platform. Ama
The issue for Amazon and other streaming giants like Netflix is that in order to be eligible for awards, like the Oscars, a movie needs to be shown in theaters.
That's why Amazon releases its high profile films in theaters and abides by the 3-month exclusivity window, like they did for Oscar winners 'La La Land' and 'Manchester by the Sea.'
If Amazon acquired AMC, it could abandon the three-month exclusivity window entirely and release its films simultaneously, in movie theaters and via direct streaming, eliminating a major headache that the streaming giants have been grappling with over the years.
The film was scheduled for a theatrical release this spring, but Universal opted to stream the film directly to consumers for $20 rather than postpone the scheduled release. The move was a hit for Universal, as the film brought in more than $150 million domestically.
But AMC viewed the move as a threat, and along with Regal Cinemas threatened to ban all future showings of movies that don't respect the three-month exclusivity window.
In a world where Amazon buys AMC Entertainment, consumers would likely see new movie releases simultaneously playing in theaters as well as streaming at home.
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