Big-screen blockbuster: Chinese conglomerate gobbles up AMC chain

In what some are calling a $2.6 billion prestige play, China's big fish Wanda is swallowing AMC to create the world's largest theater chain despite the steady decline in the US industry.

In the largest single Chinese investment in a US business to date, a Chinese real estate and entertainment conglomerate called Dalian Wanda Group has just purchased AMC, the second-largest US movie theater chain with more than 5,000 screens in the US and Canada.

The $2.6 billion purchase, which makes Wanda the world’s largest theater chain owner with nearly 5,800 screens and more cinema-chain purchases under consideration, has many wondering it will mean for moviegoers.

“It offers a lot of possibilities,” says Paul Dergarabedian, box office analyst for Hollywood.com, of the acquisition of Kansas City-based AMC, which was a year in the making.

“This transaction will help make Wanda a truly global cinema owner, with theaters and technology that enhance the movie-going experience for audiences in the world’s two largest markets," said Wang Jianlin, Wanda's chairman and president, in the Los Angeles Times.

“They intend to put a lot of money into expansion and improvements,” says Dergarabedian, some $500 million according to the company’s statements.

The purchase, he says, shows a lot of confidence in the theatrical sector: “You don’t put that kind of money into something that is not relevant.”

This commitment could show up in such items as more reserved seating and higher-quality or more varied concession items. “Maybe even some different kinds of food,” adds Dergarabedian with a laugh, “although I’m sure they will always sell popcorn, who knows if some of their own treats might be a big seller.”

Don’t look for these amenities in every market, however, says Steve Herz, an entertainment attorney and founder of IF Management, a talent agency in Manhattan.

“I think they will in specific markets,” he says via email, mentioning New York and Los Angeles. But only if the economics make sense, he adds, with sufficient “consumer demand and willingness to spend $25 on a movie ticket or more.”

Some experts cautiously suggest this deal could create more openness in a relationship historically marred by conflicts over Chinese censorship and piracy of US films.

Indeed, eyeing the potential of the vast Chinese marketplace, Hollywood is moving ahead full steam, points out Dergarabedian. This deal comes on the heels of several recent moves. According to the Los Angeles Times, Chinese film distributor Bona Film Group announced it had agreed to sell News Corp. a roughly 20 percent stake.

Walt Disney Co. of Burbank and DreamWorks Animation Studios in Glendale also have recently announced joint ventures in China. And IMAX is in the midst of a contract to build new screens in China.

“This deal could help all of that,” says Dergarabedian, by increasing the two-way flow between the markets.

The acquisition of AMC’s screens in the US and Canada may also hand Wanda new outlets for Chinese films in two of the world’s largest film markets.

But potential benefits overlook the underlying flaws in the whole arrangement, says Howard Suber, professor emeritus in the producers program at UCLA’s School of Theater, Film and Television. The acquisition, he points out, comes after a long, steady, decline in theater attendance in the US – ticket sales in 2011 were down some 10 percent from the previous year.

The question, he says, is why do this in the midst of an industry that is struggling for revenues. The answer, he says, “is prestige.”  He likens it to the era, more than two decades ago, when Sony scooped up Columbia Pictures and Matsushita purchased MCA, parent company of Universal Pictures.

“Japan was at the top of the economic heap and it got cocky,” he said, “and then when the bottom fell out, as it so often does, they dumped the properties at a fraction of the price they paid for them.”

But as this is a matter of cultural pride for China, he suggests that there may be an influx of films from China over the next 2-1/2 years.

“They may try this for the first year and find out that they do not sell well in these markets,” he says, and they will continue for an additional year, “just to give the strategy a chance to succeed.”

But then, he predicts, they will accept the inevitable that subtitles do not sell well in mainstream American markets, adding: “This whole idea is just dumb.”