Regal and AMCs foray into movie distribution is occurring against a backdrop… (Mel Melcon, Los Angeles…)
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 could disrupt 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. The new venture would essentially thrust theaters into the studios' role of distributor, turning a partner into a rival as the theaters' own movies compete for screens against those from the studios.
Regal and AMC's foray into movie distribution 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 appear in theaters. Theater operators fear that will dissuade people from going to the movies, undercutting their business.
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 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.
With attendance flat over the last five years, 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 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 would not compete with the studios by acquiring big-budget event films. Instead, the new company would 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 would have automatic access to theaters owned by AMC and Regal, which together control 31% of the nation's nearly 40,000 screens, but would also be offered to other cinemas.
AMC and Regal also would release movies on DVD, television and the Internet, which would also provide new sources of revenue that theater companies sorely need.
Ortenberg did not respond to a request for comment, nor did a representative for Regal. An AMC spokeswoman declined to comment.
While a landmark 1948 U.S. Supreme Court consent decree required major studios to divest their ownership of theaters, the federal government has relaxed the rules over the last two decades as the movie business has evolved.
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 the Loews Theaters.
Massachusetts theater chain National Amusements Inc. is privately held by Sumner Redstone, the controlling shareholder in Paramount Pictures parent Viacom Inc.
Also, the largest shareholder of Regal, Philip Anschutz, also owns the movie production company Walden Media.
"There's precedent for this," said David Garcia, an antitrust expert and partner in the law firm of Sheppard Mullin Richter & Hampton, of the proposed joint venture. "I don't see this activity as something that poses any antitrust questions."