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Author Topic: Regal acquired by Europe's Cineworld
David Stambaugh
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 - posted 12-05-2017 10:16 AM      Profile for David Stambaugh   Author's Homepage   Email David Stambaugh   Send New Private Message       Edit/Delete Post 
https://www.nytimes.com/2017/12/05/business/dealbook/cineworld-regal-movies.html

Quite a long article but this is the gist of it.

LONDON — The two largest movie theater chains in the United States will soon be owned by foreign companies.

The British movie theater owner Cineworld said on Tuesday that it had agreed to acquire Regal Entertainment Group, one of the biggest cinema operators in the United States, for $3.6 billion.

The deal would greatly expand the scale and geographic footprint of Cineworld, which primarily operates in Europe, and create the world’s second-largest movie theater owner to better compete with AMC Entertainment, which is owned by the Chinese conglomerate Dalian Wanda. The Cineworld-Regal combination would create a company with more than 9,500 screens in 10 countries.

It comes at a time of flux for operators of movie theaters competing for attention and dollars in an increasingly saturated marketplace. At the same time, studios, such as The Walt Disney Company, are exerting more control over when and how their biggest films are shown, putting pressure on operators.

And despite higher average ticket prices, box office revenue is down in the United States this year after a dismal summer. The few standouts were the superhero flicks, “Wonder Woman,” “Guardians of the Galaxy Vol. 2” and “Spider-Man: Homecoming.” The latest adaptation of Stephen King’s “It” was also a bright spot this autumn, but “Justice League,” which brought together some of DC Comics’ biggest heroes, opened to disappointing results in North America last month.

Under the terms of the deal, Cineworld would pay $23 a share in cash for Regal. Shares of Regal closed on Monday at $20.73 a share.

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Buck Wilson
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 - posted 12-05-2017 04:47 PM      Profile for Buck Wilson   Email Buck Wilson   Send New Private Message       Edit/Delete Post 
Oh boy.

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Bobby Henderson
"Ask me about Trajan."

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 - posted 12-05-2017 08:11 PM      Profile for Bobby Henderson   Email Bobby Henderson   Send New Private Message       Edit/Delete Post 
I guess this buyout of Regal would leave Cinemark as the only American-owned theater chain in the US with more than 1000 screens (not that screen count has anything to do with quality). Outside of Cinemark all the other American-owned theater chains are region-specific or niche-specific.

Next thing we know Cinemark could be bought out by some other foreign group or maybe even an entity like Amazon. It wouldn't surprise.

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Mike Blakesley
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 - posted 12-05-2017 08:55 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I guess this is the aim of every large company... to eventually get bought out. Meanwhile all the small, personal touches get lost in the shuffle.

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Bobby Henderson
"Ask me about Trajan."

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 - posted 12-06-2017 12:20 AM      Profile for Bobby Henderson   Email Bobby Henderson   Send New Private Message       Edit/Delete Post 
Customer loyalty gets lost in the throwing out of those small touches. I think a bunch of these investors think the small touches and extra efforts are just a waste of time and money (money they want in their pockets).

If America's movie theater industry ends up being consolidated among a couple giant foreign companies and maybe even Amazon it will be difficult even for movie fans to give a shit if the movie theater industry collapses.

I do worry about a lot of Walmart/Amazon-style strong-arm tactics among what would be an ever more powerful AMC/Regal cartel. But that cartel still wouldn't have much leverage against the movie studios. My worry is their need for greed would turn their attention to smaller rival theater chains and independents. The two biggest chains would whore themselves out to the studios, giving the studios better rental margins in return for cutting out the little guys on content. Then there would only be AMC, Regal and maybe Cinemark (or Cinemark by Amazon :-P).

The movie-going experience has already been compromised in numerous ways, making the experience weirdly like watching letter-boxed movies on the big HDTV screen at home. So if we wind up with only 3 big movie theater chains or even just 2 then who is going to care if big movies get released directly to video? Hollywood will finally get to see just how much "extra money" they're going to make by cutting movie theaters out of their food chain. I think the studios will have a very rude awakening on that one.

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Louis Bornwasser
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 - posted 12-06-2017 08:43 AM      Profile for Louis Bornwasser   Author's Homepage   Email Louis Bornwasser   Send New Private Message       Edit/Delete Post 
It occurs to me that the air is being let out of the tires at the exhibitor level at about the same time and rate that the studios will no longer need them or care about them. Certainly no feast in the future if sequels aren't stopped, especially animated ones.

There is still money to be made for now, but the trend line is not good and is not probably going to reverse itself any time soon.

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Marcel Birgelen
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 - posted 12-06-2017 11:29 AM      Profile for Marcel Birgelen   Email Marcel Birgelen   Send New Private Message       Edit/Delete Post 
Well, their share price dropped from GBP 695 to a current low of GBP 533 after their announcement of the Regal acquisition. Looks like shareholders are prematurely jumping the ship already.

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Sam Graham
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 - posted 12-06-2017 12:48 PM      Profile for Sam Graham   Author's Homepage   Email Sam Graham   Send New Private Message       Edit/Delete Post 
quote: Bobby Henderson
Next thing we know Cinemark could be bought out by some other foreign group or maybe even an entity like Amazon. It wouldn't surprise.
Given Cinemark's existing presence in Central and South America, I could see a logical partnership between them and Cinemex.

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Mike Spaeth
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 - posted 12-06-2017 12:55 PM      Profile for Mike Spaeth   Author's Homepage   Email Mike Spaeth   Send New Private Message       Edit/Delete Post 
They did sell their Mexican locations to Cinemex a few years back...

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Bobby Henderson
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 - posted 12-06-2017 01:04 PM      Profile for Bobby Henderson   Email Bobby Henderson   Send New Private Message       Edit/Delete Post 
quote: Louis Bornwasser
It occurs to me that the air is being let out of the tires at the exhibitor level at about the same time and rate that the studios will no longer need them or care about them. Certainly no feast in the future if sequels aren't stopped, especially animated ones.
I think the movie industry seems hell-bent on cutting its own throat. Executives aren't overtly saying, "hey let's destroy our jobs!" But all the various cash-in-quick schemes are indeed destroying the industry.

I can't help but laugh at how the movie industry is seriously marginalizing commercial movie theaters. They're so consumed with the idea of focusing everything on the home video end, thinking that's where all the money is to be made. They don't appear to realize money is drying up in the home video market yet still can be made at the commercial theater box office.

Let's take a look at the home video industry: it's in pretty sorry shape compared to its state 10 years ago.

Physical movie disc sales are way down; revenue from that category is now below revenue levels from streaming services like Netflix, Amazon, etc. Consumers are simply not buying movies on disc like they did in the past. Physical movie discs offered the best profit margins in home video sales. Subscription streaming offers far lower margins. Growth is slowing in subscriber additions to streaming services, indicating that sector is reaching its saturation point. Both Netflix and Amazon are spending billions of dollars on their own content, most of it in TV shows, but some of it in 2 hour movies. They're giving their own in-house content the highest visibility in their shitty content browsing interfaces, pushing Hollywood movies to also-ran visibility.

The movie studios have made matters worse for physical disc sales. They now commonly release the "HD Digital" download version of a movie 2-4 weeks ahead of the physical disc release. Studios don't put nearly as much effort into physical disc releases as they did 10-15 years ago. Obviously studio executives want customers to buy the plain, bare bones download version of a movie rather than a retail disc. When faced with downloading a movie consumers are often opting to go the Netflix route or with piracy sources.

Brick and mortar video rental stores are now a rare thing. Thousands of brick and mortar book, music and video stores have closed. Amazon has taken over a big chunk of the movie rental market and is trying to gobble up as much of the books and music market as it can.

I have larger concerns about brick and mortar retail in general. Commercial movie theaters have been an important anchor for many shopping centers and commercial districts in cities. It's one of the things that gives people a reason to get out of the house. If you take away those theaters it will leave behind one hell of a void. People are already staying at home in droves bad enough as it is. Restaurants are another big "out of home" activity and they've been struggling. 3rd quarter 2017 sales were the worst in 5 years. Throw in a record number of retail store closings in 2017, nearly 7000. Service sector jobs by far make up the biggest portion of America's 150 million jobs base. Most of those service sector jobs are in buildings with a physical store front. Online businesses are replacing very few of the jobs lost in brick and mortar retail.

I think it's pretty damned important for the movie studios to stop screwing over movie theaters and instead do more to keep that market segment healthy.

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Michael Riley
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I wonder if they'll keep those yokels in Knoxville here to run the domestic operations, or if they'll wipe the slate clean? When I worked for Regal, that was always the biggest impediment to success, micromanagement from a bunch of yahoos 1000 miles away that haven't actually run day to day theater operations in decades, if ever.

That has always been the biggest problem with national theater chains, movie theaters are unique in that you need to know and understand your audience with regards to policies and programming in order to make it work. What works for a theater in Knoxville may not work for a theater in New Rochelle, but they damn sure thought it did.

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David Stambaugh
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 - posted 12-06-2017 09:09 PM      Profile for David Stambaugh   Author's Homepage   Email David Stambaugh   Send New Private Message       Edit/Delete Post 
Devil’s Advocate

The local Regal seems to make an honest effort to cater to locals. At least to the extent possible when programming 15 screens.

Hey, the concessions stand offers local microbrews and wines. [Smile]

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Bobby Henderson
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quote: Michael Riley
I wonder if they'll keep those yokels in Knoxville here to run the domestic operations, or if they'll wipe the slate clean? When I worked for Regal, that was always the biggest impediment to success, micromanagement from a bunch of yahoos 1000 miles away that haven't actually run day to day theater operations in decades, if ever.
I figure chances are 50/50 Cineworld will keep the Knoxville HQ of Regal operational. Cineworld needs to have US-based offices set up somewhere. So why not keep what already exists?

However, chances are 100% a good chuck of executive and administrative staff will be cut. Investors will demand staff "efficiences" and elimination of any duplication of efforts.

Regal has been moving 400 employees into a new HQ, a renovated 178,000 square foot former medical office building. A $60 million Riverwalk at the Bridges luxury apartment complex is under construction nearby. Depending on how many of these employees are cut Cineworld might try to get out of the brand new lease and locate its American staff into smaller, cheaper digs.

Soon after Carmike was bought by AMC the Carmike HQ in Columbus, GA was closed and sold.

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Jonathan M. Crist
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quote: Michael Riley
I wonder if they'll keep those yokels in Knoxville here to run the domestic operations
In most takeover/buyouts the contract specifies that the existing management will continue to be employed at their same salaries and same positions by the takeover entity for a minimum of X years. It is part of the consideration as well as the inducement for existing management to endorse the takeover and sell their (often controlling) shares.

Keep in mind most high level management employment contracts have an acceleration clause: if the company is bought out anytime during the duration of the employment contract .... then the amount payable for the remaining balance of the employment contract is immediately due and payable from the selling entity as a lump sum (and if the contract has many years to go this can be a very large lump sum).

For management employees it is a massive win-win. And never mind that it represents a conflict of interest vis- a vis the minority shareholders when managment endorses the sale. For the management employees they collect the same money from their employment contracts twice: (i) once in a lump sum from the selling entity for the balance of their employment contracts and (ii) once again from the purchasing entity as they continue to be paid and collect. And then if the purchaser gets fed up and subsequently wants to get rid of these bozos they had to take on to get the deal done ... then the balance of the new employment contract with the purchasers also gets accelerated and paid out as lump sum.

Is this a great country or what?

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Sam Graham
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 - posted 12-10-2017 02:32 PM      Profile for Sam Graham   Author's Homepage   Email Sam Graham   Send New Private Message       Edit/Delete Post 
I would be shocked if they left Knoxville unless the plan is to have no US management, which seems absurd. It’s as cheap a place to do business as there is and they’re basically getting their new office for free.

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