Specialist
Former VP at AMC Entertainment Holdings Inc
Agenda
- AMC Entertainment’s (NYSE: AMC) operating environment – summer box office traffic and near-to-mid-term attendance recovery
- Competitive dynamics, including AMC’s differentiation vs Regal (LON: CINE) and Cinemark (NYSE: CNK)
- Growth opportunities and diversifying revenue streams, assessing international investments, pricing dynamics and promotional programmes
- Studio and exhibitor relationship developments, noting potential drivers of future leverage shifts and content type release trends
- Outlook for H2 2022 and beyond, highlighting 2023-24 box office expectations, distribution strategies and likelihood of consolidation
Questions
1.
Could you share an overview of AMC Entertainment’s operating environment and 2-3 key trends or drivers impacting the business?
2.
Where do we stand in the recovery? There have been a few high-grossing films in the post-pandemic box office, looking at Top Gun, Doctor Strange and The Batman. Are these recent performances encouraging, or has the driving force been the rosy dynamics of this nice line-up coming out after a couple of delays?
3.
What mix of movies will be coming to theatres? Will it continue to trend towards huge-budget blockbusters, or is there an opportunity for a wider slate of content as we continue through the recovery?
4.
We’re obviously still quite far from the overall 2019 North American box office – it was USD 11bn that year, and in 2021 we were at USD 4.5bn, about 60% below. What do you expect for 2022? We’ve heard estimates of about USD 6bn-8bn. Is that reasonable, or are you leaning more towards the upside given recent developments?
5.
What are your thoughts on alternative uses for theatres such as concert screenings or sports streaming? Are those effective ways of offsetting revenue from a smaller market, or a less impactful option for AMC?
6.
It seems likely the US will enter a slightly more challenging macroeconomic environment. How could this impact AMC and its nascent recovery?
7.
You noted AMC may say it’s relatively recession-proof, given it has historically been able to provide escapism and draw people to watch movies. Will the continual rise of streaming in recent years change the dynamics, as people might weigh a USD 15 ticket vs a comparable price for a month’s streaming?
8.
What strategies might the studios pursue amid a macroeconomic pullback, appreciating it’s hard to predict? You mentioned some of the smaller movies going direct to streaming, for example.
9.
How does AMC differentiate in the marketplace?
10.
It seems AMC can certainly use Imax and Dolby to continue differentiating from streaming at home. You also alluded to pushing its status as the largest owner-operator of theatres in the US. Might the company consider decreasing its screen count in the face of more challenging macroeconomics, or will it continue to focus on this aspect as a point of pride?
11.
How should we quantify over-screening in the industry? Is there a certain range or percentage of screens that might be unnecessary in a pure cost-benefit analysis?
12.
How are AMC’s competitive dynamics evolving vs major players such as Regal and Cinemark?
13.
Are there major differences to note between AMC and Cinemark beyond the ticket pricing at the door and concession, perhaps around the viewer experience?
14.
How do you expect competitive dynamics to evolve? You mentioned Regal had fallen off a bit during the pandemic and Cinemark was looking the healthiest in the competitive landscape. Will the changes from the last couple of years solidify, and could market share dynamics shift even further?
15.
We’ve discussed a potential USD 8bn North American box office for 2022. Could you frame the trajectory of that figure over the near-to-mid-term? Will there be a continual sectoral decline or do you think it’ll be relatively stable?
16.
What are your thoughts on AMC’s pricing strategy?
17.
What are your thoughts on the various promotions and membership programmes, such as AMC Stubs? Are they an effective way for AMC to try and pull in larger audiences?
18.
Could you frame the economics for A-List given it seems to be, as you mentioned, a very sweet deal for AMC’s consumers? Might it make less economic sense for AMC, depending on the number of A-List members?
19.
How price-sensitive are customers in the industry broadly? Cinemark is generally a little bit cheaper, as you mentioned. To what extent is that a differentiator for most viewers?
20.
What have historically been AMC’s top 2-3 growth drivers?
21.
You referenced AMC’s international business lagging the recliner and F&B [food and beverage] investments in the US. What would it take to get those theatres on par? Is it substantial?
22.
What else should AMC be cognisant of when strategising growth?
23.
How would you grade the state of AMC’s relationships with movie studios, or between theatres and studios more generally?
24.
It certainly seemed there weren’t many levers for AMC to pull with studios in the depths of coronavirus. Do you expect the relationship to change further as the pandemic recovery continues?
25.
What would need to happen for theatres to gain leverage in their relationship with studios? Would there have to be substantial above-expectation return of box office revenues?
26.
Do you think a scenario in which blockbusters continue to dominate the box office would impact the revenue split between operators and studios?
27.
How would you characterise AMC’s primary customers and how that has evolved?
28.
Which regional markets could be opportunities for higher viewership in future for AMC?
29.
How would you characterise AMC’s approach to cost and expense management?
30.
You mentioned a couple of different ways AMC has tried to cut costs during the pandemic. Are there areas where the company has further room to improve in this regard?
31.
What do you think are AMC’s top 2-3 spending and investment priorities?
32.
How would you describe AMC’s corporate culture?
33.
To what extent do you think AMC is having challenges attracting or retaining employees?
34.
We discussed your expectations of a USD 6bn-8bn North American box office in 2022, probably close to the USD 8bn side. You also mentioned it perhaps resets at a new level in 2023. Do you a range in mind for that year?
35.
Would you expect that USD 7bn in 2023 to be relatively similar in 2024, given the trends we’ve seen?
36.
When should we expect to know the slate for 2024? Will the changing distribution strategies impact when that starts to come into focus?
37.
What is the biggest opportunity and risk for AMC?
38.
What is the likelihood of consolidation, having noted the smaller players will be first to feel any pain from box office declines? Is something bigger possible, given the right economic circumstances?
39.
What is your 1-3-year outlook for AMC?
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