AMC Entertainment and Loews Cineplex, two of the largest movie theater chains, announced a merger deal yesterday. This deal has strong
implications for the online movie ticket market, potentially nixing Fandango's IPO, strengthening Hollywood Media (ticker: HOLL), and also impacting Google, Time Warner, Microsoft and Yahoo. Details and analyis:
AMC Entertainment and its holding company will merge with Loews Cineplex and its holding company. This is effectively an acquisition: AMC will own 60% of the combined company, and its president and CEO Peter Brown will run the combined entity. It will own 450 theaters with 5,900 screens, but will still remain the No. 2 player behind Philip Anschutz's Regal Entertainment Group.
This deal could potentially shift the balance of power in the online movie ticket market. Currently, the market is split between Fandango and MovieTickets.com, both of which have exclusive online ticketing agreements with US theater chains.
Both companies claim the leadership position. Fandango has claimed that it provides tickets for 1,100 theaters and 12,500 screens ("nearly 70 percent of theaters in the U.S. enabled for remote ticketing"), and to "four out of the five largest U.S. theater chains". That includes Loews. Travis Reid, President and CEO of Regal Cinemas, the largest theater chain, is a director of Fandango.
MovieTickets.com's largest parter is AMC Entertainment (a founder of MovieTickets.com); by partnering with smaller chains, it recently announced that its partner screen count had reached 10,000. Some industry sources I spoke with claim that MovieTickets.com has partnered with higher grossing theaters and that the two companies' competive position is mis-represented by partner theaters and screen counts. I have not corroborated that; but simple math suggests that if Fandango tickets for 12,500 screens and MovieTickets.com for 10,000, then Fandango's claim that it tickets for "70% of the US theaters enabled for remote ticketing" must imply that it is partnered with lower-screen count theaters.
MovieTickets.com, however, has recently pulled ahead of Fandango in its affilliate and distribution partnerships. Fandango provides online ticket purchase for Yahoo and Amazon's IMDB.com. MovieTickets.com provides online ticket purchase for Time Warner's AOL (including MovieFone.com), Microsoft (including Microsoft's Media Player), and most recently Google Movies. Google's selection of MovieTickets.com as a partner may suggest that Fandango does nothave superior inventory to MovieTickets.com, since Google is primarily focused on the customer experience.
Fandango and MovieTickets.com could be strongly impacted by AMC's purchase of Loews. AMC may be inclined to transfer Loews' movie theaters from Fandango to MovieTickets.com because AMC is a founding shareholder in MovieTickets.com and AMC CEO Peter Brown is Co-Chairman and Co-CEO of MovieTickets.com.
AMC and Loews both own high-grossing movie theaters in urban areas, in contrast to Regal which has lower-value theaters and a weaker position in prime urban areas. Industry sources I spoke with assert (again, unsubstantiated) that if AMC transfers the Loews movie theaters from Fandango to MovieTickets.com, then MovieTickets.com will provide ticketing for about 70% of the top-grossing US movie theaters. Fandango would then lack partners in key high-population markets.
That would have profound ramifications for the two online movie ticket companies and their distribution partners. Fandango, with lower ticketing inventory, would become a less viable partner for Yahoo Movies, and its IPO plans would be at risk. Fandango may then consider a merger with MovieTickets.com on less than equal terms. A merger of the two companies would improve the customer experience (there is no single web site where you can currently buy movie tickets for any US theater) and create a more profitable combined company.
Hollywood Media (ticker: HOLL), which owns about 26% of MovieTickets.com, would be the key publicly-traded beneficiary of such an outcome.
However, it's unclear whether AMC will be able to transfer Loews' theaters from Fandango to MovieTickets.com. Loews and Fandango renewed their partnership agreement on April 13th 2005 for six years to 2011. Fandango would not comment on whether the partnership agreement contains a change-of-ownership clause that could allow AMC to terminate early.
In response to questions about Loews' partership agreement with (and equity stake in) Fandango, a Fandango spokesperson emailed The Internet
Stock Blog the following statement:
“Nothing changes for us. Fandango has an exclusive six-year contract with Loews (through 2011) and Loews has a sizable equity stake in our company.
“We continue to sell tickets to nearly 70% of the nation’s theaters enabled for remote ticketing and to four out of the five largest U.S.
theater chains. The latest available screen count on the NATO (National Association of Theatre Owners) Web site reveals that Fandango continues to be the market leader.
