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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 not have 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.

Source: AMC-Loews merger could shake up online movie ticketers Fandango and MovieTickets.com (HOLL, GOOG, MSFT, TWX, YHOO)