Looks like Amazon is about to stretch their physical footprint even further through buying AMC Theatres. What could be behind such an acquisition, apart from simply not missing out on an opportunity to gobble up a legendary company falling off the cliff?
Thrusting Competitors Out and Squeezing onto the Red Carpet
Could be that Amazon’s intention is to swallow competitors for its streaming service and hit other movie theaters by undercutting ticket prices. That might have been a reasonable assumption three months ago, but today looks outdated for an obvious reason – the cinema industry happened to be among the most susceptible to the pandemic and does not need any help going underwater. It is very unlikely that AMC would resume operations and they have no other choice than starting a bankruptcy event or putting themselves up for sale.
Another assumption could be that Amazon is setting up a way for movies of its own production to compete at top movie awards, as big screen release was a requirement for festival-grade movies. This was widely cited as the reason why Netflix acquired lease of Paris Theater in New York and was in negotiation to buy the iconic Egyptian Theater in Hollywood, but faced some backlash and eventually the later deal did not go through. This might be only a secondary reason for Amazon, as running a festival nominee on just one screen in New York and Los Angeles would be enough, there is no need whatsoever to buy 11,000 screens across a few countries.
Omnichannel Strategists Put an Eye on Cinema
The Amazon and AMC case … gives us more evidence of the paramount role of physical space for businesses of digital origin.
By now, the retail industry has delivered quite a number of business cases to draw lessons from. A few years after a massive shift into e-commerce, the industry discovered the new virtue of brick and mortar stores. Previously, physical shops functioned as sales channels, but today they’ve lost it for good. Instead, shops and malls are getting new lives as experiential spaces designed to bring back the pleasure of physical shopping to customers, revitalize direct engagement, reinforce brand loyalty and get to know a customer better. A well-executed omnichannel strategy has proven to be a new major driver of success for contemporary retail. And it looks like retail’s playbook is getting borrowed by many consumer oriented industries, shaken up by Corona.
A cinema theater is one of the most experiential types of spaces you could think of, much more so than a mall or a boutique store. Its immersive nature starts playing out from the moment a customer enters the theater’s front door, and a pleasurable 3 hour journey starts.
Big-Screen Movies and Laptop-Screen Content Need Different Living Spaces
Big screen movies have radically different aesthetics, technical parameters, and production models from telemovies or, more commonly, “on-demand content”. It is hard to think of movies such as “Star Wars” or “Lord of the Rings” or “Avatar” being ever produced for a laptop screen. If home consumtion of content is poised to kill cinema theatres, it will also destroy the medium of movies as such. It is doubtful that even the horror of Corona would make cinemas a thing of the past. However, the way movie theatres are operated will certainly be different, and the number of screens may have to decrease.
Buying one of the biggest movie theatres chain would allow Amazon to tap into industry’s both revenue stream models.
If big screen movies continue their glorious life, they happen to be out of reach of streaming services. Unless streamers find a financially viable way of allowing high-profile movies to run on the wide screen ahead of on-demand availability.
Streamers’ ability to finance movie production gives them huge bargaining power over movie directors, which, in turn, resulted their attempts to squeeze exhibitors out of the value chain. Box office revenues at pre-COVID times have really made movie’s financial outcome, much more so than later small-screen sales. A standard theatrical run is somewhere between 70 and 90 days, but this window has been challenged more than once over past two years by Netflix. The most prominent case is “The Irishman” by Martin Scorsese, which virtually bypassed the big screen.
Straight-to-streaming model not only undermines future existence of box-office revenue model, but also puts off the most recognized directors, who lose the ability to shoot high-profile movies eligible for awards.
AMC prime locations can become venues for VIP events, special releases, promotion of anything on Earth that Amazon is going to dip its fingers into.
For such a well-cashed company as Amazon trying to get its foot in entertainment industry, there is no better time for taking action than now. Buying one of the biggest movie theatres chain would allow Amazon to tap into industry’s both revenue stream models. Not only that. If things really shift this way, it would change the whole nature of the movie production business. Amazon and other streaming services would be willing to strike a deal with most prominent directors, finance their movie production and then exclusively run the movie in their own cinema theaters. A tremendous value could be extracted from such exclusive deals for Amazon brand. Owning AMC would be a deal breaker in competing with other streaming companies for the opportunity to attract big names among directors and actors.
Looking further ahead, the consumer brand promotion strategy of hiring a movie star for commercials could get disrupted as well. Amazon would not even have to hire those stars, as they’d be virtually full-time Amazon employees already.
The Virtue of Space
Apart from using Amazon own screens as a showcase for their high budget releases, the most prime locations can become venues for VIP events, special releases, promotion of anything on Earth that Amazon is going to dip its fingers into.
Cinema theaters could become not only a movie distribution channel, but an extremely powerful promotion channel
Speaking in marketing language, a cinema theater could become not only a movie distribution channel, but an extremely powerful promotion channel, unique in its ability to trigger all consumer’s senses at once.
The Amazon and AMC case (even though it’s only rumor and is likely to meet legal scrutiny) gives us more evidence of the paramount role of physical space for businesses of digital origin. In case the deal goes through, Amazon will be reaping tremendous benefits of AMC’s recently upgraded theaters at iconic locations across the country.
Post Scriptum
Two short videos on the topic worth watching:
#1. Can you believe how mind blowing the hundred year history of AMC is?! It is a blockbuster by itself, which starts with self-made entrepreneurs following the American dream, rolling out into a thriller with a murder, sex for money, a war of amusement parks, and Chinese soft power spread into the West… And pay attention to the design and exteriors of the theatres – what a powerful physical footprint could Amazon get with it!
#2. Guys are discussing among other things – what could AMC stand for if acquired by Amazon: Amazon Movie Cinemas? Amazon Master Cinema?
How is the public going to take the retail giant’s audacity to flip “American” for “Amazon” in the abbreviation? Wouldn’t it be an indication of a fundamental societal shift? Remains to be seen…