Amazon Leads Stampede of Smaller-Budget Studios at Theater Show

(Bloomberg) -- The movie business may be struggling, but the number of people looking to make money from it seems as big as ever.

Producers and cinema operators are flocking to Las Vegas this week for the annual film industry conclave known as CinemaCon. The official convention of the National Association of Theatre Owners will host a record 11 studio presentations -- including ones from newer filmmakers like Amazon.com Inc. and STX Entertainment -- to a new high of more than 3,700 registrants.

With domestic attendance falling to a 25-year low last year, the movie business is being forced to change. Walt Disney Co. has led the box office in recent years by focusing on big-budget action films, counting on a handful of superhero dramas and serial tales to drive the business. Newer players are willing to gamble on stories with more modest budgets.

Theater owners need both.

“The commitment that the studios have made to film production for the next five years is unprecedented,” said Tim Richards, founder and chief executive officer of cinema operator Vue International. “And what is really exciting is that we have new market entrants like Amazon.”

In years past, the biggest topic at CinemaCon might have been flavored popcorn, 3-D screens or the studios’ push to release new movies for home viewing sooner -- at the expense of multiplex owners.

This year, the industry is gathering against the backdrop of deals and disruption. Disney is buying much of 21st Century Fox Inc. for $52.4 billion. AT&T Inc. is trying to digest Time Warner Inc., parent of Warner Bros. And an upstart marketing company called MoviePass is offering consumers unlimited admissions for as little as $6.95 a month.

Pairing Up

Exhibitors have also been consolidating. In February, London-based Cineworld Group Plc completed its takeover of Regal Entertainment Group, one of the largest U.S. chains. Vue’s CEO Richards expects the next few years to be prosperous and wants to be a buyer.

“We absolutely had a hard look at what options were available in terms of a public listing or sale and we decided not to pursue that for the time being,” he said.

North American box-office sales this year will be probably be roughly flat at $11.2 billion, according to Leo Kulp, analyst at RBC Capital Markets. The summer movie season, a big part of the annual take, opens next weekend with “Avengers: Infinity War,” the latest superhero film from Disney’s Marvel division. It’s expected to debut with domestic weekend sales of $238 million, according to Barton Crockett, an analyst at B. Riley FBR Inc.

Waiting for Rebound

“We’ve had a less positive view on this year’s box office,” Kulp said in an interview. Tracking data for big summer releases, including Disney’s “Solo: A Star Wars Story” and Universal Pictures’ “Jurassic World: Fallen Kingdom,” are running lower than he expected.

“The expectation for the third quarter was that it would bounce back against last year, but there is not a lot there,” Kulp said. “The fourth quarter looks challenging too.”

While cinemas owners basked in the breakout of Marvel’s “Black Panther” earlier this year, the industry is still confronting slack domestic attendance. Higher ticket prices have had to do much of the lifting to maintain revenue.

Then there’s MoviePass, the controversial startup that lets customers watch films every day in theaters for a set monthly rate. The money-losing business is attending CinemaCon in hopes of gaining more industry support.

Seeking Dialogue

“We are really looking forward to the opportunity to create a more open dialogue with the film community -- exhibitors, studios and distributors -- about how to implement a subscription model that benefits the entire ecosystem,” CEO Mitch Lowe said in an email. “It takes time for an industry to adopt and embrace change, but we all share the common goal of driving more people into the theater.”

Film distributors like Amazon Studios and Universal’s Focus Features, meanwhile, will be making the case that mid-budget movies provide more bang for the buck.

Focus Features’ presentation will include “BlackkKlansman,” about an African-American cop infiltrating the KKK, and the biopic “Mary Queen of Scots,” which stars Saoirse Ronan. STX will show highlights from its slate, including “Adrift” and “Mile 22.”

“It’s essentially a recognition that more than just big-budget blockbusters have the ability to drive box office sales in a meaningful way,” said Shawn Robbins, an analyst at Box Office Pro.

Saudi Arabia’s foray into entertainment also is bringing some optimism to the show, underscoring that international markets are still growing. Industry representatives from the country will attend a presentation on the opening of the region. “Black Panther” was released in the kingdom this month, marking the first commercial cinema screening in the country in more than 35 years.

It’s a big deal for companies like Richards’s Vue, which is planning to build 30 theaters in Saudi Arabia.

“I’ve never seen an opportunity quite like this,” Richards said. “This is a completely clean slate, which makes it very very exciting.”

To contact the reporter on this story: Anousha Sakoui in Los Angeles at asakoui@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum

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