Saudi Cinema Renaissance Put on Hold After Khashoggi's Death

(Bloomberg) -- Just six months ago, Saudi Arabia looked like the New World to Hollywood. Industry advisers and dealmakers crowded a Beverly Hills, California, hotel to rub shoulders with a visiting delegation from the kingdom, which was ending a 35-year ban on movie theaters.

But the murder of writer Jamal Khashoggi in Saudi Arabia’s consulate in Istanbul has put those plans in doubt. Vue, one of the world’s largest cinema chains, has put on hold plans to open as many as 30 locations, Chief Executive Officer Tim Richards told the Guardian newspaper Monday. He also won’t attend the economic forum dubbed “Davos in the Desert.”

Theater operators were one group that was going to benefit quickly from the Saudi Crown Prince Mohammed bin Salman’s liberalization plans. On April 18, the first commercial theater in Riyadh opened after a three-decade ban.

AMC Entertainment Holdings Inc., the first to win a cinema license in the country, outlined plans to open 100 theaters in partnership with the country’s Public Investment Fund by 2030. At stake is $1 billion in revenue, by the Leawood, Kansas-based operator’s own estimates. The company didn’t respond to requests for comment.

Imax Corp., the operator of large-format screens, declined to comment. The company announced plans in May to expand there in a deal with Dubai-based Vox Cinemas. CEO Rich Gelfond said in July he looked forward to more growth in the region.

Since the exhibitors were just getting started there, their risks are small, according to Michael Pachter, analyst at Wedbush Securities.

“AMC has one theater there and if they proceed with new builds, it will be after sanctions/resolution of this issue,” said Pachter, who expects even a temporary closing of the market to have no impact on the stocks. He recommends both AMC and Imax shares.

“Saudi gross domestic product is one third of Italian GDP,” he said, “so AMC has a better opportunity in Italy.”

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