Author Topic: AMC - AMC Entertainment Holdings  (Read 33809 times)

stahleyp

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Re: AMC - AMC Entertainment Holdings
« Reply #30 on: June 10, 2019, 08:11:54 AM »
According to this AMC gives $8.99 to the studios:

https://www.fool.com/investing/2018/07/10/theres-1-potential-danger-in-amcs-new-subscription.aspx

How much will AMC pay the studios?
The hangup for studios is that A-List pays studios a cut of admissions using a ticket price of $8.99. The problem? A-List members are probably going to see films in deluxe formats (since it doesn't cost extra), which carry a higher price. In fact, AMC's average ticket price was $9.32 in 2017 ($9.68 in domestic markets), with deluxe offerings in big-city markets being much higher. So studios will make less from a person seeing a film via A-List than if they'd seen it without the program.

AMC justified choosing the $8.99 by saying that is the figure used by the new monthly plan of rival Cinemark, which offers only one film per month and 20% off concessions (with unused tickets rolling over to the next month). The catch: Cinemark's average ticket price in 2017 was only $6.48 ($7.71 domestic), as it operates in smaller markets than AMC. 
Paul


txvalue

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Re: AMC - AMC Entertainment Holdings
« Reply #31 on: June 10, 2019, 08:19:01 AM »
Foreign you are correct in that basic calculation but I think there are a few notes worth adding.

- People buy food & beverage at the theater, on average $5/person. Management has said that that the average A-List sub spends less than this. We know food has 85% margins so lets call it $3/ person into AMC's pocket per A-List visit. As for Stub points if I give you a gift card for $100 of popcorn it is only costing me $15 dollars.

- Your calculation ignores take alongs, if you have A-List and a friend or family member doesn't you will get them to see the movie at an AMC rather than a Cinemark.

- The price is no longer $20 across the board, new users are often paying 21.95 or 23.95/mo.  AMC has said repeatedly that customers don't notice small price increases, for example a dollar up charge for a ticket on a weekend, or changing discount Tuesday to be slightly more expensive.


- I think that they intentionally underpriced it to get traction and prevent others from being able to match/beat the offering. Again Johnny hit on this with the winner take all dynamic. AMC has so much of the countries big cities blanketed that it doesn't make sense to get two memberships to see the same movies. It's not a situation like subscribing to Netflix and Disney+.

- The amount of A-List visits is growing, but still only around 10% of total theater attendance.

- They have said that moving forward on average an A-List sub will provide $3 Ebitda per sub per month.

- I believe that AMC is paying less to the studios for an A-List visit than they are for a "normal" visit, on average as there have been some comments that the studios are not thrilled with this. (sorry to mention this twice this I was typing my reply while Stahleyp posted).
« Last Edit: June 10, 2019, 08:28:36 AM by txvalue »

Foreign Tuffett

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Re: AMC - AMC Entertainment Holdings
« Reply #32 on: June 10, 2019, 08:48:45 AM »
Foreign you are correct in that basic calculation but I think there are a few notes worth adding.

- People buy food & beverage at the theater. On average this is over $5/person but I don't think it is split out separately for A-List, although on calls and investor events they do say that the average A-Lister spends less than this. We know food has 85% margins so lets call it $3/ person into AMC's pocket per A-List visit. As for Stub points if I give you a gift card for $100 of popcorn it is only costing me $15 dollars. $48 annually becomes less of a big deal when you look at it this way.

- Your calculation ignores take alongs, if you have A-List and a friend or family member doesn't you will get them to see the movie at an AMC rather than a Cinemark. You can see this happening as their attendance is out indexing other chains.

- The price is no longer $20 across the board, new users are often paying 21.95 or 23.95/mo.

- I think that they intentionally underpriced it to get traction and prevent others from being able to match/beat the offering. Again Johnny hit on this with the winner take all dynamic. AMC has so much of the countries big cities blanketed that it doesn't make sense to get two memberships to see the same movies. It's not a situation like subscribing to Netflix and Disney+. AMC has said repeatedly that customers don't notice small price increases, for example a dollar up charge for a ticket on a weekend, or changing discount Tuesday to be slightly more expensive.

- The amount of A-List visits is growing, but still only around 10% of total theater attendance.

- They have said that moving forward on average an A-List member will provide $3 Ebitda per sub per month.

- I believe that AMC is paying less to the studios for an A-List visit than they are for a "normal" visit, on average as there have been some comments that the studios are not thrilled with this. (sorry to mention this twice this I was typing my reply while Stahleyp posted).

1) Food and beverage gross margin % will come down as the traditional overpriced candy and popcorn mix continues to shift more towards "restaurant food" like hamburgers and chicken fingers. Take a look at iPic Entertainment for what this looks like.

There's a reason why movie theaters have, traditionally, been run the way they've been run: operate lean and cheap, make your money on overpriced concession stands that are simple enough for 16 year olds run, take small price increases every year, and let the movie slate drive attendance. I feel like AMC is trying to reinvent the wheel. 

2) I stand corrected on this point. That said, I don't think this is a situation that will last: one way or the other, Disney is going to get its 50 - 60% of the take. Now that the Fox-Disney transaction has closed, Disney has unprecedented market share.

I don't know if this has been discussed yet, but when you apply a more realistic maintenance capex estimate, alot of the pro forma FCF disappears. 
Former Teldar Paper Vice President

txvalue

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Re: AMC - AMC Entertainment Holdings
« Reply #33 on: June 12, 2019, 01:17:42 PM »
Speaking of trying to reinvent the wheel I chuckled at the iPic reference. They have 15ish theaters (vs 1000) that are trying to be odd luxury venues with extensive menus. I don't think iPic is long for this world but they are entertaining to watch. 

Margins may come down a bit on F&B but as long as the overall spend is growing I don't think that it will be a back breaker.  I don't disagree with your overall assessment of the business though, you are spot on that there is a reason the business was run this way for decades.

I think 300m-350m on CapEx/Growth is about where things could realistically end up vs what mgmt has guided depending on how aggressive the Euro circuit is revamped, but they could also save additional money by trimming the dividend. At this point I seriously doubt it is being held for the yield by most besides maybe Wanda. The yield is now 7.25%+

For as much as Aron likes to talk and promote I am puzzled as to why the company is being so silent knocking against 52 week and multi year lows.  There is room on the buyback to retire a meaningful amount of shares but the market is so focused on debt that it might not matter. With all this in view the only recent action has been to acquire another small chain a few weeks ago that needs a refurb.

Similar to a Barnes & Noble, I continue to feel that a buyer could make a killing here.  The asset is fine, but the mgmt is just struggling after flying too close to the sun. If its not an unlikely strategic like NFLX, AMZN etc. then someone could come take a big stake and buy this thing out.  Sell off the Euro assets, clean up the debt and bounce mgmt to the curb. You do that and this thing spits out cash for years to come.

given2invest

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Re: AMC - AMC Entertainment Holdings
« Reply #34 on: June 12, 2019, 02:02:50 PM »
You can be sure Wanda looked for a buyer for the whole company before they sold their partial stake at a discount...and there was none.

txvalue

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Re: AMC - AMC Entertainment Holdings
« Reply #35 on: June 25, 2019, 11:34:10 AM »
Regal is said to be releasing an unlimited subscription plan in July. It looks like it will have a small upcharge for PLF showings.  All the details don't appear to be firm quite yet, but it will be interesting to watch.  If folks think A-List is not sustainable it seems unlikely that an all you can eat plan will pencil. Interesting to see if this offering draws the heavy users to Regal.

My AMC position is now full, never thought I'd be able to buy in the 9's.

« Last Edit: June 25, 2019, 11:45:19 AM by txvalue »

given2invest

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Re: AMC - AMC Entertainment Holdings
« Reply #36 on: June 25, 2019, 11:55:20 AM »
All a Regal all you can eat sub will do is bring a price war to the industry...won't be good for all players.  Maybe you're right they will take the heaviest users but I'd guess less than 1% actually see >3 movies a week so AMC is effectively all you can eat.

I posted this on VIC...will repost here...not sure how people can own this at any price given the 2020 box office upcoming debacle.

copy/pasted below:

Is nobody long this concerned with 2020 box office?  What is happening with 2019?  This is the 3rd or 4th weekend that has disappointed.  See this article:

https://www.boxofficepro.com/weekend-estimates-toy-story-4-childs-play-anna/

Something definitely seems wrong.  But beyond that, 2020 is setting up to be a disaster.  There is no Avengers, no Star Wars, no Frozen, and Pixar is debuting two original films.  No Lion King.   And 2019 might not even be > 2018 even with all those movies.

Go look at the expectations for 2020 movies on HSX.  It's not pretty, especially 2020 Q4. 

https://www.hsx.com/security/feature.php?type=upcoming

What if the super hero movies disappoint? 

New York Times did a long piece on the future of movies and it sure doesn't read great.  I'm struck by this comment:

"I was at a bar with a friend who directs big movies, and while we were in line for the bathroom, he was saying that movie theaters were going to go away. He was like, “Kids don’t watch movies, they watch YouTube.” Which I thought was crazy. So he goes, “Watch this.” There was a girl in front of us in line, and he said, “Hey, excuse me, what’s your favorite movie?” And she said, “I don’t watch movies.” Just randomly, he picked someone — and she was like 25, she wasn’t a child or anything. We were like, “Well, do any of your friends watch movies?” And she said, “Not really.”

https://www.nytimes.com/interactive/2019/06/20/movies/movie-industry-future.html

There is so much operating leverage in this business.  It just seems like the stock can't be owned at any price with the risk of a double digit decline in the box office in 2020. 

txvalue

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Re: AMC - AMC Entertainment Holdings
« Reply #37 on: June 25, 2019, 01:04:21 PM »
Spring 2019 was up over 10% vs 2018 and the "disappointment" over the summer slate is way overblown IMO. Toy Story 4 had the best opening weekend in the franchise and as a family film it will perform well this summer just like Aladdin is doing.  No one expected MIB, Dark Phoenix, Godzilla etc. to do well.

The best part is that summer year to date is only down 2.3% vs 2018 and CNN, CNBC and the NYT are all writing as if its the end of the world. Once Spiderman and the Lion King come out over the next few weeks I fully expect Summer 2019 to be outpacing 2018. I guess "YouTube" must not work in summer : )

In 2015 the top 4 movies outgrossed 2016's top 4 by 600 million dollars.  2016 still managed to beat 2015 when the dust settled. The top end of the slate matters but mid range movies can make still make up ground.

2020's slate is not top heavy, but it likely would have kept pace with 2019 had Avatar not been pushed back into 2021.  That being said films are still getting placed on the schedule so its early and a stock should be valued off the future not one year. There are now Avatar and Star Wars films coming out in each of the next 7 years beginning in 2021.

A wildcard is that AMC has opened up negotiations with NFLX again Re: playing their content.
« Last Edit: June 25, 2019, 01:09:30 PM by txvalue »

given2invest

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Re: AMC - AMC Entertainment Holdings
« Reply #38 on: June 25, 2019, 01:11:47 PM »
Netflix original content is awful and nobody is paying to see their movies in the theater with a 30 day window let alone a 90 day one. 

The articles I linked, both on the recent disappointment and long term worries, go much deeper than "one bad weekend". 

2020 could very well be -10% or worse.  Not sure how you think the stock would look past that given the leverage.

txvalue

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Re: AMC - AMC Entertainment Holdings
« Reply #39 on: June 26, 2019, 08:03:28 AM »
There was an analyst note this week acknowledging that the recent film underperformance has pressured shares and that the balance sheet presentation due to ASC 842 is potentially preventing buyers from stepping up to offset the decline.  Multiple people have been given this same info from AMC IR who has said they are still working with Capital IQ and Bloomberg etc. to present the data in another way to make things clear. PT is $20.