Why are tech companies investing in cinemas?

Key receivers

  • Amazon and Apple are said to be expanding into the movie theater space by either financing theatrical releases of movies or buying movie theater chains.
  • Tech companies’ interest in movie theater chains may be a bid to promote their own content, encourage membership growth on their streaming platforms, or sell other services and products.
  • The movie theater industry continues to struggle since the early stages of the pandemic, with attendance levels remaining well below pre-Covid levels.

Amazon.com Inc. ( AMZN ) is reportedly in talks to buy ailing movie theater chain AMC Entertainment Holdings ( AMC ).

AMC shares rose 21 percent on news of a possible Amazon acquisition in late March. Amazon’s interest in AMC is the latest in a series of moves among the tech giants into the movie space.

In the year By November 2022, Amazon said it would spend $1 billion a year to produce up to 15 movies for theatrical release. Earlier that year, he completed the $8.5-billion purchase of MGM Studios. Meanwhile, Apple Inc. ( AAPL ) said this month it will increase spending on movies for theatrical release.

Amazon founder Jeff Bezos is weighing the purchase of more than 600 movie theaters in order to promote Amazon Prime movies and provide cross-selling services, including merchandising, according to a report by The Intersect.

Buying movie theaters and financing theatrical releases could boost demand for streaming subscription services like Amazon’s Prime Video and Apple TV+. Both companies spend billions a year producing content for these platforms.

Some analysts are skeptical about the value of big tech companies buying movie theater chains.

“Amazon has no interest in the theatrical exhibition space to make money. Strategically, they may want a place to show their own movies,” Wedbush analysts Alicia Reese and Michael Pachter wrote in their report.

Tech giant British movie theater chain Cineworld Group Pvt. They said it would be better if he bought it. Cineworld filed for bankruptcy last September, allowing Amazon to “cherry-pick screens” for much less.

“So Bezos’ investment advisers couldn’t say, ‘Buy AMC for $8 billion,’ when they could buy the selected screens for $200 million or less. That’s a low-risk strategy and will get them the same thing,” Wedbush analysts wrote.

AMC, one of Reddit’s most famous “meme stocks” in recent years, has $4.6 billion in debt. Along with other movie theater chains, it has yet to return to its pre-pandemic levels amid high inflation and a weak economy.

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