It looks like Amazon may be gearing up to make more moves in the brick-and-mortar world. Bloomberg reports that the e-commerce behemoth is putting itself in the running to acquire Landmark Theatres, which claims to be the United States’ largest chain of movie theaters focused on art house (indie and foreign) movies, with a network of 56 cinemas, covering 268 screens in 27 markets.
Bloomberg’s sources say that Amazon is going up against other potential acquirers in purchasing the business from Wagner/Cuban Cos., but that no final decisions have been made.
The companies aren’t publicly commenting on the reports, but it’s an interesting scenario to consider because of all the ways that it seems to fit into Amazon’s wider strategy.
The company has done an incredible job of making it easy (and cheap) to buy virtually anything you want from it in the digital world, whether it’s necessities like toiletries, books, groceries, clothes and electronics, or digital products like movies, music and cloud storage space for your app or game, in as little as one click. Through its marketplace model — where it is both a middleman between consumers and sellers, and the seller itself of different goods and services — Amazon wants to be wherever people want to spend money.
But there are certain forms of retail that may never translate to the online world. Experiential retail — dining out at restaurants, going to a bar or event, picking a melon that you can smell before you pay for it and, of course, going to the movies — requires that you get up and go somewhere to do it.
Amazon knows this, and so it’s slowly, quietly amassing selective assets that will let people engage in the more physical side of commerce. These have included book stores, and its own futuristic, checkout-free food shops. And of course it spent $13.7 billion to gobble up the natural food leviathan Whole Foods.
The latter of these is very instructive when you consider how a movie theater chain might fit into the Amazon pantheon. Amazon’s Prime Fresh grocery delivery service gives busy users the convenience of skipping the grocery store, but Whole Foods also gives Amazon a way of capturing buyers who might prefer to make trips to a grocery store.
But that’s not all it does. It’s added Whole Foods discounts as yet another sweetener for Prime subscribers; it’s extending its formidable logistics muscle to Whole Foods ordering and delivery (first for Prime subscribers, naturally); and of course it has put in pop-up shops selling its other products, like the Kindle and the Echo, in prime spots when you enter a store.
Amazon owning a chain of theaters spells out a lot of opportunities for it in terms of expanding its interests in film; in experiential, physical commerce; and in leveraging the rest of the pieces in its commercial empire.
The world of movie theaters has been hobbling for years, with droves of consumers these days foregoing increasingly expensive tickets and snacks and opting to watch a slightly smaller screen in the comfort of their own home. But to the disruptive eye, that ageing business model is catnip, and so unsurprisingly, MoviePass has come along, seeing that there was an opportunity to try to revive the cinema experience by offering subscriptions for a flat rate to get more bums on those seats.
Yes, MoviePass is bleeding money, and it looks like a mess for many other reasons, but it’s had an impact, so much so that AMC has taken notice and launched its own competitor.
The world’s largest theater chain almost certainly won’t experience the same sort of pains that MoviePass has, because it both controls the means of distribution and has a sizeable support infrastructure, and of course owns the cinemas.
But if AMC has a safety net, then Amazon — one of the world’s most valuable companies — has airbags, collision sensors, seatbelts, automatic braking and maybe even an Alexa-powered predictive voice to tell you what to do next. If Amazon ran a loss-making chain of cinemas, it would be but a little drop in the bucket for it.
Amazon already has one of the biggest digital subscription businesses in the world, with more than 100 million Prime members, as of April 2018. Tacking a subscription to cinemas on to that, which either made going free or discounted, is a no-brainer.
But wait! You get more for the price of the Landmark Theatres! Amazon, as we know, also has a budding media business, offering movies, TV and music to Prime users. Included in that is its own original content machine, Amazon Studios, responsible for shows like Transparent and movies like Manchester by the Sea.
A theater chain acquisition would further open the distribution channels for Amazon’s own films, and give Amazon a much tighter grip on the costs for that distribution. And with a position covering theatrical, DVD and digital distribution windows, you can bet that will give Amazon more leverage when negotiating screen rights to films that it hasn’t produced itself.
Controlling distribution could also prove useful during awards season — the timing of a film’s release goes a long ways toward determining nominees. (And yes, those screens also become one more place where Amazon can run ads, too, in its budding advertising empire.)
And don’t forget the fact that theaters are, at the end of the day, also retail real estate.
It’s a long-known fact that cinemas make most of their money on concessions, and they have accordingly built out large lobby areas where people can mill about and spend money before and after sitting down in the darkened screening rooms. In addition to selling all the usual concessions (both made by Amazon and its marketplace partners), Amazon could use those spaces as they have with Whole Foods, creating retail experiences for products that might have nothing at all to do with what you came to the cinema for in the first place, but then suddenly seem like interesting places to try out something new.
Is it any wonder that even without Amazon or Landmark responding to Bloomberg’s report, theatre chain stocks dropped on word of the news?
Source: TechCrunch
