AMC Could Be Getting Up To 10% On Film-Rental Fees From WarnerMedia, Says Analyst

AMC Could Be Getting Up To 10% On Film-Rental Fees From WarnerMedia, Says Analyst

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Struggling movie theatre chain AMC Entertainment Holdings Inc. (AMC) is likely getting discounts on film-rental fees from AT&T Inc.’s (T) subsidiary WarnerMedia, the Wall Street Journal reported Thursday.

What Happened: During an earnings call Wednesday, AMC Chief Executive Adam Aron said that concessions from WarnerMedia would likely show up in the fees paid by AMC to rent its movies, but did not provide further details, as per the report.

“You should probably assume that if we’re playing Warner movies, we came to an agreement with Warner that any changes in their strategy are being done in ways where AMC shareholders benefit as opposed to are being penalized,” Aron said, as quoted by WSJ.  

As per Wedbush analyst Michael Pachter, AMC could be getting as much as a 10% discount on the rental rates from WarnerMedia.

WarnerMedia’s “Godzilla Vs. Kong” is scheduled to be released in theatres, including AMC, on March 31. Films such as Walt Disney Company’s (DIS) “Black Widow”, “Top Gun: Maverick” and “F9” are also scheduled to hit the company’s screens in the coming months.

Why It Matters: AMC and other movie chains were negatively impacted by the closure of theatres amid the pandemic. The company is now pinning its hopes on the rollout of Covid-19 vaccines in the U.S. and the release of blockbuster movie titles in the coming months to boost sales this year. About 90% of the company’s U.S. theatres are now open.

As film rentals usually account for a huge share of a theatre chain’s costs, a discount on film-rental fees could boost AMC’s gross margins while it struggles with a cash crunch.

Nevertheless, AMC’s stock has been popular among retail investors and surged in January along with other heavily-shorted stocks such as GameStop Corp. (GME). The shares continue to see high retail investor interest in March, including from the Reddit community r/WallStreetBets.

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