LAS VEGAS — Mergers and acquisitions among theater chains are likely to continue to the point where as few as four to five circuits could control 80% of the nation’s screens.
That was the contention of several members of a ShoWest panel focusing on the hot-button issue of consolidation in the exhibition industry.
The well-attended Wednesday morning seminar, titled “Restructuring of American Exhibition: Financial and Strategic Perspectives,” was moderated by Landmark Theatres co-founder Steve Gilula.
Current low interest rates are one reason for the recent wave of mergers and acquisitions, said Jeff Lewine, who late last year led a leveraged buyout of the Mann/Cinamerica chain. But Lewine cautioned that the rate of building also made it difficult to maintain dominance in any given market.
Members of the group also agreed that while cinema-building was going at break-neck speeds, in many cases the new state-of-the-art theaters are actually making existing theaters obsolete, tempering the net gain in screens. Also, because almost all of the new theaters are large multiplexes or megaplexes, the number of actual complexes is likely to decrease.
The newer theaters also tend to have several small auditoriums and more space between rows, bringing the average number of seats per screen down. The net result could be that within the next five years there might be 40,000 screens in the U.S. — as opposed to the current 31,000 — but the same number — or even fewer — seats, according to AMC president Phil Singleton.
Asked about the high prices Wall Street firms have recently paid for certain chains, despite their need for modernization, the panel agreed the industry newcomers needed a platform from which to expand. “People have tried building a chain from scratch. It’s very hard.”
Gilula reminded the group that a similar trend towards consolidation failed a decade ago. In light of that, he asked why they believed the current round would succeed.
“The people are better,” offered outspoken Cinemark CEO Lee Roy Mitchell. “Look at Garth Drabinsky’s takeover of Cineplex. It’s hard to fathom how they could take that much money and power and fail. But they did it.”