AMC pullout signals Spanish exhib woes

Co. owns four megaplexes in the country

MADRID — AMC Entertainment looks set to join Warner Bros. and Viacom in bidding adios to Spanish exhibition.

Viacom sold its European theaters, including Spanish circuit Cinesa-UCI, to U.K. private equity company Terra Firma in 2004. Last May, Terra Firma bought WB’s 33% stake in Warner Lusomundo Sogecable Cines de Espana.

The question now for fellow exhibs is not if but when AMC will abandon Spain. AMC owns four megaplexes, repping 86 screens, in the country. Their sale will raise few eyebrows, as AMC is controlled by JPMorgan, which as a private equity company is in the business of buying and stripping properties.

The divestment also underscores the decline of Spanish exhibition.

Although Spanish B.O. has slumped 16% from 146.8 million admissions in 2001 to an estimated 123.7 million in 2005, screen count ramped up 17% from 3,700 in 2001 to 4,326 this December thanks to a property boom.

Spain’s sprawling new suburbs need shopping malls. The centers need cinemas to drive foot traffic, even if theaters prove loss leaders for mall constructors. So annual admissions per cinema screen have fallen 21% since 2001, squeezing margins.

One tell-tale sign of overscreening is isolated price-cutting. In Malaga this summer, Andalusian circuit Cinesur opened a 21-plex down the road from Yelmo Cineplex’s 20-screener and instituted a four-week E1 ($1.20) Monday. In the Canary Island village of Telde, a cinema run by distributor-exhibitor Melo charges E3 a ticket.

“Three euros was the average 1995 ticket price. You’re paying the same for ‘King Kong’ as ‘Forrest Gump’ or ‘Braveheart.’ The threat is we’ll go the way of Germany, where nobody makes money,” says Yelmo Cineplex development director Pablo Nogueroles.

Other foreign companies’ enthusiasm for Spain appears to have waned. UGC has sold off a Seville project. Kinepolis’ last project, a Granada 15-plex, opened in June 2004. South Africa’s Ster Century pulled out of Spain in 2003. The last Yank loop still standing in Spain is Yelmo Cineplex, teaming Loews Cineplex and local exhib Yelmo. Loews and AMC are merging.

It would be logical for Yelmo to buy AMC’s screens. But private equity firms may be ready to offer more money. And Loews itself has a private equity owner. If the price were right, Loews may be tempted to leave Spain, completing the U.S. pullout.

With so much private equity coin seemingly available and Spanish exhibition distressed, the only certainty is uncertainty.

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