AMC is putting an important marker down in Saudi Arabia. The world’s largest movie theater chain has been granted the first license to operate movie theaters in the Middle Eastern nation. The first of these theaters will open in Riyadh in two weeks on April 18.
Saudi Arabia’s decision to lift a 35-year ban on cinemas has inspired a land rush as theater chains jockey to be among the first to break into the market. AMC chief Adam Aron has been particularly aggressive, journeying to the country to try to win over Crown Prince Mohammed bin Salman.
“It is big news with global significance,” Aron said on a call with journalists following the announcement. He said the initial theater is in a former symphony space and predicted it will be “the prettiest movie theater in the world.”
The deal is with the Development and Investment Entertainment Company, a subsidiary of the Public Investment Fund of Saudi Arabia. AMC expects to open up to 40 cinemas in Saudi Arabia within five years and up to 100 theaters in Saudi Arabia by the year 2030. With a population of 32 million, 70% of whom are under the age of 30, and a relatively affluent citizenry, some analysts expect that Saudi Arabia could eventually produce $1 billion in revenues and be among the top 10 markets for theatrical revenues. AMC and the Development and Investment Entertainment Company said their goal is to achieve approximately a 50% market share of the Saudi Arabian movie theater industry.
“Where else are you going to find a movie market that does not exist today that could be a billion dollars three or five years from now?” Aron asked.
AMC has struggled of late. The company positioned itself to be the beneficiary of consolidation in the exhibition space, spending big to acquire Carmike and Odeon. It has also invested heavily in improvements to its facilities, outfitting numerous locations with recliner seats. But all these changes have left it with high debt leverage ratios. That balance sheet combined with a roller coaster box office year in 2017 was a drag on the stock. Shares of AMC have lost roughly half their value over the past 12 months.
AMC isn’t alone in its efforts to break into Saudi Arabia. Empire, Vue, iPic, CJ CGV, and Cinepolis are among the companies that have announced plans to have bases of operation in the country.
Saudi Arabia is a culturally conservative country — women didn’t get the right to drive cars until 2017 — but the crown prince has been leading an effort to liberalize the nation and to diversify its oil-based economy. On the conference call, Aron positioned the opening of theaters as part of that larger effort. Despite the culture, AMC does not expect the theaters to be segregated based on gender, but it may offer special showtimes for just women or men.
“Saudi society is changing,” Aron said. “I’m sure this will be a trial and error situation as the ministry takes the temperature of the populous. Currently it is our view the theaters will not be segregated.”
The AMC chief would not reveal which Hollywood films will play when theaters open in two weeks, but he predicted that a “broad array” of pictures will score releases. Ultimately, the films hitting screens could emerge from local filmmakers.
“I expect to see a Saudi film industry emerge out of this,” he said.