AMC Entertainment has won approval from U.S. Department of Justice to buy Carmike Cinemas for $1.2B, and will become the biggest U.S. theater chain.

For the uninitiated, “Cinemark” and “Carmike (Now acquired by AMC) “ are the two theater chains which payout more percentage to distributors compared to other two primary chains “Regal” and “AMC”. For this reason, many south Indian movie distributors in USA prefer releasing in Cinemark and Carmike chains primarily and do limited release in Regal , AMC.

How will this impact Telugu film market in USA?

Disclaimer : Some of the calculations below to calculate share are simplified as they depend on myriad variables. 

[pullquote position=”right”] Getting prints on time is going to be paramount as AMC is pretty stringent — Sanjay, Cinegalaxy [/pullquote] Status Quo:  If a movie collects $200k from AMC chain, payout to the distributor is only $100K, whereas Carmike pays out $140k to the distributor. Thus the distributors and in turn exhibitors would be getting a lesser share from AMC, all other things being equal.

Given the role “payout percentage” plays, to estimate the impact of AMC-Carmike merger , we need to dig into how much percentage Carmike collects typically for a Telugu movie.

For Bahubali , the ticket sales from Carmike chain is 24.4% of its total USA gross
For Nannaku Prematho, 18% of the ticket sales is from Carmike
For Janatha Garage, 18% of the ticket sales is from Carmike

[pullquote position=”left”] Distributors have to adjust purchase price to the new reality — Srini, Bluesky Cinemas  [/pullquote] If we apply the new AMC percentages, Baahubali, Nannaku Prematho , Janatha Garage movies’ distributor share would go down by 2.24 crores , 49 lakhs , 33 lakhs ( between 5 – 8%)

As established above, leaving alone exceptional hits such as Bahubail, big hits like Nannaku Prematho, Janatha Garage distributor shares are going down only by 33 to 50 lakhs. Thus , the distributors would get 5-8% less share from the overall pie. In other words, even if we apply AMC payout to Carmike as well, for super hits in 2016, there is going to be around 5%-8% difference in share. Finding few alternate theaters to Carmike would resolve the issue. Most distributors we talked to concede there is going to be some impact, but not as significant that would change the dynamics of the market. Distributors talk about the fact that AMC pays good percentage from second week unlike Carmike.

Bottom line:

• Days of 100+ theater release ( premiere) for a mid/ small size are over

• In pure economic sense, distributors should offer 10% lower price to producers. But movie industry never works as per text book economics. So we are not surprised if there is not much change in the price that is offered to producers.

• Overseas telugu movies might go back to pre 2006 days and screen as much as possible in local theaters. There are local theaters already in all the major centers — Chicago, New Jersey, Atlanta, Bay Area etc.  Some distributors we have talked to are even contemplating discrete pricing strategy — $18 ticket in local theater and $25 in AMC.

What is the distributor community saying? 

Telugu360 reached out to all the major distributors in US. Each of them had a very interesting and different perspective  to offer.

Sanjay from Cinegalaxy, who distributed superhits such as Nannaku Prematho, Kabali, 24 etc. 

“There will be an impact in terms of theatrical share as Carmike used to pay upto 75% of net gross based on the gross revenue in their chain. Till today, less number of runs are given to AMC due to low payout share and restrictions towards premieres for south Indian films as the content is delivered in the last minute.

With this merger, there will be an impact to the distributors who closed movies for higher prices based on previous share revenue calculations but going forward the whole process can be streamlined like Bollywood. We might see more number of runs around 300 to 400 on average and distribution rights will be dealt based on the new scale “

Srini from BlueSky cinemas, a major player in overseas market and distributor of Bahubali I 

“It’s going to have impact on South Indian movies. It doesn’t make any difference to Bollywood movies as they already used to get this 40 to 50% payments from AMC and Regal.

Current AMC percentages we will get max. 50% share based on gross. Four A…Aa movie we got 50% from AMC. For least (overall less than 50k from all AMCs) then we get 35%. But difference from Carmike and AMC is that AMC will pay the same % for entire run where as Carmike pays 60 to 65% first week then from 2nd week on wards pays only 50%.”

Overall, Yes, it will have some impact on South Indian movies. Distributors buying next movies need to consider this and go for their bets on upcoming purchases.”

Ram Muthu of ATMUS entertainments, who distributed a number of Telugu and Tamil superhits thinks that big movies to be released in 2017 are going to be impacted.

“For a small grossing movie (gross below 100k), the impact wont be much. People just take a couple of screens from Carmike and share is also low when grosses are low. For medium grossing (100 – 500K) also, the impact would be 5% or lower on overall net as Carmike paid 50-55% on full shows and 42.5% on limited schedule and now AMC would pay 40% or less. For a big (500k – $1M) or very big($1M+) movie, the impact will be high. Carmike paid 65% on full schedule for these films. Exceptions like Bahubali got up to 82.5% (Clarification –> As per Bluesky, they got 75% for one center in Atlanta. Average for remaining locations is 65%) !! In case of AMC it will be mostly 40% and even Bahubali can get max 50%. It will make a net impact of at least 15 – 25% to the distributor/exhibitor on these movies.

So major impact will be in Telugu movies as we rarely get Tamil movies grossing above 500k! The immediate impact will be on Sankranti releases which distributors already paid a high amount. The biggest impact will be in Bahubali 2. For future sales, the distributors will start realizing and offer lower prices to producers. I don’t think increasing ticket prices will help as it will create negative impact on people coming to theaters. Prices are already much higher for Telugu films compared to other language films.

Another issue could be the ‘record number of screens’ release – Carmike used to allow limited shows with no VPF on many of their theaters. AMC may not allow that and it is not worth paying VPF and screening at those theaters. So number of screens the movie is releasing would go down because of this.“