AMC Endorsed the Paramount-WB Merger, But Indies Still Need Convincing

In 2019 after Disney closed its acquisition of 20th Century Fox, independent movie theater owners found themselves caught off guard when classic movies they had been accustomed to playing were suddenly unavailable to them. Titles like “Home Alone,” “Alien,” “Fight Club,” and more Fox films became locked in the fabled “Disney Vault,” only licensed to dedicated repertory cinemas, and sometimes not even to them. These movies that filled in the gaps among first-run new releases and provided indie exhibitors with small, but needed revenue had dried up.

The fear among smaller theater owners now is that history will repeat itself.

America’s three largest theater chains, AMC, Regal, and Cinemark, have all come out in strong support of the merger between Paramount and Warner Bros. Discovery. They want to see a steady stream of movies available to them, they want a guarantee those movies will play exclusively in theaters for at least 45 days, and Paramount CEO David Ellison has been willing to put his promises to them in writing. And they also don’t want to see a prolonged legal battle interrupting any of the gains the box office has made.

Their collective endorsement put Cinema United, the exhibitor trade group that represents the big guys and the little guys, in a tough spot. In a letter from Aug. 18, Cinema United called on Ellison and California Attorney General Rob Bonta to reach a settlement, with some important caveats to a deal. The group wants to ensure that the promised 30 theatrical releases a year are marketed properly and promoted in theaters of all sizes, it wants guarantees that rental terms aren’t increased for smaller theaters who won’t have the negotiating power to push back on a merged company, that safeguards are in place for small theaters that want to make choices best for their theaters, and that the libraries of both companies are still accessible.

“There are differences between big circuits to the smallest, and we’re all providing the same product for our guests, but how we get from here to there, it’s different for the independents. We have more challenges financially than the big guys. We have to be a little sharper in how we operate,” one independent theater owner who was a signatory to the Cinema United letter told IndieWire. “Commitment to the 30 films is certainly a starting point, but there’s a lot of questions that need to be worked out. How widely will they be released, how will they be marketed, and will independent theaters have reasonable access to these films?”

For the smallest of theaters, even ones with just a single screen, exhibitors can be stuck in a position where they need to hold a movie for multiple weeks, generally with “clean screens” that only show that one film across all the showtimes. If it’s “The Odyssey,” the theater might do great Weekend 1, less well in Weekend 2, and even lose money in Weekend 3 because they’re generally only seeing their most loyal customers once in that span. If a movie flops, it can really hurt an indie theater’s bottom line, more so than a national circuit that can spread risk across hundreds of venues, and terms are often set uniformly for massive multiplexes down to single-screen venues.

Holds on films is a problem not exclusive to a Paramount-WB merger, but it’s still a concern that indies have when considering potential market control if one major provider could be going away.

“[We’re] not looking for special treatment but fair terms and enough flexibility to operate in their theaters and communities,” the theater owner added. “They need the ability to evaluate and license films based on their market, their screen count, and their audience, which an indie owner knows intensely.”

The theater owner worried this merger would be a repeat of Disney-Fox when it came to the particular issue of repertory titles. Such movies fill the gaps in release calendars and create differentiated programming that can help an indie exhibitor better connect with their community. Disney had and still has a unique licensing policy, withholding older titles that it believes could compete with its new ones, a policy Paramount historically hasn’t necessarily shared.

But if that were to change, such as if Paramount decided it wanted to use the Warner Bros. library to better support its streaming brands at the expense of putting those movies into theaters, that could pose challenges with yet another studio’s library locked away from theaters. An exhibition expert said that such views on library titles tend to be “short-sighted,” and for many theaters, repertory releases are great resources because the “small guys can’t always get the movies they want.” The expert added that he wasn’t surprised the major chains endorsed a settlement, but even for them, “the devil is in the details.”

Documentary filmmakers in a recent IndieWire piece raised a similar concern over Paramount presumably taking over CNN. Would a new CNN under Ellison and Bari Weiss be less willing to license archival footage to documentary filmmakers? Would HBO Documentaries be less willing to take on such films?

Paramount did not respond to a request for comment on this piece.

Cory Jacobson, the owner of the mid-range chain Phoenix Theaters with 10 locations across multiple states, still has his concerns, but he in a recent guest post for THR recently came out in support of the merger and is more concerned about the aftermath of a lengthy legal battle or even no merger. As a primarily first-run chain, he told IndieWire the repertory titles are a fairly minor part of his business, and he’s focused on having a steady stream of new movies and seeing a long-term commitment to theatrical.

One area in which Jacobson would like to see change is for Paramount’s 30-film/45-day window commitment to grow from three years to five. Some movies can’t even be developed in a three-year span. Meanwhile, he has leases on buildings that last as long as 25 years. A more stable commitment to a business plan for at a minimum five years would put him at ease.

He’d also like to see added tiers for different movies based on their performance, all as a means of giving indie theaters a little more flexibility. That’s another popular talking point among many exhibitors that has little to do with the specifics of the Paramount-WBD merger, but it’s part of the conversation that can happen now.

“If the studio releases a picture and it underperforms, do we really begrudge anybody for wanting to move up the release date on streaming? Probably not nearly as much. But on the backside, all these middle-sized films, maybe sometimes things need a little time to just sit in the theater and build an audience,” Jacobson said. “I think that discussion has started. I think it still needs some improvement on the part of Paramount and Skydance to say, ‘Here’s a better plan.’ And if there are things that you’re already going to do because they’re in your financial interests as a studio already, then why not just ensconce those things that you’re already knowing you’re going to do in a definitive plan that everyone can live with?”

Truth be told though, not all theater owners are even at Phoenix Theaters’ level or in a position to make any requests.

“Unfortunately we don’t drive the bus,” one West Coast-based mid-size theater owner said. “I think there’s always going to be a challenge for people that have less than more for people to negotiate their position … that’s just the way the free economy works.”

He shares the majors’ concerns that a lengthy legal battle could create a supply chain issue with movies being delayed while at the same time wondering if Ellison is the person to deliver on the 30-movies promise. He argues that theater owners are consistently making a lot of investment in their own theaters to help the studios make more money, and what a settlement would ensure is that same commitment coming from Paramount.

“This is an opportunity so we don’t have to take them at their word,” the theater owner said.