A Deal's Mixed Reviews

By Jeremy Caplan

A series of cinematic duds has analysts wondering if the movie-house business is slowly going dark, as film fans switch to DVDs. No, say AMC and Loews, which are merging in an estimated $4 billion deal to create AMC Entertainment. The new company will have 4,592 screens in 338 theaters in 30 states, second to market leader Regal's 6,273 screens.

The deal comes amid an industry drought in which ticket sales fell from 1.63 billion in 2002 to 1.53 billion last year. And attendance is lagging again this summer. But since 1970, annual ticket sales have risen 67%, outpacing population growth, so AMC representatives argue that the recent downturn is but a blip for U.S. box-office numbers, which totaled $9.53 billion in 2004.

Because Loews has its strongest presence in major cities, while AMC's theaters are spread more widely around the country, the new deal is expected to help AMC Entertainment reach a broader audience and negotiate better deals for popcorn and soda. But some are dubious of the synergy. Several big theater conglomerates have battled bankruptcy, and General Cinema filed for Chapter 11 in 2000. "Is there a merger that's worked out right in Hollywood in the past 20 years?" asks industry expert Arthur de Vany, author of Hollywood Economics. "I can't think of one." --By Jeremy Caplan