Does It Make Sense for Amazon to Buy a Movie-Theater Chain?

Sell the house, sell the theater chain, sell the food-delivery app. Photo: Getty Images

The economic downturn created by the pandemic could prove to be a moment of historic conglomeration if massive companies pony up to buy firms that are either experiencing new growth or facing the expiration of an old way of life. No two companies represent that divide better than movie chain AMC Theatres and the food-delivery app Grubhub. Already in financial peril before sitting indoors with strangers became impossible, the country’s largest movie-theater chain may not have the liquidity to hold out through the shutdown, according to Wall Street analysts. And though Grubhub missed its earnings goal for the first quarter, its CEO intends to invest “nearly all” second-quarter profits in the effort to boost orders in a time of surging demand: According to one industry estimate, deliveries increased by 30 percent in March, the largest uptick the sector has ever seen. On the most recent episode of the New York podcast Pivot, Scott Galloway and Kara Swisher explored the pros of picking up either company for a firm with the bankroll to do so.


Twice weekly, Scott Galloway and Kara Swisher host Pivot, a New York Magazine podcast about business, technology, and politics.

Kara Swisher: On Monday, AMC Theatres stock spiked 56 percent following a report that Amazon is considering a purchase of the chain, which has over 1,000 locations in the U.S.

Scott Galloway: Amazon does anything and you can bet that Disney and Time Warner all of a sudden have their pencils out, thinking, Should we be acquiring movie theaters?

AMC is literally like Sears or JCPenney — these guys are in real trouble. If you look at the companies that have excelled over the last ten years, they have one thing in common, and that is they control their distribution. Two weeks ago, AMC said to Comcast that it was going to come out with Trolls World Tour. Comcast said, “You’re not allowed to do that.” It’s a typical distribution fight. It’s similar to the ’80s and ’90s, when JCPenney said, “Levi’s, if you try to sell your denim direct to consumer via the website, we’re not going to carry you.” And finally, Levi’s said, “This is the future,” and stuck up its middle finger and started selling direct. And now you see that the content-makers have all the leverage and are bypassing the theaters, especially in the time of COVID-19.

Swisher: Nobody in Hollywood wants Amazon to be owning this particular distribution channel, because it’s so well known for strangling distribution. Amazon would call it helping grease the skids of distribution. But I think probably media people and lawyers today would probably be like, What the hell? And then, of course, Congress will get involved. This wouldn’t be a one-step, quick thing.

Galloway: It’s really interesting because everybody thinks about it one way. They think, Okay, Amazon is going to buy movies or produce movies. AT&T or Comcast is going to start skipping theater distribution and go straight to your TV set. It makes sense, right?

But there are opportunities to go the other way. And that is, I think, if Amazon owned AMC, it might release the first four episodes of season three of Jack Ryan in the theater. It might say, “All right, we’re doing a Fleabag evening, a girls’ night with drinks in the lobby. And we’re showing the first four episodes or the last four episodes of Fleabag.” I think there’s a lot of opportunity to do interesting things with theaters and do away with the shitty food. What if it just becomes part of a Prime membership? I mean, these are essentially gathering places and fantastic real estate, and they need to be reimagined.

Swisher: But I do think what’s really interesting is what’s going to happen from a legal point of view. Amazon making things is one thing, but owning this important distribution channel —

Galloway: Well, that’s the thing. It’s not that big.

Swisher: It’s perceptually big in people’s minds. “We’re going to the movies.” So it’ll be a really interesting fight. And Amazon, of course, once again is showing it has no bounds to its ambitions, which I think is really the story.

Galloway: Whenever I get together with elected officials or I talk to the media, my ideas aren’t that novel. They’ve heard my rap. What I do that usually kind of shock-and-awes them is I talk about proportionality. So AMC went up 56 percent today. It’s got a total market cap of $480 million. An influential brand, right? Amazon is at $1.2 trillion. In an average business day or average trading day Amazon goes up or down $25 billion. So, in sum, Amazon loses or gains 50 AMCs every trading day.

Amazon, right now, they don’t give a good goddamn about the acquisition price. It’s literally the sweat on the sweat on their brow. They try to figure out, “Okay, is this strategically important? What kind of antitrust flags does it raise for us? Do we distract key employees with this horrible department store of media called movie chains?” But the fact that this company, the fact that Amazon literally trades up or down AMC about every three seconds gives you a sense for just how gargantuan it is.

Swisher: Okay, let’s transition to the food sector. Would you buy into Grubhub? Or do you feel like they’re sort of a rapacious company taking advantage of the weakness of restaurants?

Galloway: You know more about this space than I do. What do you think?

Swisher: I think that they’re going to get a lot of scrutiny. If all the storefronts start going out of business, these apps need to have a better relationship with restaurants. Everybody uses them. But I think that they have to question how much they’re charging and work out something, a better relationships with restaurants. I don’t know. I think it’s probably a good investment right now, but, at the same time, I think there’s going to be a lot of ire among the people.

Galloway: It feels like it’s straight out of an economics class. You have two or three really well-funded competitors: there’s DoorDash, there’s Grubhub, and there’s Uber Eats. When you have a consolidation of power on one part of the supply chain and then you have literally hundreds of thousands of suppliers, there’s just so much leverage and power that goes to the consolidators.

For a while, what was strange is that there was such a market-share grab that the consolidators were showing up and saying, “We’ll pay you to deliver your stuff.” But that appears to be over. And now you’re hearing these stories about restaurants giving Grubhub $1,100 worth of orders and ending up with $380. So, that’s going to be a super-interesting analysis by economists and the antitrust folks to figure out, “Should they be regulated?”

The other really interesting thing that you’ve been looking at is what is going to happen to ghost kitchens. Physical places really do become liabilities, given that the joy of welcoming your friends to your restaurant and density becomes the enemy. But people want more food delivered. If feels like it plays right into this notion of ghost kitchens.

Swisher: Travis Kalanick has an investment in ghost kitchens, which I think is interesting. Good timing for Travis Kalanick — as long as he can keep workers. And, of course, he’ll get probably himself wrapped around the axle on that.


Does It Make Sense for Amazon to Buy a Movie-Theater Chain?