When Saudi Arabia reopened cinemas for the first time in decades, AMC Entertainment Holdings Inc. swooped in to ink a deal with the government, gaining a foothold in one of the world’s final frontiers for theaters.
Four years later, the American cinema giant lags behind local rivals.
The Saudi kingdom’s market is proving tricky for the world’s biggest cinema chain, which was expected to dominate a field with no other major global players.
AMC’s experience illustrates how Saudi Arabia remains a difficult place for Western companies to do business, even with the country’s efforts to woo international business with legal and social changes.
AMC said it would open up to 20 cinemas by the end of last year but currently runs 10, with about 65 screens. Its two biggest competitors, Saudi brand Muvi and Dubai-based Vox Cinemas, run roughly 150 screens each, despite winning licenses to operate after AMC and without the direct government support that AMC has. Three other firms are building cinemas, and three more have obtained licenses, according to investment bank Saudi Fransi Capital, making Saudi Arabia a competitive market.
Earlier this year, AMC’s Saudi operation replaced its chief executive, John Iozzi, and installed a former executive at Vox’s parent company as interim CEO, according to people familiar with the changes.
Now, the Saudi government is taking greater control of its joint venture with AMC, and the two sides plan to renegotiate the terms of their contract, according to people familiar with the partnership. AMC currently owns 10% of the joint venture with Saudi Entertainment Ventures, a subsidiary of the country’s sovereign-wealth fund, and the American firm receives fees for licensing its brand and for managing the partnership, these people said.
A new-look partnership is likely to involve a simpler relationship whereby Saudi Entertainment Ventures, also known as Seven, pays a fee to license AMC’s brand but runs the operation, according to a person familiar with the discussions.
In a statement, AMC Chief Executive Adam Aron said the pandemic slowed the pace of its theater openings. (WSJ)
