🍿 AMC Theaters pulls a 180

Thursday, July 30, 2020 by Robinhood Snacks | Disclosures

Big Tech's Congressional Zoom sesh

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Hey Snackers,

The banker who drops bangers is back. Goldman Sachs' CEO David Solomon, aka DJ D-sol, opened for the Chainsmokers at a Hamptons party (casual). Crowds gathered to watch DJ D-sol spin his bankable EDM tracks. Now the concert is being investigated for overcrowding. Doesn't get better than this, folks.

Tech stocks led the market surge yesterday, all while Big Tech CEOs were getting grilled by Congress. Also market-moving: the Fed decided to keep interest rates low to continue stimulating the economy. Earnings from Amazon, Apple, and Google drop today.

1. AMC and Universal will slash the theatrical window period in a historic agreement

Major plot twist... Three months ago, AMC banned all Universal movies from its theaters after some Trolls drama. TLDR: Universal made bank releasing Trolls World Tour direct to streaming, and said it'll do both digital and theatrical releases going forward. AMC reacted by excommunicating Universal. Now the two have struck a game-changing truce:

  • They're slashing the theatrical window from 75 days to just 17 days for Universal films shown at AMC theaters.
  • Theatrical window: The period that a movie has to be exclusively in theaters before release for home viewing.

An Oscar-worthy win for streamers... and a loss for theaters. The window has long been key to theaters' sales. Even though the first three weekends make up the bulk of those, slashing the window from 2.5 months to 2.5 weeks encourages people to wait for digital releases (manageable FOMO).

  • Customers get: Savings. While digital rentals will likely cost ~$20, there's no "pay-per-butt" charge. The whole family can watch for the price of 1 (and skip the $17 popcorn).
  • Universal gets: Money. Universal made more off 3 weeks of Trolls online rentals than 5 months of the original theater release. Big reason: streaming platforms take a smaller cut of sales than theaters do.
  • AMC gets: A lifeline. Theaters have been closed since March, and AMC could be looking at bankruptcy soon. Now it'll reportedly get a cut of Universal's sales from digital rentals and rights to release new Universal films on its own on-demand service.

This could become the status quo... AMC is the world’s largest theater chain and Universal is a major studio. Others could follow their major league window-slashing. By the time the pandemic is over, homebound consumers might be used to saving money by watching new movies at home. Short windows might keep getting shorter (or even become non-existent).


Grab the popcorn... The latest season of Big Tech vs. Congress dropped yesterday. Besides a few screaming matches and some technical difficulties, important questions were raised around anti-competitive activities of Big Tech companies. Highlights from the stars:

  • Amazon CEO Jeff Bezos made his Congressional debut. He got grilled on using data from 3rd party vendors to make competing (and cheaper) Amazon products.
  • Google CEO Sundar Pichai got hammered with questions around favoring Google products or paid ads over relevant search queries.
  • Facebook CEO Mark Zuckerberg got grilled on copying features of successful competitors, or acquiring them to crush threats (especially RE: Instagram).
  • Apple CEO Tim Cook got let off easy (the fewest questions), mainly around Apple playing favorites on its App Store and making things overly complicated for developers.

Grab the PR flashcards... All four CEOs took the stance that they do face real competition, and that everything they do is to improve products for their customers. Overall, the whole thing was often Congresspeople making their statements without actually listening to answers, and CEOs trying to waste as much time as possible by circumventing questions. Niiice.


Will anything actually come from these Congressional TV dramas?... The biggest thing would be a change in competition laws. Overall though, these hearings have rarely affected regulation. Buuut: a rare bipartisan unity clearly emerged around hostility to Big Tech (though the reasons varied). This hearing likely serves more as a slap on the hand than a game-changer.


Varsity Blues... Meal kit company Blue Apron has been sitting on the bench as its rival HelloFresh scores all the points. It was worth $2B when it IPO'd in 2017 — now it’s worth just $160M. Then the pandemic lifted the tide for all at-home-cooking ships, and Blue Apron finally got its shot in the game. It delivered:

  • Blue Apron turned a quarterly profit for the 1st time ever, taking home $1.1M compared to a $7.7M loss during the same quarter last year.
  • Thank the ARPU: Average Revenue Per User. Blue Apron's ARPU surged 25%, with the average customer spending $331 in the quarter (up from $265). Sales jumped 10%.

But no one was cheering... Sigh. Despite the profit win, Blue Apron stock plunged 15% because:

  • Growth was underwhelming, like a poorly seasoned Bok Choy. It added only 20K new customers, a 5% growth bump.
  • $18M will be lost this quarter, according to Blue Apron's unappetizing forecast. Higher labor costs (like employee bonuses) are eating into profits.

Blue Apron still has a shrinkage problem... It didn't make a profit because it's growing — it made a profit because the highly unusual pandemic made home-cooking spend surge. Despite its higher ARPU, Blue Apron's customer count is actually getting smaller. It now has 396K customers, down from 449K last year. Investors think the profit was a one-hit pandemic wonder. Since investors are all about future growth, they plunged the stock.

What else we’re Snackin’
  • Tune: Spotify missed quarterly sales expectations and lost $419M — while monthly active users jumped a solid 29%, ad revenue fell 21%.
  • Billions: GE posts a $2B quarterly loss — its jet engine biz was hit hard on decimated travel demand.
  • Tok: TikTok is valued at around $50B by some investors in its Chinese parent company, ByteDance, that are trying to do a takeover.
  • Shopped: Shopify nearly doubled its quarterly sales as retailers tapped Canada's biggest tech company to get their stores online
  • Leftover: Tupperware shares surge 65% after the leftover legend posts a 60% jump in profits thanks to a fresh sales strategy (though sales actually fell 16%).
  • Tired: GM swings to an $800M loss and burns through almost $8B on closed factories and corona-plunged car sales.

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Snacks Daily Podcast

2 megatrends that could dramatically hurt movie theaters:

1) Staying home: We're doing way more of it during the pandemic.

2) Saving money: Budgets are tighter in the corona-conomy.

Tune into our snackable 15-minute pod to hear more.


Disclosure: Authors of this Snacks own shares of Amazon, Apple, Spotify, and Shopify

ID: 1284803

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