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#4 “The welcome we got from customers in the first 10 days was beyond what we expected,” he said. The initial subscription rate is ‘over the business plan that we had,’ Greidinger noted, telling me, ‘I think there is a lot of satisfaction from the price, the tiers…..We don’t share subscriber numbers in Europe as a general policy. I’m not sure what we are going to do in the U.S., probably not, but we’ll see.’ Cineworld based Regal Unlimited on its success with its UK program and Greidinger said he sees it as ‘a long-run game.’ But, he allowed, ‘I can carefully estimate it is not going to be less successful than in the UK. Usually, Americans go to cinemas more than in England.’ (CEO Cineworld, August 8th 2019)
Conslusion#4: There are strong cross national-comparative reasons to expect the success of Unlimited in the US.
Amateur Assessment of Recent Morgan-Stanley Note=Fail.
Unless the Morgan-Stanley Analysts are prepared to beat-me-up with their superior knowledge of balance sheet stress and debt-to-cash-flow ratios (which I happily concede they could), I would fail their recent note, which seems to argue the toss for an egregiously and suspiciously low target price by concentrating, for the greater part, on a projection of future market conditions and associated impacts on the CINE business model. Very sorry for the long post. But when highly paid analysts stray from the balance sheet, they inevitably end-up rubbing shoulders with outraged amateur investors who need to vent.
Four pieces of easily harvested grey literature:
#1 “In the summer of this year Regal finally launched its own subscription offering. There were some who speculated that the combination of our price increases Cinemark continuing to dramatically undercut us on price and a new Regal program could hurt us. Not the case. Our membership base is solid loyal to AMC growing and importantly profitable” (AMC CEO, 3q2019 Earn-call).
Conclusion#1: consumer proximity to cinema is the key factor for subscription uptake
#2 “Quest: Since Regal launched the program have you noticed any attrition in the markets where you guys compete? Ans: No we haven't see[n] any impact really. A-List is healthy strong resilient profitable…. There was a reason why we put in a limit of 3 movies per week in the A-List program. And in the Regal Unlimited Program theirs is truly unlimited. So if somebody wants to see 25 movies a month they can. Honestly when you are only charging $20 a month $22 a month $24 a month somebody wants to see 25 movies a month we're happy to give all those people to Regal. They can have every single one of them. But to answer your question no there's been no competitive impact on us” (AMC CEO, 3q2019 Earn-call).
Conclusion#2: see Conclusion#1 and AMC know that Unlimited is a highly competitive and more committed subscription service than A-List despite Conclusion #1.
#3 "We are not direct competition to Netflix or Amazon, they are very different products. Cinema is a social event. People need to leave the house and find new ways to entertain themselves," said Cohen. “Cinema is a shared experience, you see new movies as soon as (or before) they're released… on the biggest screens imaginable. It is very different from watching movies or box sets at home." (Casey Cohen, head of marketing at Cineworld, 31 May 2019)
https://www.youtube.com/watch?time_continue=6&v=8dofngoXZLI&feature=emb_logo
Conclusion#3: Cineworld understands its product, its market, its unique-selling-point and its consumers.
Indeed. Set in that context, it is extremely puzzling. With shorts to these levels, mortal threats to the company should be obvious. But they aren’t, IMHO. As devil’s advocate, yes, CINE has high debt, missed earnings targets, declining sector trends (very much debatable), declining sister companies (arguable), which make it a candidate for shorts. But to this level? As a long term cinephile, I’d very confidently argue the toss with a fund-manger about the future of the sector, which I see as assured. Streaming is a threat to free-to-air, not cinema. Post-modernist art forms (streaming) are, at best, cultural dominants, not hegemons. They sit very comfortably alongside high modernist forms (cinema). They need them. And this is a fact. Scorsese’s flirtation with streaming is petulant rather than significant. I could also make a good many arguments about the virtues of the purchase of Regal, the US introduction of Unlimited, which is a great service, and which will do very well in a US mature market. Then there is the recent Director’s buy, a big one. And beyond the message of the buy itself, it suggests that management are watching the SP decline, that they’re unhappy about it, that they’ll very likely do something about it. But then surely the shorts see all this, and so what are they seeing that I’m missing? Surely they know more than me? But for mine, CINE just ain’t Debenhams, Metro Bank or Thomas Cook. I just don’t get it and its bothering me because with shorts at these levels, it must be big?