Featured image credit: BrokenSegue
In a rare business acquisition, though one we may be seeing more of in the future, entertainment giant Sony Pictures Entertainment purchased movie theater chain Alamo Drafthouse Cinema. With 35 locations (just down from 40 in early June), Alamo Drafthouse remains the seventh-largest movie theater chain in North America. Combining new releases, carefully curated programming, and dine-in convenience, the brand has built a loyal fanbase since its first location opened in Austin, Texas in 1997. While the business acquisition may seem sudden, industry insiders have been watching for signs of a sale in the wake of the pandemic.
Why the Alamo Drafthouse is a Beloved Brand
Alamo Drafthouse has long been a favorite theater chain for cinephiles. With its strict policies against late arrivals, talking, and texting and its age-restricted showings, it’s often a premium choice for movie buffs looking for a distraction-free viewing experience. Further revered for its extensive menu including alcoholic beverages such as custom cocktails, along with servers that bring your orders to your seat, Alamo’s business model offers an elevated cinematic escape. Fans are cautiously optimistic that these benefits will continue under Sony’s ownership.
Details of Sony’s Latest Business Acquisition
While the exact terms of the business acquisition are being kept private, it’s clear that all 35 of Alamo Drafthouse Cinema’s surviving locations are included in the deal. These remaining locations pepper 25 high-traffic metropolitan cities. Sony also acquires Alamo’s popular Fantastic Fest. The film festival creates a platform for Alamo’s outstanding genre-focused curation skills; a major factor in putting the movie theater chain on the map. Alamo will continue to curate Fantastic Fest under Sony’s ownership.
Post-Acquisition Structure
While ownership of Alamo Drafthouse will be under Sony’s recently developed Sony Pictures Experiences division, no major structural changes are anticipated in the wake of the business acquisition. Michael Kustermann will continue in his role as CEO of Alamo Drafthouse. However, he will also be taking on the additional duty of serving as Sony Pictures Experiences’s CEO. Kustermann will report directly to Sony Pictures Entertainment COO Ravi Ahuja. Likewise, Alamo will continue to be based in Austin, Texas and all locations will continue under the Alamo brand.
Tough Times for Alamo
In a typical year, Alamo Drafthouse Cinema serves over 10 million theatergoers. Yet, like its peers, the movie theater chain suffered significantly from pandemic-era closures. Possibly due to a business model catering to a comfortable and convenient theater experience, Alamo was able to rebound more robustly from the pandemic than the average movie theater chain. In 2023, Alamo enjoyed a 30% surge in box office revenue when compared to 2022’s numbers. By comparison, the industry at large experienced only a 21% revenue boost.
Yet, Altamont Capital Partners, Fortress Investment Group, and co-founder Tim League have been shopping the brand around for several months. After tepid interest, the Sony business acquisition has renewed some much-needed faith in theater investment. Those closely watching the theater chain may have figured that an acquisition was inevitable. In March 2021, Alamo filed for Chapter 11 bankruptcy, though they pulled out of it in just four months. However, four locations closed overnight just earlier this month. Following a franchisee filing for Chapter 7 bankruptcy, the four Dallas-Fort Worth locations and an additional location in Minnesota closed with little to no warning.
The First Major Movement Following Rescinding of the Paramount Decree
However, the Sony business acquisition of Alamo Drafthouse is surprising for another reason. Until recently, movie studios weren’t permitted to purchase movie theater chains. The Paramount Decree, a federal standard instituted in 1948, prevented major studios from purchasing theater chains in an attempt to prevent a monopoly. The standard arose in the wake of accusations that Hollywood studios in ownership of theaters were driving up ticket prices while controlling distribution.
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However, in 2020, the Paramount Decree was ruled by a federal court to be outdated. With the rise of cable TV and, more recently, streaming services, the court believes that studios no longer hold the power they once did. Therefore, the Sony acquisition of Alamo Drafthouse is an exceedingly rare circumstance. Yet, if it proves fruitful, we’re bound to see other major studios follow suit. While the Paramount Decree deterred most major business acquisitions like the Alamo purchase, it wasn’t a well-regulated standard. Sony managed to purchase the Lowes movie theater chain in the 1990s without incident.
What the Future Looks Like for Alamo Drafthouse
At present, Sony hasn’t revealed any plans to change Alamo’s established business model. At least for the foreseeable future, Alamo diehards can expect to continue enjoying their local theater without interruption. The purchase may even leave theatergoers feeling more confident that Alamo Drafthouse isn’t going anywhere. But those looking far into the future can’t help but wonder about the implications of major studios purchasing and controlling movie theater chains. Does streaming really insulate us from a monopoly? Time (and lots of money) will certainly tell.
