Sony Pictures Acquires Alamo Drafthouse Cinema in Landmark Deal That Puts Studios Back in Theater Game

Pamela McClintock, Alex Weprin and James Hibberd

12 June 2024 at 2:00 pm·7-min read

In a groundbreaking moment, Sony Pictures Entertainment has acquired Alamo Drafthouse Cinema in a deal that puts a major Hollywood studio back in the business of owning a movie theater for the first time in more than 75 years with certain exceptions.

From 1948 until 2020, the U.S. Department of Justice prohibited film distributors from owning an exhibition company under what was known as the Paramount Consent Decrees, which arose from a 1948 U.S. Supreme Court ruling. The decrees essentially dismantled the old Hollywood studio system by forcing the majors to divest of their theater holdings.

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At that time, the majors essentially controlled all aspects of filmmaking, from the talent to the productions to the theaters. The decrees forced exhibitors to stop practices like “block booking” (bundling multiple films into one theater license) and “circuit dealing” (entering into one license that covered all theaters in a theater circuit). The landscape was radically different then, however. There were no multiplexes, but rather one-screen theaters that could play one movie for months; a scenario that played into favoritism.

Sony is the first major Hollywood studio to step forward and test the waters since the Paramount Decrees were officially rescinded in 2020. The rules had been relaxed for some in the 1980s and studios including Sony and Universal bought various stakes in certain chains, but the economics ultimately didn’t make sense.

The only major film producers to acquire theaters since 2000 were Netflix and Amazon. Netflix purchased Los Angeles’ Egyptian Theatre and New York’s Paris Theater in order to appease filmmakers who want their films to play on the big screen, as well as to qualify their titles for awards consideration. Amazon had the same aim when buying the old ArcLight location in downtown Culver City in Los Angeles, although that cinema is a first-run theater, meaning Amazon has to book new movies in addition to its offerings. (In a reverse twist, the world’s largest cinema owner, AMC Theatres, got into the distribution business last year when acquiring rights to Taylor Swift’s Eras Tour doc.)

Alamo filed for Chapter 11 bankruptcy protection in 2021, when it was still reeling amid the COVID-19 pandemic. Altamont Capital, Fortress Investment Group and League emerged as its owners post-bankruptcy. Sources say other parties looking at Alamo included Cinemark and a major exhibitor in Latin America. Alamo is hardly the only exhibitor that considered, or is considering, bankruptcy in the aftermath of the pandemic and the writers and actors strikes, which have slowed the content pipeline to a trickle (domestic revenue year-to-date is down more than 24 percent).

Wednesday’s announcement stressed that Alamo Drafthouse — an independent chain with 35 locations that has been at the forefront of in-theater dining and other consumer-friendly initiatives — will continue to be run by Alamo CEO Michael Kustermann, under a new division that he’ll also be in charge of, Sony Pictures Experiences. Sony said the deal reinforces its long-held commitment to theatrical exhibition and continued initiatives in experiential entertainment.

Kustermann will report to Ravi Ahuja, president and COO of Sony Pictures Entertainment.

“We are excited to make history with Sony Pictures Entertainment and have found the right home and partner for Alamo Drafthouse Cinema,” said Kustermann said in a statement. “We were created by film lovers for film lovers. We know how important this is to Sony, and it serves as further evidence of their commitment to the theatrical experience. Together we will continue to innovate and bring exciting new opportunities for our teammates and moviegoers alike.”

Added Tom Rothman, chairman and CEO of Sony Pictures Motion Picture Group, “Alamo Drafthouse has always held the craft of filmmaking and the theatrical experience in high esteem, which are fundamental shared values between our companies. I’m jazzed that our company is doing this.”

Alamo will continue to operate all 35 of its cinemas across 25 metro areas under the Alamo Drafthouse brand. And the Alamo Drafthouse-owned Fantastic Fest, the world-renowned genre film festival, is included in the acquisition and will also continue to be operated by Alamo Drafthouse. The company’s headquarters will remain in Austin, Texas.

“We believe strongly in engaging entertainment fans outside the home in fun and distinctive ways as seen most recently with our Wheel of Fortune LIVE! traveling tour, and the opening of Wonderverse in Chicago,” Ahuja said in a statement. “Alamo Drafthouse’s differentiated moviegoing experience, admired brand and devoted community fit well with this vision. Our Crunchyroll business also aligns well with their audience’s interests. We look forward to building upon the innovations that have made Alamo Drafthouse successful and will, of course, continue to welcome content from all studios and distributors.”

Alamo Drafthouse was founded in 1997 by Tim and Karrie League as a single-screen mom and pop repertory theater in Austin, Texas, and has grown into a thriving and dynamic dine-in cinema chain that is beloved by its fans and the industry alike.

As North America’s seventh-largest theater chain, it releases more movies per year than any other theater chain, welcomes over 10 million guests annually, and has built a highly engaged core audience of 4 million loyalty members. Last year, the theater chain saw a 30 percent jump in box office revenue from the previous year, which came in ahead of the industry at large.

SPE acquired Alamo Drafthouse from owners Altamont Capital Partners, Fortress Investment Group and founder Tim League. Goldman Sachs & Co. LLC acted as exclusive financial adviser to Alamo Drafthouse in the transaction.

“We are beyond thrilled to join forces with Sony Pictures Entertainment to expand our company vision to be the best damn cinema that has ever, or will ever, exist now in ways we could only ever dream of,” said Tim League. “They have a deep respect and understanding of cinema’s ability to both drive growth and create lasting cultural impact which aligns perfectly with everything Alamo Drafthouse stands for.”

The news is sure to be met with a mixture of relief and worry by the chain’s famously devoted fans.

On one hand, Alamo has been battling serious financial problems since it declared bankruptcy during the pandemic in 2021 and was rescued by a private equity firm. Last week, five North Texas locations closed amid a franchisee likewise filing for bankruptcy. Sony coming on board gives the theater chain some assuredly solid financial backing moving forward, and hopefully investment for further expansion.

Yet Alamo — which currently operates theaters in 14 states — is arguably the only theater chain in the country with a very specific and well-honed personality, one you can trace back the company’s roots as a single-room theater founded in downtown Austin.

Alamo’s movie preshows, for instance, are full of clever and carefully curated archival footage related to the upcoming film (with no advertising). The chain invests in ongoing unique programming (like its popular Master Pancake live movie-mocking events). It hosts occasional bold stunts — such as a 2015 Star Wars movie endurance marathon where a theater full of fans competed to see who could endure watching the sci-fi saga the longest (the winner lasted for 46 hours straight). Alamo also has what’s considered the country’s strictest theater chain no-talking and no-texting policy, which it pioneered with preshow ads like this famously profane viral example.

One question moving forward will be: Will Alamo be able to keep its independent spirit now that it’s under major studio ownership? (Although generally speaking, studios aren’t involved with such things as preshow ads or cinema policies. That’s up to the exhibitors.)

June 12, 4:25 p.m.: Updated with additional history regarding the Paramount Decrees, and various exemptions.

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