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AMC Entertainment Holdings (AMC) Q2 2020 Earnings Call Transcript | The Motley Fool



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AMC Entertainment Holdings (NYSE:AMC)
Q2 2020 Earnings Call
Aug 06, 2020, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Greetings, and welcome to the AMC Entertainment second-quarter 2020 earnings conference call. (Operator instructions) As a reminder, this conference is being recorded, Thursday, August 6, 2020. I would now like to turn the conference over to John Merriwether, vice president, investor relations. Please go ahead.

John MerriwetherVice President, Investor Relations

Thank you Kevin. Good afternoon, everyone. I’d like to welcome you to AMC’s second-quarter 2020 earnings conference call. With me this afternoon is Adam Aron, our president and chief executive officer; and Sean Goodman, our chief financial officer.

Before I turn the call over to Adam and Sean, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements which are based on management’s current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our public filings including our most recently filed 10-K and 10-Q. Several other factors that will determine the company’s future results are beyond the ability of the company to control or predict.

In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned to not place undue reliance on these statements. The company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information or future events. On this call, we may reference measures such as adjusted EBITDA, free cash flow, adjusted free cash flow and constant currency, among others which are non-GAAP financial measures. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the investor relations section of our website earlier today.

After our prepared remarks, there will be a question-and-answer session. This afternoon’s call is being recorded, and a webcast replay will be available in the investor relations section of our website at later today. With that, I’ll turn the call over to Adam.

Adam AronPresident and Chief Executive Officer

Thank you, John. Good afternoon everyone, and thank you for joining us today. I — needless to say, I’ll begin the call as I’ve begun so many over the past several months. I do sincerely hope that all of you and your families are safe and healthy.

This is a time that AMC has been waiting for since mid-March of this hard, horrible year of 2020. More than a third of our theaters in Europe and the Middle East are already open once again, and essentially all should resume operations within two weeks. And of course, we are greatly looking forward to the reopening of our theaters in the United States which seems to be at hand in most, but not all U.S. cities by the end of this month.

Both for financial and psychological reasons, we are so eager to delight moviegoers as AMC has done now for a full 100 years. It’s no surprise to anyone that with all of our theater operations suspended between March and May, and most of our theater operations suspended even now, the COVID-19, once-in-a-century global pandemic, has significantly impacted the financial performance of companies across multiple sectors with the movie theater industry being particularly hard hit, and AMC has not been exempted from that fate. With no revenue to speak of coming in the door until June, and then for AMC only in some countries in Europe, you are already all aware that the second quarter of 2020 was arguably the most difficult and unsettling quarter that the theatrical exhibition industry and AMC have ever seen. I cannot tell you though enough how proud I am that the entire AMC organization has responded quickly, boldly and decisively with an exceptional level of commitment, tenacity and professionalism to adjust our plans, and then to deliver on very aggressive new targets, whether those be for massive capital expenditure and operating expense reductions, endless time devoted to landlord negotiations, achieving dramatic enhancements to our liquidity position or the skillful crafting of safe and responsible theater reopening plans.

This afternoon, similar to our first-quarter earnings call, we really won’t spend very much time at all on the actual financial results of Q2, but instead, we’ll focus on what we believe is a primary interest to most of you, and that is to update you on the actions we’ve taken to manage through this crisis, our preparations to safely welcome guests to our theaters once again, and our general thoughts about the prognosis for our company looking forward. The four priorities that we outlined on our last call remain our primary focus. One, continuing to take actions to bolster our liquidity and to deleverage our balance sheet. Two, reducing our cost structure and spending posture, realizing that revenues may take time to ramp up.

Three, reopening our theaters as smartly and as professionally as we can, enlisting some of the world’s top scientists and experts to help us offer a safe and clean theatrical environment for our guests and associates; leveraging our industry-leading guest platform and rich consumer database to drive attendance and implementing a wide variety of strategies to optimize theater profitability once theaters do reopen. And four, managing our business through whatever structural changes, world events or industry dynamics are thrown in our direction. In the 60 days or so since we last spoke, AMC has made significant progress in each of these four focus areas. The two most important of which include: first, our recent successfully completed debt exchange and new first lien debt issue that lowers leverage, provides additional liquidity and extends debt maturities; as well as second, the signing of a historic agreement between AMC and Universal Studios that we believe will expand the market for both Universal and for AMC.

It will preserve the most important period of time during an exclusive theatrical window in which most of the movies’ revenues come in the door, while allowing AMC to share in new premium video-on-demand revenue streams. Our agreement with Universal also works to increase studio profitability from theatrical releases which over time should lead to green lighting of more theatrical releases which after all is the lifeblood of our core business. We’ll share more in a moment, but before we do, I’ll now turn the call over to Sean to update you on the second quarter and some of the more recent specific actions taken by AMC. Mr.

Goodman, sir, you’re on.

Sean GoodmanChief Financial Officer

Thanks Adam, and thank you everyone for joining us this afternoon. I do hope that you and your families have been safe and well during these difficult times. As Adam mentioned, our results for the quarter were severely impacted by COVID-19 crisis which necessitated the suspension of all our theater operations in the U.S. for the entire second quarter and all of our international theaters for two-thirds of the quarter.

Theaters in our international markets began to reopen in early June, but only on a limited basis. And for the quarter, international attendance was only 100,000 tickets sold compared to around 25 million last year. As of June 30, we had 37 international theaters opened, mostly playing older library Hollywood titles and some local content. As of July 31, that number of open theaters have grown to more than 130, and as of today, we have 184 theaters open internationally.

We now have theaters open in every country where we operate abroad. It’s very early days but the initial results from our international locations are encouraging, particularly with respect to food and beverage spend per person which is holding up nicely and actually running well ahead of last year. We’re also especially encouraged by the performance of a local language sequel that just opened in Spain. The sequel this year is actually driving more box office revenue even in these coronavirus-impacted times than the original did last year.

And the original was the single highest grossing domestic film in Spain in 2019. Hopefully, this is a harbinger of what can occur when new Hollywood titles are released in the U.S. and overseas starting later this month. But with virtually no revenue generated in the second quarter, our bottom-line financial performance in the second quarter is almost irrelevant.

What is crucial is how we performed against our priorities, namely the preservation and enhancement of liquidity, the reduction of debt and the management of our expenses. From a liquidity point of view, as of June 30, 2020, we had $498 million of cash, plus $10 million of restricted cash. Our total cash burden for the second quarter was $292 million, precisely within our targeted monthly cash burn that I guided you to on our last call. In early June, as you know, we announced an exchange offer to our senior subordinated debt holders and other related transactions which closed on July 31.

More than 87% of the senior subordinated note holders elected to participate in exchange resulting in the issuance of approximately $1.46 billion of new second lien notes that are not due until 2026 and the elimination thereby of $555 million of debt. In addition, as part of this overall transaction, we raised $300 million of new cash prior to transaction costs, premiums payable and original issue discount from the issuance of new 10 and a half percent first lien notes due in 2026. $200 million of this new cash was raised from subordinated debt holders and $100 million was raised from Silver Lake. Also, in conjunction with the debt exchange, the $600 million of 2.95% Silver Lake convertible notes have been restructured to first lien convertible notes with a maturity extension from 2024 to 2026.

And a reminder that the coupon on these Silver Lake notes remains unchanged at an extremely attractive 2.95%. The transaction also calls for the interest expense on the exchange notes to be picked due in 2026 instead of cash due now for the first 12 to 18 months. This saves the company between $120 million and $180 million of cash outflow — outlay in the coming four to six quarters. In summary, this debt exchange transaction meaningfully improves our financial position in four key areas.

One, reduces net debt by $555 million. Two, provides incremental liquidity of $300 million before discounts and transaction costs from the issuance of the new first lien debt. Three, provides $120 million to $180 million of enhanced liquidity from the ability to defer cash interest payments on newly issued second lien debt for the first 12 to 18 months. And four, extends maturities for approximately $1.7 billion of debt that was previously due in 2024 and 2025 through to 2026.

As a result, our liquidity runway, should theater operations remain suspended, is extended through 2021. Switching topics, I’d like to provide an update on our negotiations with landlords. Our strong and long-term landlord relationships remain the foundation upon which we have successfully been able to defer or abate the vast majority of rent owed during the second quarter. Currently, we have over 900 distinct theater leases, and we have already reached agreements on approximately 75% of our leases to defer or abate rent.

Each agreement is unique. But you should note that in the second quarter, the vast majority of the rent expense shown on the face of the income statement has been deferred with repayment terms mostly around 24 months, although a number of agreements have repayment periods that extend through the remaining lease term which, in some cases, is in excess of 10 years. As I previously mentioned, the terms that we have agreed with our landlords are generally confidential and specific to particular facts and circumstances for each landlord and each theater. While future cash rent payments will depend on our ultimate reopening schedule and level of attendance, we expect that a sizable portion of the rent reflected in the income statement for the third quarter will also be deferred.

Shifting to capital expenditures. We have slashed capital expenditures to minimize — to the minimum maintenance levels while theater operations remain suspended. We’ve halted all but essential maintenance capex and growth capex that is associated with projects that were committed to prior to the onset of COVID-19. During the second quarter, our capex spend was only $26.1 million, net of landlord contributions, most of which was committed prior to the outbreak of the pandemic.

This spend is $85.4 million lower than the same quarter a year ago. We continue to expect 2020 net capex to be between $130 million and $160 million. Finally, before handing the call back over to Adam, it’s worth noting that we are using these unprecedented times as an opportunity to intensely examine literally every category of our spending and all plausible opportunities to enhance our efficiency and improve our profitability for the longer term. While the closure of our theaters is temporary, the learnings and the actions that we are taking will have an enduring benefit for AMC.


Adam AronPresident and Chief Executive Officer

Thank you Sean. In response to the unprecedented environment that we find ourselves in, we have taken bold and decisive action to get through this period of extended suspended operations to best position AMC for the future. Many of my personal friends and business colleagues graciously have asked me in recent months how stressed am I feeling or how am I holding up or something like that, given the tough hand that we and the movie theater business have been dealt. Ironically, I have been able to reply each and every time that I honestly haven’t felt any pressure because if we want AMC to get through this, it was just so obvious to us exactly what we had to do, and so essential that we get the things we needed to do actually accomplished and to do so expeditiously.

The lack of doubt made it easy to proceed. Dating back to March, in a very short period of time, this is what AMC has done. Eight crucial steps absolutely necessary which enabled us to move forward: One, we suspended operations and mothballed a multibillion-dollar global enterprise with 1,000 locations spanning three continents in only a week; two, we reduced our capital expenditures and operating expenses so dramatically, while simultaneously stepping up our cash management efforts with such stringency that our sustained cash outlays were cut by an incredible 80% to 90% in just a matter of weeks; three, in April of 2020, we raised $500 million of new public debt. We needed that cash; four, we renegotiated hundreds and hundreds and hundreds and hundreds of theater leases the world over.

In addition to deferring and abating rent in 2020, we took this opportunity to permanently lower some rent agreements going forward. Not talking about the reimbursement of deferred rent dating back to Q2 or Q3 of this year, but looking at ongoing lease contracts, we already know, for example, that our rents owed for 2021 operations, and for essentially all the years thereafter, will be permanently lowered by at least $35 million per annum as a result of these lease renegotiations. And discussions and negotiations with landlords are still ongoing and continuing in many cases. Five, John just took you through the successful bond exchange offer which reduced our debt, increased our cash and extended our maturities.

I want to take this opportunity to thank our investment bankers and attorneys, who so ably helped us through this complex transaction, namely Moelis & Company and Weil, Gotshal, respectively. Thanks also to all of the firms who thought long and hard about this effort to strengthen AMC. Our senior subordinated noteholders, led by PGIM and H/2, deserve special mention as they too, worked incredibly hard to buttress AMC’s future. Many of these noteholders provided AMC with much needed additional cash as did Silver Lake.

Their actions were consistent with the support that AMC has enjoyed over many, many years from all of our stakeholders, up and down the capital stack from top to bottom for which we’re all so truly grateful. Six, John also just related our pouring through every operating expense line and every staff position in our headquarters and at our theaters to reduce our cost structure going forward for the long haul. We’ll be talking about this in more detail on our next quarterly call. But you should know that our target for a reduction in operating and capital expenditures is in the several hundred million dollar range.

As part of the effort to reduce cost, it’s always painful to have to say goodbye to some truly talented managers. But under these unique circumstances, we had no choice but to reduce staffing at our corporate headquarters by about one-third fewer people going forward as compared only a year ago. Our theater management teams have similarly been streamlined. We are certainly getting leaner than we have ever been before.

Seven, we developed our extremely important AMC safe and clean protocols consulting with the Clorox Company and faculty of Harvard’s prestigious School of Public Health. This all being done with the overarching goal in the near-term of resuming theatrical operations, safely and responsibly. And finally, eight. We just negotiated an industry-changing agreement with Universal that will reshape exhibition for years to come and will do so in ways that we believe will materially benefit AMC’s shareholders.

There are signs that we’re starting to emerge from the deepest of depths of the pandemic as our international theaters began reopening over the last 60 days. Just yesterday, we welcomed back our 1 millionth paid guest since resuming operations in our international markets. And we are literally counting the days to our U.S. reopening expected to commence only a couple of weeks from now in the United States.

Let’s turn to the subject that many of you are now thinking about, our agreement with Universal, what it means for AMC and what it means for exhibition more broadly. As you know, from our previous announcement, this is a multiyear agreement that provides for theatrical exclusivity for all Universal pictures and focused features, theatrical releases for at least three weekends comprising at least 17 days, the time went as much as 80% of a film’s theatrical viewing has already taken place. After which time, the studio will have the option to make its titles available across premium video-on-demand platforms, known as P-V-O-D or PVOD including our very own AMC Theaters On Demand accessible at the website. Universal has said publicly that not all of their titles will move to PVOD after 17 days, but admittedly, it does provide Universal with that option.

Even though the Universal agreement is about a week old, we already have offered similar arrangements to all of our studio partners. Undoubtedly, some will and some will not take us up on our offers to do the same. So why did AMC do this? Here’s the answer. We cannot just live in the past, fear change and hope that it will never take root.

Sometimes, one has to stare change in the face, recognize that it has or soon will arrive and reshape it to one’s own benefit. That what we’ve done at AMC. Yes, the press seems focused on Universal’s experiment with Trolls back in March, but we were looking at much larger and more important trends, take a deeper look at what has happened of late. Netflix has outbid major studios for one script after another.

Disney took Hamilton, Artemis Fowl and now Mulan to Disney+. Warner took SCOOB! to HBO MAX. Paramount took SpongeBob to CBS All Access. Sony sold Tom Hanks’ new Greyhound to Apple TV+.

Exhibition will not receive $0.01 on any of these movies. Sure, some hope that this is merely a short-term coping with closed theaters during the virus, but we saw a change in the industry where we at AMC needed to figure out how to be included in the economics of all film viewing whether it takes place in our theaters, on our own website or on people’s couches at home. Incidentally, our capital cost invested in someone’s couch at home is precisely 0. Although the financial terms of the Universal agreement are confidential, I can tell you that the agreement allows AMC to participate handsomely in the entirety of the economics of this new structure including receiving a share of each film’s PVOD revenue stream, whoever may be the retailer as well as receiving considerable additional economics when the film is retailed on our own AMC Theaters on demand service.

AMC benefits in three ways with this new Universal agreement, and hopefully, with other studios where we do something similar. One, we now will be cut in, included and paid when Universal movies go to the home early. Two, hopefully, the market will expand. Think about this very carefully.

Of the hundreds of movies released last year in 2019, pre-COVID, only about 15 grossed more than $150 million domestically. Only another 15 or so grossed between $100 million and $150 million domestically. That means that even though movie theaters sold well more than 1 billion tickets in the U.S. and Canada last year which is a stunningly high number in total, only 30 movies in total sold more than about 10 million tickets in the U.S.

and Canada, only 15 movies in total sold more than 15 million tickets in total. That in two countries of more than 340 million people in total. How much can moviegoing and movie viewing increase with PVOD? As AMC will meaningfully share in that new revenue stream, this potential dramatic expansion of revenues should protect AMC against the cannibalization that admittedly will occur as some people shift from theatrical viewing to home viewing instead. This is something that we have very carefully researched, very thoughtfully modeled and something that our company has been thinking about for almost five years.

And the third way that we benefit from PVOD is this, PVOD creates the added potential for increased movie studio profit from that added home viewing of theatrical movies. More profitable theatrical movie making should logically, in turn, lead to more theatrical movies being made. The reaction of one major studio to our Universal agreement was that AMC would take some incoming flack. But more importantly, and I quote them verbatim, Adam, you’re going to take heat.

But with this action, AMC just saved Exhibition. Honestly, we were going to greenlight fewer and fewer theatrical movies. Now with an added revenue stream to studios, we’ll be greenlighting more and more theatrical movies instead. No doubt, some of you may be interested in our reaction to Disney’s Mulan announcement this week.

I’ll save the sharing of our view until one of you ask us during Q&A. Before we open up the call to your questions, in summary: One, AMC remains focused on driving down costs, preserving and increasing liquidity and reducing debt as we manage our way through the current market challenges. Two, the safety and well-being of our guests is enormously important. And those of you who visit our theaters when they reopen, will see for yourself that AMC is all over this issue of providing a clean, safe and enjoyable experience at our theaters as we resume operations.

Our marketing activity will be extensive to convince moviegoers to get out of their homes and apartments, where they’ve almost been in prison since March, and see movies once again at AMC’s and Odeon’s theaters in our big seats, with our big sound and on our big screens. Three, AMC is not afraid of change. And as said, we believe that we are forcing that inevitable change to bend in ways that will serve AMC well and will benefit AMC shareholders as a result. And four, finally, as we celebrate AMC’s 100th anniversary, we’re thankful to all those institutions standing by us during difficult times.

We’re especially thankful to the dedication and commitment of our management group and our associates who have been and continue to be working tirelessly with great dedication and a great personal sacrifice to allow us to emerge from this crisis as a strong industry leader, ready to provide thrilling experiences for audiences at home and abroad as we’ve done for decades and decades and decades in century No. 1 now behind us. With that, thank you for listening. We now look forward to taking your questions.


Questions & Answers:


(Operator instructions) The first question is from Eric Wold with B. Riley. Please go ahead.

Eric WoldB. Riley FBR — Analyst

Thank you. Good afternoon. A couple of questions is one — for Adam I guess I guess, a follow-up question on the Universal deal. Obviously, you spoke with universal extensively on this digital modeling.

How do you think about — how should we think about the decision that we made as to whether or not a film is pulled after 17 days or not? I’ll leave it to you to answer if you want. I guess — and how would that be communicated to consumers. Is this communicated well ahead of time? Will they be a movie showing on the screen so they know it’s on PVOD in 10 days? Will it not be announced until right the release to PVODs? I just want to make sure that they’re not obviously adjusting their behavior as much as they can with advance notice.

Adam AronPresident and Chief Executive Officer

Thanks Eric. And I really appreciate the question because it gives me an opportunity to make sure that everybody on the call understands what we actually did. First of all, under the Universal agreement, no movie is being pulled. The movies that go to PVOD at 17 days are going to stay in theaters, and we expect to still sell a whole bunch of tickets at our theaters even when movies are available on PVOD.

There are certain advantages to watching a film on a 40-foot screen and watching a film on a 40-inch screen. Our company has invested billions of dollars over the past few years to make sure that our theaters are in great condition, and that our fleet of theaters appeals to consumers. Similarly, I’ll remind everybody the conventional wisdom about streaming and PVOD and all this before the pandemic was — by the way, conventional wisdom from people who I disagree with but that’s a different issue. All theaters are an anachronism, why would anybody go to a theater? People want to stay home.

If the pandemic has taught us anything, it’s that people would do anything to get out of their house or their apartment. If you told me right now I could go spend three hours at a hardware store, I would tell you, that’s an exciting afternoon. And so movies aren’t going to get pulled from theaters. They’ll stay in theaters.

We’ll continue to sell tickets. On that score, yet another reminder, every house has a kitchen, every apartment has a kitchen, people go out to restaurants all the time. On the issue of when people find out that a film will be going to PVOD, remember that not all films will. So already you’ve unpredictability as to which films are going to go PVOD and which films are not going to go PVOD, especially if some other studios take very few films to PVOD, and even Universal itself has said that on many of their films, they won’t go to the home in 17 days.

By contract with Universal, they are not allowed to talk about a film being released to the home or the tablet or the cellphone or whatever other distribution channel, to your laptop, I guess. They’re not allowed to state that until after the 10th day of theatric release. So the only advertising for a movie through its first two theatrical weekends, when well more than half of the movie’s revenues are booked, we’ll say only in theaters. It’s only the Monday after the second weekend where Universal can start talking about the fact that this — starting this coming weekend, the movie would be available in theaters and at home.

And finally, one last important point in — buried in the press release — no not buried, it was there, but not sure everybody focus on it. In the press release announcing the agreement, we contractually reaffirmed with Universal the 74-day electronic sell-through window and the even later video-on-demand window than that. So other than the PVOD channel, those cheaper distribution vehicles that exist today for consumers to watch movies in other than theaters, are not going to slide forward. And there’s been enormous discussion and pressure within the industry over the past four or five years to bring those windows forward.

Those windows have been fully protected under the terms of the Universal agreement.

Eric WoldB. Riley FBR — Analyst

Perfect. Thank you. And just one last follow-up. As you think about the theaters reopening in the coming weeks and you think about kind of the combination of the operational changes you’ve made to reduce expenses going forward including kind of offset by some of the expected pressure from enhanced cleaning procedures, etc.

How should we think about, on a consolidated basis, the best you can domestically, what kind of a breakeven level attendance would look like?

Adam AronPresident and Chief Executive Officer

A simple question and complicated answer. First of all, on enhanced cleaning costs, they are sizable. I’ve seen others of our competitors state what they think they are for their chains. We think they are appreciably higher, in part, because we’re taking this so seriously.

We’ve got electrostatic sprayers and HEPA vacuums and upgraded MERV-13 air filtration filters that are quadruple the cost of what we had previously. We can’t eat all these costs. Ultimately, we’re going to have to pass these costs on the consumer as all businesses pass costs on a consumer. So I don’t think you necessarily should assume that enhanced cleaning costs are only going to come out of our bottom line.

In terms of breakeven, it’s a question I’d like to save for the next quarterly call when we can exactly and precisely identify our cost-cutting targets for 2021. The — as I said, our ambitions are high. We already have $35 million found in rent reductions. We’ve already knocked several hundred people off the payroll, and we’re cutting costs all over the place.

So we’ll be looking for hundreds of millions of savings, either in capital expenditures or operating expenses, and by definition, where we land will also affect the breakeven point. But let me just share with you this number. The real question is, are we better off open or closed? And by our calculation, if we’re more than about 25% of last year’s volumes, we’re better off open than shut because the theaters would be cash positive. They may not be generating as much EBITDA as they generated if we were — had last year’s attendance level, but they’ll be generating contribution to overhead, contribution to landlord rent payments.

And I haven’t seen any research that suggests that with new Hollywood content, with new titles that we’ll be doing less than 25% of last year’s attendance levels for any lengthy period of time. So I think that’s the most important number. If we cross 25% of last year’s levels, we’re better off open than shut. And of course, the sooner we can ramp up to much higher attendance level, the sooner it won’t be an issue are we better off open and shut.

It will be an issue of how much EBITDA are we generating and driving the business forward.

Eric WoldB. Riley FBR — Analyst

Perfect. Thanks Adam.


Next question is from Jim Goss with Barrington Research. Please go ahead.

Jim GossBarrington Research — Analyst

OK. A couple more on the topic today, Adam. When you say 80% of the revenues are box office revenues, are usually generated in the first three weekends, I wonder if that figure changes as it gets more compressed, if people do know that PVOD will be available. And I guess that’s always been the whole argument against a longer window because even though the majority are done upfront, that’s because of the longer lag.

And so I wonder what you think that might come down to. And what sort of PVOD sell-through do you think you’d need to make up for whatever it is you might give up? And are you suggesting today that whole issue might involve not just that particular film, but the broader group of films, so that’s how — part of the rationale as well? And maybe go with that first.

Adam AronPresident and Chief Executive Officer

OK. So on the 80% figure, that number’s a pretty good number but it does vary title by title. And on some movies, it’s only half of the business is done in the first three weekends. On other films, it’s almost 100% of the business is done in the first three week — by the end of the first three weekends.

Obviously, the bigger the film, the more successful the film, so more of its revenues will occur after 17 days. Having said that, the bigger the film, the bigger the potential theatrical revenue to come, that could actually cause a studio not to want to take the film to PVOD in 17 days. They might prefer to wait and milk the exclusive theatrical window for all they can get. Remember, there’s not a requirement here that all movies go to the home in 17 days.

It’s an option on a film-by-film basis for each and every studio who participate in something similar. And we’re putting them in the driver’s seat because, as I said, we believe that we’re well compensated if they go to the home. How much we need to essentially breakeven from cannibalization really depends on how big PVOD becomes or not and for what films is it allocated. In some circumstances, we would need for the incrementality to be very small for us to be ahead of the game on — of the admitted cannibalization that’s going to come.

Some people, clearly, who would have seen the theater are going to watch at home instead. But we’re getting paid for everybody who watches at home. And as I said, we’re getting a meaningful chunk of that revenue. And we do need some incrementality for this to prove to be a wise decision for AMC.

But it’s a reasonable amount of incrementality that we need. We’ve modeled this with very high cannibalization rates. And based on our agreement with Universal, we come out just fine. The terms are confidential, so I’m not at liberty to say what they are.

And so I — it would be wiser if I duck the third question, but as I said, we’ve modeled this very carefully. It’s gone through a tremendous amount of analysis. And we’re pretty sure we’re ahead of the game, not behind the game.

Jim GossBarrington Research — Analyst

OK. I appreciate that. A couple of others, I’ll give you the chance to talk about Mulan as you seem to be interested in. And also, is there room for the other exhibitors to do a similar deal or do you have first-mover advantage, and they would not — there would not be enough left that one of the studios would want to cut in more than one on the PVOD issue?

Adam AronPresident and Chief Executive Officer

I’m expecting this is going to become an industry standard. So I would expect that some of our competitors will do it, not all. That’s going to be up to the heads of those other exhibitors and the heads of each studio as to — that’s a private negotiation between lots of parties, multiple studios, multiple exhibitors. Our agreement is U.S.

only at the moment. But we did say in the release that we expect this to go to some European territories over the next — in the coming weeks or months, we’ll sit down with Universal and sort through that where it makes sense. I do think you should assume that we got a first-mover advantage because we were a first mover, and first movers do deserve to get a first-mover advantage. As I said, we think we made an attractive deal for AMC’s shareholders, and we know it’s an attractive deal for Universal.

This is something they wanted to do for a very long time. And it’s interesting, with all the letter writing and press statements, privately, our discussions with Universal were always amiable, respectful. We sell more tickets for Universal than anybody on the planet. We want Bond in our theaters.

We want F9 in our theaters. We want Candyman in our theaters. And there might have been a little posturing but there was no ill will between Universal or AMC during this whole process. And coming out of this whole process, both AMC and Universal are both all smiles and very much committed to continuing to sell a lot of tickets for AMC.

Speaking of our great friends, if I’m being honest. I just talked about Universal, and I’m going to talk about Disney, I would be really remiss if I just didn’t say the word Warner Bros. Because I think Warner Bros. is doing something heroic for the exhibition industry by releasing Tenet in a few weeks, assuming it doesn’t slip, but sounds pretty good for a Labor Day weekend.

And I just would like to thank everybody at Warner, Ann Sarnoff, Ron Sanders, Jeff Goldstein, Andrew Cripps, Toby Emmerich. Warner Bros. is right out there on the edge for exhibition. Now having said that, surprisingly, you might think I’m disappointed that Mulan is moving.

But AMC has no bigger friend in the planet than Disney. We sold more tickets for Disney than anyone else in the world. Disney provided us with more content last year than any other studio in the world. It’s a symbiotic relationship between Disney and AMC, where both companies will thrive if each company thrives.

Mulan was supposed to go to market and have its premiere in March. It got delayed and delayed and delayed. Their company just announced earnings. Just like AMC is under duress, Disney is under pressure too.

And at some point, they’ve got to monetize their movie products. They have a huge slate coming for the balance of 2020. We will benefit mightily from Disney titles in 2020, with or without Mulan. So we fully understand that we — what they did.

We would have preferred that they kept the movie as a theatrical movie only. But I think our biggest reaction overall to the Mulan announcement is how much it reaffirms our wise and smart decision last week to take the risk and sign on to PVOD, because, right now, Disney’s choice, under the current world order are these two choices. They can take it to the home or they can take it to theaters. They can’t do both.

Under the PVOD model, they could have taken it to theaters and taken it to the home, essentially at the same time, admittedly with this at least 17-day lag where a huge percentage of Mulan’s revenues theatrically would have been booked. As we go down the road with studios like Disney, I’m hoping that we take them out of the Hobson’s choice of having to choose between Disney+ or theatrical. I’d like to give them the opportunity to do an and, not an or. And I assure you that we would make far more money out of Mulan if that movie had been released to our theaters and then to PVOD, especially we got a cut, than we would benefit from Mulan just going straight to the home and are not seeing a penny from it.

Jim GossBarrington Research — Analyst

Interesting formula.

Adam AronPresident and Chief Executive Officer

I do realize that some of our competitors are anxious about this change. Change is always difficult for some to cope with. But as I said, we researched it. We’ve modeled it.

We thought about it. We’ve argued it. We’ve debated it. And we’re sure that we’re coming out ahead.

Jim GossBarrington Research — Analyst

OK. They have an extra issue because you have to pay for a Disney+ subscription and pay the extra $30. So that makes it even more interesting because it limits the audience.

Adam AronPresident and Chief Executive Officer

Well, that’s true. That’s one reason why theatrical release would still be attractive. And right now, they’re prevented from doing the theatrical release. But if the AMC-Universal thing becomes an industry standard, they would not be.

And by the way, the Universal-AMC agreement calls that movies cannot be retailed for less than $20. You’ll notice that Disney chose to retail Mulan for $30, $29.99. That’s interesting to us because that gives our theaters an easier point of price comparison. The other thing that we are especially relieved about is until the Mulan announcement, the Disney+ model was the Netflix model.

It was you pay some dollars a month and you have unlimited content. There was nothing transactional in it. So it’ll be hard to figure out how we might share in Disney’s Disney+ revenue stream. But what Disney just created with Mulan is a transactional PVOD release, where the consumer does have to pay a premium to watch Mulan.

That’s a very good thing for us because they — if they so chose, they could strike an agreement similar to what we’ve done with Universal without compromising any of the economics of the basic Disney+ option.

Jim GossBarrington Research — Analyst

Thanks so much. Appreciate it.

Adam AronPresident and Chief Executive Officer

Thank you Jim. I hope you’re well.

Jim GossBarrington Research — Analyst

You too.


(Operator instructions) Our next question is from Meghan Durkin with Credit Suisse. Please go ahead.

Meghan DurkinCredit Suisse — Analyst

Hi guys. I just wanted one for Adam and one for Sean. If other exhibitors, Adam, don’t sign on to a similar deal with Universal, how do you envision that proceeds? Like Universal then, would they sort of segment their titles and deliver the ones that they’re aiming for PVOD to just you, and then the tent poles go to everyone? How do you envision that would go? And then I have a follow-up question.

Adam AronPresident and Chief Executive Officer

I think that’s a question more smartly directed to Universal than to AMC. But I can tell you that under certain scenarios, if other circuits do not reach an agreement with Universal, then AMC stands to benefit even more and, potentially, dramatically more, than we do in an environment where everybody signs on to the AMC-Universal model. But I think that’s smarter for me to let Universal comment on the distribution of their films and their alliances with other exhibitors.

Meghan DurkinCredit Suisse — Analyst

Got it. So Sean, I just wanted to clarify on the comment you made on liquidity through 2021. Does that mean you have liquidity through the end of calendar ’21? And then just to — I just wanted to touch on the food and beverage strength that you’re seeing overseas. Where is that coming from? I’m assuming you’re not selling the expanded menus currently.

Is there alcohol that’s fueling that? Anything you can give us on that?

Sean GoodmanChief Financial Officer

Sure. So from a liquidity point of view, one thing I’ll give you that might be quite helpful. So we disclosed at the end of June, we had $498 million of cash available to us. Pro forma for the debt exchange transaction that goes up to over $700 million of cash.

And when you think about then our run rate, assuming that theaters remained closed, right, throughout the remainder of 2020, so we can — in that scenario, we continue to spend roughly $100 million per month. That will take us into early 2021. Obviously, we benefit from the — as a result of the debt exchange transaction, we benefit from the interest savings from PIK interest. That kicks in at various points in time during the year, so that will give us some additional liquidity as well.

So that should give you an idea of kind of how things look should everything remain closed right through 2020.

Adam AronPresident and Chief Executive Officer

And before Sean goes to the second question, I just want to weigh in, Meghan. We’re not done yet. We have identified other ways to bolster our liquidity if we need to bolster our liquidity even further. And these are options that we think are well within our grasp.

But of course, the modeling that Sean just described assumes that all of our theaters are shut. Already, that’s not true, right? Already a third of our theaters are open in Europe. We think all of our theaters will be open in — by Tenet’s August 26 release. And we ought to be able to open two-thirds of our — at least two-thirds of our theaters this month in the United States.

So we’re not going to be shut. So if our theaters are indeed cash-positive, that even further pushes the runway out later into 2021. I really do think that, subject to never relying on a forward-looking statement which is a good time to bring that up again, I think we’ve survived the corona crisis. And now we just have to get back to running the company really well.

And I say that either because of the liquidity actions we’ve already taken or the liquidity actions that are within our grasp if we need to take more. Now on food in Europe?

Sean GoodmanChief Financial Officer

Yeah. So just a couple of points on food and beverage in Europe. What’s interesting there is that some countries, because of the regulations, the audience is required to wear masks. And in some countries, they aren’t.

But we’re seeing that food and beverage strength across both, and actually in the countries where audience is required to wear masks, Spain, Italy, I think Germany, food and beverage growth is really in line with the rest of Europe. So that’s really pleasing to see. What we’re seeing is really in terms of transactions, a higher percentage of audience is purchasing food and beverage. There is a limited menu in certain of the countries, but it’s just a higher percentage of people purchasing food and beverage.

Bear in mind that obviously the attendance is lower than normal level just because of the library content that we’re showing. So it’s fairly early stages. But we’re very encouraged by this. And hopefully, we’ll see similar trends in the U.S.

when we open here.

Adam AronPresident and Chief Executive Officer

Never the underestimate the appeal of the aroma of popcorn slathered in healthy butter and salt, washed down with a Coca-Cola.

Meghan DurkinCredit Suisse — Analyst

Got it. Thanks.


Next question is from Jason Bazinet with Citi. Please go ahead.

Jason BazinetCiti — Analyst

I just had a question regarding some of the covenants in your — in the new first lien bonds. The language seems to suggest you might be contemplating asset sales potentially in Europe. Is that a reasonable interpretation?

Sean GoodmanChief Financial Officer

What — look, what I will say is the covenants were negotiated with our first lien bondholders to give us flexibility to do transactions that may be helpful for our ongoing liquidity going forward. Yes, according to the covenants, there are opportunities to sell assets. We’re allowed to do that. But if you look at the details in the covenants, there are certain restrictions on the cash flow from those asset sales in terms of what percentage goes to repay debt and what percentage stays in with the company.

But we do have the ability in some — we do have the ability to sell certain assets. And we do have the ability to keep some of the proceeds from those sales, yes.

Jason BazinetCiti — Analyst

Super helpful. Thank you.

Sean GoodmanChief Financial Officer



Next question is from Eric Handler with MKM Partners. Please go ahead.

Eric HandlerMKM Partners — Analyst

Thank you very much for the questions. So I want to touch on the Universal deal a bit more. So when I’m doing the math, when you look at the average ticket price you had last year and the average spend on food and beverage, and then took your margin on both of those lines, I get to a per person gross margin of $9.23. If you add on the profit associated with digital ticketing fees that goes even higher.

Now I can’t imagine universal’s willing to give you $10 when they’re only charging $20 for PVOD. So unless you’re getting a substantial reduction in film rents, how are you making profit on a Universal deal? And then secondly, are you getting paid for each transaction that occurs for PVOD by Universal or are you just getting paid on the PVOD transactions done in ZIP codes where you have theaters?

Adam AronPresident and Chief Executive Officer

So — like, the terms are confidential. So I can’t, as much as I’d like to help you model. Your numbers are right, right? We’re — for every cannibalized fellow, male or female, we lose $9. It could be more if they’re coming in Manhattan or Los Angeles.

And we’re getting paid something on PVOD attendees. I’m not allowed to tell you what that is. But since we can do the same math that you just did, I’ve been saying for four years, we would never do a PVOD deal that was bad for our shareholders. So I think you should assume, without being specific, that we knew the same math that you’re aiming at, and we would not have signed on to an economic program that we thought was a negative.

And to clarify your final question, I know I’m dodging a little bit, but I can’t release the terms. So I can’t release the terms. I can’t release the terms. But we’re getting paid on regardless of whether the PVOD customer would have gone to our theater or not, would have — lives in a ZIP code near our theater or not.

But of course, the exact structure of that and the other components of the agreement are not released and you don’t actually have — you have the loss of the cannibalization that you can calculate but you don’t have the inflows. And it’s the combination of the incrementality — the payments on incrementality, the payments in total against the cannibalization loss, and I think you — I’ve said that we’ve researched it, and modeled it and analyzed it as carefully as we can, we think we’re ahead of the game there. But what’s not even in our calculus, if this causes more movies to get released, to be greenlighted and released theatrically, then we’re so far ahead of the game here, so far ahead of the game. Because as I — is in that quote that I shared with you, and the examples that I gave you of so many — what could have been theatrical movies not being released theatrically, our industry was facing a circumstance, not just during this PVOD time, but looking ahead where we might see fewer theatrical movies being released.

And if fewer theatrical movies are being released, whether there’s PVOD or no PVOD, theatrical attendance will be lower, theatrical revenues will be lower. We’ve got a 25% market share in the United States. That’s very meaningful to AMC. So it’s extremely important to us that studios continue to release movies and if we can provide them with incentives to produce — to release even more movies to first make and then release even more movies, that’s where we — that’s — that dwarfs the PVOD economics, positive or negative.

But as I said, we think that the PVOD economics on their own are positive for AMC based on the deal that we cut.

Eric HandlerMKM Partners — Analyst

Got it. And then one question for Sean. When you think about your stated interest, not the cash interest, but the overall interest that you’ll be paying each quarter, you’ll have a reduction because of the redemptions that are being done, but you’ll see an increase because of the new debt that you now have. So net-net, what is your as-reported quarterly interest payment going to look like? And what is — what will be the cash component of that?

Sean GoodmanChief Financial Officer

So the cash — let’s start with the cash component. The cash component, if you assume that we pick interest on the new second lien debt, the cash component are when you compare before the debt exchange versus after the debt exchange and taking into account the new incremental first lien debt and your cash interest will be lower, lower by probably around $20 million, $30 million on an annualized basis, right? Because obviously you’ve got the significantly lower interest that you’re paying on the second lien debt because of PIK, but you’ve also got all the new interest that you’re paying on the new first lien instruments. When you look at the income statement amount, the interest is going to be a little bit higher. It’s roughly about 115, 120 basis points higher on the new second lien debt.

It’s quite apples-to-apples basis, so it’s about that 120 basis points higher just given the 10% versus the average of 6% and then adjusting for the exchange ratio. So you’ve got that impact, and then you’ll have the impact of the new first lien debt so you can kind of calculate it from there.

Eric HandlerMKM Partners — Analyst

Ok. Thank you very much.

Adam AronPresident and Chief Executive Officer

Thank you Eric.


And everyone, we have time for one more question. So our last question is from Chad Beynon with Macquarie. Please go ahead.

Unknown speaker

This is Aaron on for Chad. I just want to talk about A-List for a little bit. Given you’re…

Adam AronPresident and Chief Executive Officer

You want to talk about what? You broke up a little. You want to talk about what? Say again?

Unknown speaker

Can you hear me? Yeah, I wanted to talk about A-List a little bit.

Adam AronPresident and Chief Executive Officer


Unknown speaker

Yeah. Given your success with the program last year, are there any features you’re thinking about rolling out in the near term that you think could help drive attendance or engagement upon reopening?

Adam AronPresident and Chief Executive Officer

Yeah. And we’re going to share them with A-List members first before we share them with all of our competitors who are going to get a copy of this transcript of this call. But you should assume that we are going to be very aggressive in marketing offers to A-List members, the Stubs members and through our general customer base at large because we need to get them back in our theaters. And when we get them back in our theaters, they will just be surrounded by a massive amount of AMC safe and clean paraphernalia.

And we hope that they will look around our theaters and say, the theater has never been cleaner, and I felt good there. And so if we get them in our theaters, we think the experience that is created in our theaters will accelerate word-of-mouth as they tell all their friends, I went to a movie theater and, my goodness, that was — I enjoyed the movie and the theater felt great. And to do that, we’ve got to be very aggressive to win people back. So — and I think there’s — I think there would be a general agreement on this call that if you look at the past five-ish years, AMC has been a really good consumer marketer, whether it’s A-List or Stubs or other things that we’ve done, we’re a really good marketing organization.

Our marketing department continues to blow me away with how good our marketing materials look, the power of their thinking and designing offers for consumers. So without necessarily revealing exactly what they are, you should just assume that the words hyperaggressive are going to — should be connected to AMC in terms of convincing moviegoers to come back to AMC once we reopen in the States.

Unknown speaker

Got it. That’s helpful. Last one for me. As you think about the international operations, how do you think the recovery will be different from the U.S.? I mean you guys have talked about the higher — the strong CPP.

Any reasons why that shouldn’t be the case in the U.S. as well?

Adam AronPresident and Chief Executive Officer

No, there’s no reason why the U.S. should or should not perform differently than Europe on food. But I will tell you that within the various countries that we serve in Europe, even though it’s the same continent, and a couple of islands off the Northwest Coast called England and Ireland, the performance country-by-country is very different country-by-country. So if you ask me how the U.S.

will perform versus Europe, the virus is under better control in Europe currently than it is currently in the United States. So I think the ramp-up of attendance levels in Europe would logically come faster than it will come in the United States, but no one’s going to know exactly what that ramp is until we open. And we all can speculate, but there’s not one of us on this phone call who really knows what the state of play of the virus is going to be in the United States in October or November or December. We talk to our scientists and experts at Harvard and elsewhere almost every day, and we’re hearing very encouraging signs about rapid testing, rapid inexpensive saliva testing, therapeutic treatment improvements, could you get the virus, the prospects of vaccines being close at hand.

I was on a Harvard call yesterday, for a couple of hours with Sanjay Gupta and Dr. Anthony Fauci, who were sharing with some Harvard insiders their views as to what’s coming. There is a lot of talk that vaccines and therapeutic treatments and rapid testing are close. There’s also a concern that the virus is obviously not as well under control in the United States as it is in some other countries abroad.

So this is something we’re all going to learn together.

Unknown speaker

Got it. Thank you.

Sean GoodmanChief Financial Officer

This is Sean. I just want to come back to one thing. I was just looking at the numbers on the interest question from the previous question. I just want to clarify, right, the new first lien debt, the $300 million of first lien debt, 10.5%, that’s $31 million of interest payment, cash interest payment.

The cash savings that we get on the previous subordinated debt of $120 million, I’m talking everything on a 12-month basis. So effectively, from a cash basis, as a result of the transaction, the interest expense is down by about $90 million.

Adam AronPresident and Chief Executive Officer

Then you have the April financing as well.

Sean GoodmanChief Financial Officer

Sure. So I’m just performing for the debt exchange. The April financing obviously you’ve got another $500 million at 10 and a half percent, which you would adjust for as well. I just wanted to make that clear.

Adam AronPresident and Chief Executive Officer

Operator, we’ll take one more question if there is one.


There’s nothing in the queue at the moment. But if we did have one…

Adam AronPresident and Chief Executive Officer

Then we’ll let people go.


Very good.

Adam AronPresident and Chief Executive Officer

I leave you with one and only one thought. We are very close to theaters opening soon in the United States. See you at the movies. See you at AMC.

Thank you all for joining us today.


(Operator signoff)

Duration: 75 minutes

Call participants:

John MerriwetherVice President, Investor Relations

Adam AronPresident and Chief Executive Officer

Sean GoodmanChief Financial Officer

Eric WoldB. Riley FBR — Analyst

Jim GossBarrington Research — Analyst

Meghan DurkinCredit Suisse — Analyst

Jason BazinetCiti — Analyst

Eric HandlerMKM Partners — Analyst

Unknown speaker

More AMC analysis

All earnings call transcripts


Dune Shows WB Learned Nothing From Zack Snyder’s DCEU



Dune Shows WB Learned Nothing From Zack Snyder's DCEU

The handling of Dune and its necessary sequel shows Warner Bros. failed to learn its lesson from Justice League and their original DCEU plans with Zack Snyder. Despite the fallout of Snyder’s departure from the DC franchise, the studio handed another epic, bug budget sci-fi project to an auteur director without fully committing to the creative vision.

After Man of Steel, Warner Bros. announced a slate of director-driven DCEU projects surrounding Zack Snyder’s planned Justice League arc, seemingly committing to Snyder’s vision for the DC universe, but after a rocky start, the Snyderverse was abandoned, leaving the future of the DCEU in the lurch. While there was a specific plan in place for a grand culmination of Snyder’s 5-part Justice League story, including a number of spin-offs from other directors, Warner Bros. says there’s no plans to see this original plan to completion, meaning the story set up by the original slate of DCEU films will never be fully realized.

Related: The Snyder Cut Proves WB Killed Their Best Chance to Compete With Marvel

While WB gave auteur director Denis Villeneuve $165 million to adapt the first half of the epic sci-fi novel Dune, the studio decided not to approve the sequel until after they could see how the initial installment, only half the story, performed at the box office. This continues WB’s history of embarking on big director-driven projects without fully committing to the vision, an approach that is virtually guaranteed to ensure the resulting product will be less than its original conception, even if a Dune sequel still happens.

WB’s Failed Director-Driven DCEU Plan

Justice League Snyder cut snyderverse

After the success of Christopher Nolan’s The Dark Knight trilogy, Warner Bros. had Nolan develop a modern adaptation for Superman, and Nolan selected Zack Snyder as the director due to his approach with his adaptation of Watchmen. Man of Steel became the highest-grossing Superman movie, so Warner Bros. had Snyder develop a larger DCEU plan, which became Snyder’s 5-part Justice League saga. The story would center on Superman but would bring in the rest of the Justice League members, and a full slate of movies was planned, including Wonder Woman, Suicide Squad, Aquaman, The Flash, Cyborg, Green Lantern Corps., and a solo Batman movie. Warner Bros.’original DCEU plan was to follow the model established by Nolan with The Dark Knight trilogy and Man of Steel by bringing in directors with distinct styles to head each project, including David Ayer, Patty Jenkins, Rick Famuyiwa, James Wan, and Ben Affleck.

Batman v Superman: Dawn of Justice and Suicide Squad were among 2016’s top-grossing movies, but their polarizing reviews resulted in notoriously low Rotten Tomatoes scores, resulting in Warners taking drastic action to change plans for the rest of the franchise. The changes immediately impacted Justice League the most even though it was already in production, resulting in conflict with Snyder that eventually resulted in him exiting the project following a family tragedy, allowing WB to bring in Joss Whedon to drastically reshape the project in reshoots, abandoning most of the sequel set-up and erasing as much of Snyder’s distinctive style as possible. The fallout impacted almost all the remaining movies in the slate. Aquaman was already in production, but both Famuyiwa and Affleck left their respective movies. Versions of The Flash and The Batman are coming out next year, but both are drastically different versions than originally planned (and The Batman isn’t even part of DCEU canon)

Snyder’s plan was very clearly leading to a big culmination, with Batman v Superman: Dawn of Justice teasing a post-apocalyptic “Knightmare” future that had been conquered by Superman who was under the control of DC ultra-baddie, Darkseid. Snyder would eventually get the chance to release his intended version of the movie, the 4-hour long Zack Snyder’s Justice League, spurring excitement for what would have been, but with no plans for Snyder to return and the current slate servicing a different plan, Warner Bros. seems content to leave this epic set-up forever unresolved.

Related: The Latest Restore The SnyderVerse Trend Proves It’s Not Going Away

The odd part is Warner Bros.’ biggest successes with DC movies have always come from the bold visions of distinct directors like Richard Donner, Tim Burton, Christopher Nolan, and even Zack Snyder, while attempts to make more broadly appealing crowd-pleasers didn’t work, like Batman & Robin, Superman Returns, and Green Lantern. As if to double down on the point, Snyder’s Watchmen, Batman v Superman, and Justice League saw significant changes for their theatrical releases, only for Snyder’s director’s cuts to be nearly universally regarded as the superior product. Despite the problems caused by their decision to abandon the original DCEU plans, Warner Bros. didn’t learn their lesson and made similar decisions with Villeneuve’s Dune.

Warner Bros. Repeated Their DCEU Mistakes With Dune

Why WB betting big on Dune Villeneuve

Denis Villeneuve’s Blade Runner 2049 was lauded by critics, but bombed at the box office, bringing in less than $260 million from a $150 million budget, failing to hit the typical twice-budget break-even point. Blade Runner 2049 was Villeneuve’s highest-grossing movie, despite its box office failure, but his ability to adapt stunning high-concept sci-fi convinced Warner Bros. to hand him the reins to Dune, although they didn’t opt to film it back-to-back with a sequel, or even greenlight a sequel at all, despite knowing Villeneuve was only adapting half the book in the first movie.

While WB’s caution is understandable due to Villeneuve’s box office history, the willingness to begin work on the $165 Dune part 1 without committing to part 2 upfront immediately shortchanges the franchise’s potential. Under this strategy, the absolute best-case scenario was Villeneuve produces a monster hit with an incomplete story and WB has to start the sequel from scratch and can’t capitalize on Dune‘s performance for three years. In addition to the time delay, they also miss out on the massive cost savings of shooting back-to-back, reducing the overall profitability of both movies. The worst-case scenario would be the movie flops and the whole thing looks like a massive, ill-conceived blunder on the part of WB, who would have a massive bomb on their hands after entrusting a big-budget sci-fi epic to an auteur director whose last big-budget sci-fi epic also flopped. While Villeneuve and WB escaped harsh criticism for Blade Runner 2049 due to the movie’s quality, that likely wouldn’t be the case if Dune flopped, since the movie is only half the story of the Dune book, and adapting it would likely burn a chance for another director to take a swing at the property in the near future.

Meanwhile, committing to the whole vision up-front would have been better all-around, even if WB’s concerns came true and Dune flopped.  The cost-savings of back-to-back production would at least partially offset box office losses, audiences wouldn’t be deprived of the second half of the story, and there’s always the chance the sequel could be a bigger hit, salvaging the hypothetical losses from part 1. Like with Blade Runner 2049, the quality of the film would offset a lot of the criticism over the box office losses.

Dune had a solid box office opening and seems to have fair chances of getting a sequel, but it won’t be soon enough for audiences hungry for a sequel and may see a reduced budget, ironically missing out on the cost savings that could have accompanied a back-to-back sequel production. If Warner Bros. was willing to take the risk of the first installment, why not commit to the whole vision?

Warner Bros. Needs To Follow Through On Director Driven Visions

New Warner Bros. Logo

Warner Bros. has a history of being a studio that takes big swings on grand director visions, but changes in leadership in recent years, such as the departure of former Warner Bros. Pictures Group president Jeff Robinov (who brought iconic directors like Nolan, Affleck, Snyder, the Wachowskis, and others to the studio) has seen a rise in situations like Justice League and Dune. As if to punctuate the severity of the decline, Nolan decided to make his next movie at Universal after working with Warner Bros. exclusively for nearly 20 years.

Related: Nolan’s Massive Universal Deal Could Reinvent Blockbusters Post-Pandemic

The problem isn’t that the days of bold director-driven projects are in the rearview mirror at Warner Bros., those still exist, there’s even a new Matrix movie coming out December, but there is a concerning pattern of self-sabotage of big projects brought on by a lack of trust in their directors. Situations like Justice League and Dune make the studio’s decision-making suspect and erode consumer confidence in their projects, particularly for big IP adaptations.

The whole thing is also incredibly short-sighted. It’s common for a franchise to overcome early stumbles only for those movies to be well regarded after the franchise finds its footing. The Marvel Cinematic Universe had several films in Phase 1 that were considered underwhelming at the time and Fast and Furious powered through several films with a mediocre reception to become one of the biggest franchises in film. Even films like the original Blade Runner got poor reviews and underperformed at the box office and are now considered required viewing. In the case of the DCEU, Warner Bros. was scared away from Zack Snyder’s plan because of reviews for Batman v Superman: Dawn of Justice, but that movie was so impactful in the zeitgeist that WB’s attempts to pivot away from Snyder couldn’t outpace their momentum, and they eventually had to cave to demands for the Snyder Cut when simply committing to the plan and finishing the plan they started would have seen Zack Snyder’s arc completed by now, allowing them to start fresh without having to deal with the unending reminders of the incomplete Snyderverse.

Fortunately, Dune is well received and performing well at the box office, which bodes well for sequel potential, but the lost time, momentum, and wasted money will ultimately hold back the complete vision from what it could have been if they’d produced the movies back-to-back. If WB wants to retain (or regain) its reputation for being the studio that produces this kind of movie, they need to gain some confidence and stop with the half measures and deliver on the director visions they sell to audiences.

Next: Why Warner Bros Losing Christopher Nolan Is Such A Big Deal

No Way Home Trailer Hopes Mocked By Spider-Man & Doc Ock Meme

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Capturing the entertainment proclivities of racing fans



Simon Fraser, XB Net: Capturing the entertainment proclivities of racing fans

Simon Fraser, XB Net: Capturing the entertainment proclivities of racing fans
Image Source: XB Net

Simon fraser, Senior Vice President of International at XB Net, discusses how XB Net is taking the sting out of protracted integration processes for sportsbook operators.

Backed by 1/ST Technology, Fraser walks us through the ways that XB Net is helping bettors to engage in all aspects of horse racing, before explaining how the company plans to use the Breeders’ Cup to broaden North American racing’s international reach.

SBC Americas: For those that might not know, can you tell us a little bit about XB Net? What’s the story behind the company and which markets are you targeting?

SF: XB Net provides a comprehensive North American racing service to international gaming operators across both fixed-odds and pool betting. The service covers the popular codes of thoroughbred, quarter-horse, harness and greyhound racing. Our key markets currently include the UK, Ireland, France, Italy, Turkey, Australia and New Zealand.

We manage the rights and distribute this premium content (data, odds, live broadcast and video streaming) on behalf of a broad progressive portfolio of global partners, allowing them to deploy ground-breaking technologies to attract and educate new audiences.

We’re lucky enough to be backed by a true powerhouse in 1/ST Group, whose consumer-facing brand forms a world-class technology, entertainment, and real estate development company with thoroughbred horse racing wagering at its heart – anchored by best-in-breed horse racing operations at the company’s premier racetracks, including (to name but a few): Santa Anita Park, Gulfstream Park – home of the Pegasus World Cup Championship Invitational Series; Laurel Park and Pimlico Race Course – site of the legendary Preakness Stakes.

And now the stateside stage is set for this year’s flagship finale at the Breeders’ Cup World Championships (5-6 November) in Del Mar. It all represents 1/ST’s continued movement towards redefining thoroughbred horse racing for a modern audience, and optimizing the ecosystem that drives it.

As a result, we can draw from an unrivalled network of over 60 North American tracks which account for over 75% of U.S. racing, opening the door to many of the planet’s most prestigious horse races.

SBC Americas: How is XB Net ensuring that it stands out from the competition?

SF: That aforementioned deep well of resources and racetracks isn’t a bad place to start from when you’re trying to positively delineate XB Net from the competition. And as a basic premise, we are planning to work with our partners across the globe to increase the awareness of North American horse racing, both as an exciting sport and as a high-quality betting medium.

By harnessing low-latency feeds from more than 2,500 meetings, showcasing over 25,000 races per year, North American racing is steadily accruing more global viewers and bettors, especially after a spell in which the pandemic has badly disrupted, if not decimated, so many events on the typical sporting calendar. While many of those sports have since recovered from the treatment table, North American racing – which mostly continued unaffected during the outbreak – has largely retained its enlarged audience share.

In the UK, some of that success and enduring retention can be attributed to the popular nightly pictures on Sky Sports Racing, whose friendly, informative GFN was instructive in “home-schooling” many new viewers to North American racing during the lockdowns.

Accordingly, with many heads having been turned by North American racing, the sport is now pulling up a comfortable seat in their wider entertainment choices. Particularly considering the nature of its rapid-cycling events, which conveniently fill the recreational gaps for drop-in audiences who might like a bet. Providing the right content at the right time remains so important, wherever you stick your pin on the international map.

XB Net’s steady stream of short-form premium content captures eyeballs and improves digital hang-time, allowing our partners to engage untapped audiences, deliver 24/7 horse racing, and also guard against any unforeseen impediments to the global sporting calendar.

SBC Americas: Tell us about your EasyGate™ products. How are they eliminating the complexity of North American racing?

SF: EasyGate is a breakthrough multitote technology and software architecture, providing structured race content, betting pathways and secure track video streams to our partners. Long story short, EasyGate navigates an intuitive path through the complexity of North American racing (from streaming formats to different data sources and their multivariate components), and also simplifies access to other content from other countries.

We give operators everything they need to succeed and take the sting out of protracted integration processes – just plug in and go, whatever the channel.

SBC Americas: Tote betting, and arguably horse racing in general, across the UK has had a tricky few years. How is XB Net making sure that racing is still the ‘product of choice’ for your partners?

SF: Our ability to present North American racing as a fixed-odds product allows us to take advantage of the UK market where Tote betting will always be a marginal betting product. Elsewhere, innovation around in-running betting can really allow horse racing to catch-up on any lost ground and reconsolidate its market position.

The complex variables of horse racing have meant this sport, for so long the retention backbone of many operators, hadn’t previously been able to seize the opportunities that other sports have secured with in-play. After all, nowadays, betting products must smoothly transition from pre-play to in-play, which is why operators must employ the latest trading tools and reactive in-play odds to attract modern-day audiences.

XB Net has now successfully trialed a ground-breaking feed that couples the Starting Price with the best of automated trading via Total Performance Data’s (TPD) astonishing array of consequential in-running analytics, including stride length, stride frequency and sectional timings enabled by saddle-cloth GPS tracking. These variables are accordingly harvested in-play by TPD’s machine-learning trading tools whose algorithms train themselves on race pace for precise pricing that delivers a distinct step-change in live fixed-odds wagering.

SBC Americas: How does your company help bolster revenue and support sometimes struggling traditional racetracks?

SF: I’d take issue with the word struggling. On the US side of the pond, the prize money at most tracks is very positive and betting turnover is up significantly. As a core technology in the wider arsenal of 1/ST and 1/ST Technology, XB Net is part of a broader company wide goal to sustain a successful business model while ensuring all stakeholders who work in the industry are cared for and supported.

That means delivering a fresh and holistic racing experience for the fans which captures the entertainment proclivities of every age group at the racetrack, especially the younger generation that is coming through. We are embracing this challenge and opportunity (sometimes two sides of the same coin!) at every touchpoint we have with our customers.

Just take our recent efforts with Historical Horse Racing (HHR) and how these terminals can provide workarounds for their local racetracks, increasing revenues where slots aren’t legal. As a result, HHR games can bolster revenues at traditional racetracks through direct new gaming revenue for operators who are directly tied to horse racing.

We also pay back a percentage to each host racetrack for every single wager placed, using each respective track’s historical races. This is akin to the simulcast live horse racing host-fee structures, in addition to paying horse racing industry stakeholders for the requisite historical race information data (e.g. Equibase).

At the tracks, our teams are working to modernize the horse racing experience, leveraging technology to bring an on-demand, digital experience to our customers. Ultimately, we’re targeting a growing audience looking for quick-fire action and engaging gameplay experiences driven by end-user thinking and the best interfaces that support that. Providing opportunities for consumers to engage in all aspects of horse racing – from live racetrack visits to simulcast viewing, online wagering and mobile – is the best way to grow our sport in a modern world.

SBC Americas: XB Net holds the international distribution rights for the upcoming Breeders’ Cup. In what ways is this agreement helping to broaden North American racing’s international reach?

SF: Self-evidently, our three-year contract extension with the Breeders’ Cup was a welcome endorsement of our team’s efforts over the past few years. The agreement comprises worldwide broadcast and video-streaming distribution rights from the Breeders’ Cup whose 2021 renewal, consisting of 14 Championship races and over $31 million in prize money and awards, is fast-approaching (5-6 November) at Del Mar racetrack in California next month. Del Mar is one of my favourite venues in all of sport, and its most common epithet of “where the surf meets the turf” tells you what sets it apart.

When the standard-bearer for elite North American racing selects you to further broaden the international reach of its world-class festival, you must be doing something right, and I’m pleased to say that sports fans and bettors around the globe can look forward to even more coverage of the World Championships.

You’re even seeing a suite of domestic host broadcasters (for example Sky Sports Racing and ITV in the UK) broadcasting all 14 races this year, which is ideal for growing the sport. Of course, the increasingly international make-up of these fields, bringing the best horses together from all around the world, only adds to the allure and transcendent appeal of the Breeders’ Cup for global audiences.

SBC Americas: And how will you help optimise and increase the returns to North American racing following what has undoubtedly been a challenging economic period?

SF: For us, it’s all about expanding markets and coverage, coupled with enhancements to our cutting-edge technologies. We’ve already launched in India, while we also have new Tote and fixed-odds roll-outs set for Asia and Africa.

Regarding the race tracks themselves, the more we can add to the service, the better-value our proposition will inherently become through sheer economies of scale. Again, we can return these cost advantages to the tracks. That even applies in Australia, where we’ve recently agreed a deal to add thoroughbred racing from the principal racing state of Victoria to our service which runs off the same infrastructure. We’re thrilled to be able to add more world-class contests for our partners, with the Victorian Spring Racing Carnival already capturing players’ imaginations.

As for what’s under the hood, we’re always refining and fine-tuning, despite having some of the most durable and trusted tech around. For instance, we actually just classified our pari-mutuel totalisator and fixed-odds wagering platform as a “legacy” product.

Instead, we’re replacing it with a next-gen wagering platform that will play a key role as 1/ST Technology continues to deliver on our vision to build upon the strengths of our current gambling platform while also extending its capabilities (e.g. quickly adding new bet types) – increasing speed to market, enhanced support of our customers’ needs, and unlocking the ability to efficiently onboard new consumers via verticals such as sports betting, esports, and other emerging opportunities. In short, it will allow us to react to the market with peerless agility.

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Window on Arts & Entertainment: Oct. 14, 2021 | Diversions



Window on Arts & Entertainment: Oct. 14, 2021 | Diversions

The Majesty of Rock set to perform at First Friday Seminole

SEMINOLE — The Majesty of Rock, one of Florida’s most prestigious bands, will salute the music of Journey and Styx at First Friday Seminole, on Friday, Nov. 5, 6 to 9 p.m., on the main street in front of Studio Movie Grill at Seminole City Center, 11201 Park Blvd. N., Seminole.

Sponsored by Seminole City Center and The Rotary Club of Seminole Lake, this will be the final First Friday Seminole of 2021. The event will feature a variety of Seminole City Center merchants, food, prizes, and games, as well as a special concert by The Majesty of Rock. Attendees are asked to bring their own chairs. Coolers are not allowed. Vendors other than Seminole City Center tenants are not permitted.

The Majesty of Rock features the voice of John D’Agostino, coupled with the exceptional musical talents of four equally sophisticated and experienced musicians. That combination soon propelled the group to become one of the premier Journey reverence bands of our time. The band strives to re-create the exact sounds and nuances of Journey. Their passion for authenticity and attention to detail go a long way toward ensuring that the audience feels like they’re at a real Journey concert.

While the band has enjoyed performing the music of Journey, front man John D’Agostino also loves another American super group: Styx. Turns out the rest of the band are huge Styx fans, too. So, they began adding some of Styx’s best tunes to their already expansive repertoire of Journey material.

CWP to stage ‘Vanya and Sonia and Masha and Spike’


The cast and crew of the Carrollwood Players Theatre production of “Vanya and Sonia and Masha and Spike” include, front row, from left, Kaedin Cammareri, stage manager; Jason Goetluck as Spike; and Pauline Lara as Nina; and, back row, Se’a Ryan as Sonia; Stephanie Russell Krebs as Cassandra; Kenneth Grace as Vanya; Kari Velguth as Masha; and Alicia Spiegel, director.

TAMPA — Carrollwood Players Theatre will present its production of “Vanya and Sonia and Masha and Spike” by Christopher Durang, running Oct. 15-30, at the theater, 4333 Gunn Highway, Tampa.

Tickets are $24. Tickets now on sale at Performances will be Fridays and Saturdays, 8 p.m.; and Sundays, 2 p.m. For information, call 813-265-4000 or visit

“Vanya and Sonia and Masha and Spike” won the 2013 Tony Award for Best Play.

Middle-aged siblings Vanya and Sonia share a home, where they bicker and complain about the circumstances of their lives. When Marsha, their movie-star sister, swoops in with her new boy toy, Spike, old resentments flare up, eventually leading to threats and chaos. Contributing to the excitement are a sassy maid who can predict the future, and a lovely young aspiring actress who can’t. Audiences will discover why Durang is lauded as the master of mining the absurdities of human folly.

Presented with the support of the Arts Council of Hillsborough County and the Hillsborough County Board of County Commissioners, this production will be directed by Alicia Spiegel.

“‘Vanya and Sonia and Masha and Spike’ is not exactly a well-known show, and the title can be a bit hard to remember … but audiences won’t soon forget the hilarious storyline,” Spiegel said. “I think everyone will relate to the family/relationship dynamics in this modern comedy laced with emotional baggage and heartfelt moments.”

The cast features Kenneth Grace as Vanya, Se’a Ryan as Sonia, Kari Velguth as Marsha, Jason Goetluck as Spike, Pauline Lara as Nina, and Stephanie Russell Krebs as Cassandra.

“Our cast has been perfecting their characters for almost a year a half since we were supposed to put this show on in April 2020 before the world changed,” Spiegel continued. “Luckily, CWP has decided to put it on this season and we are very ready to entertain audiences. They will be treated to sibling rivalry, a sexy young man barely wearing anything, a clairvoyant housekeeper whose predictions can’t be trusted, and a sweet girl next door who doesn’t know what she’s in for.”

“Vanya and Sonia and Masha and Spike” is presented by special arrangement with Dramatists Play Service Inc., New York.

Carrollwood Players offers a limited number of free tickets to every performance for low-income families receiving Florida SNAP benefits. For more information, visit

Syd Entel Galleries to present Borowski glass exhibition

SAFETY HARBOR — An opening reception for a new glass exhibition by the world-famous Glass Studio Borowski will take place Friday, Nov. 12, 4 to 7 p.m.; and Saturday, Nov. 13, 11 a.m. to 5 p.m., at Syd Entel Galleries and Susan Benjamin Glass Etc., 247 Main St., Safety Harbor.

The Borowski’s “Odd Birds Walk of Fame,” a tribute to 20th century celebrities in glass, will run through Nov. 27. The show is open to the public. Gallery hours are Tuesday through Friday, 9:30 a.m. to 5 p.m.; and Saturday, 10 a.m. to 3 p.m. For information, call 727-725-1808 or email

Borowski is one of the leading modern glass studios worldwide. Stani Jan Borowski transforms the iconic Fat Gonzo light object into the wildly successful Odd Bird Series. The Odd Bird series has continued to grow into a collection of 22 famous celebrities from the world of art, music, media and science. These hand-blown glass creations are a work of art, unique and distinctive. All are wildly imaginative with recognizable characteristics of the many famous characters, such as Pablo Picasso, Vincent van Gogh, Elton John, Micheal Jackson, and Marilyn Monroe.

In addition to the Odd Bird Series, the gallery will have on hand a huge selection of work from the Borowski art objects, studio line and outdoor collection.

Cool Art Shop presents artisan holiday ornament tree

DUNEDIN — The Professional Association of Visual Artists will celebrate the upcoming holiday season with the annual Holiday Ornament Tree featuring handcrafted artisan ornaments, holiday décor, small gift items, and holiday greeting cards by various PAVA fine art and fine craft artists.

The tree is on display at The Cool Art Shop, 1240 County Road 1, Dunedin, in the Independence Plaza Square, through Thursday, Dec. 23. An open house reception will take place Friday, Oct. 15, 6 to 8 p.m., at the shop.

In addition to the Holiday Ornament Tree, The Cool Art Shop also displays and sells PAVA’s artists’ artwork which is comprised of an impressive collection of both visual and functional art for sale in both 2D and 3D mediums including painting, ceramics, photography, mixed media, drawing, pastels, sculpture, and jewelry in all price points. The artwork is rotated on a 6- to 8-week basis to keep the artwork fresh and new. Shop hours are Wednesday through Saturday, 11 a.m. to 4 p.m.

PAVA is a nonprofit organization run by volunteer artists to serve local artisans and support the arts community in the Tampa Bay area. It provides exhibition, education and grant opportunities for its members. Additionally, PAVA supports local art centers, and is a local sponsor of the Pinellas County Regional National Scholastic Art Awards where scholarships are provided to students for art instruction. Visit

Mat Kearney concert canceled

CLEARWATER — The Mat Kearney concert scheduled at the Nancy and David Bilheimer Capitol Theatre on Wednesday, Nov. 3, has been canceled.

Ticket holders will be contacted about refunds. For more information, visit

Creative Clay virtual exhibit opens

ST. PETERSBURG — Creative Clay presents “Celebrating Disability Employment Awareness,” October’s virtual exhibit, featuring artwork by Creative Clay’s member artists who actively create, market and sell their work. The exhitib opened Oct. 9.

This new exhibit coincides with National Disability Employment Awareness Month. According to the United States Department of Labor, the theme this year is “America’s Recovery: Powered by Inclusion,” which reflects the importance of ensuring that people with disabilities have full access to employment and community involvement during the national recovery from the COVID-19 pandemic.

Creative Clay promotes inclusion by empowering its artists to create art that is exhibited in its Good Folk Gallery, exhibited throughout the community and online, and market themselves as working artists. Many of Creative Clay’s member artists engage in training for potential employment. Creative Clay’s artists receive commission on all works sold.

NDEAM is held each October to commemorate the many and varied contributions of people with disabilities to America’s workplaces and economy. Employers, community organizations, state and local governments, advocacy groups and schools participate in celebrating NDEAM through events and activities centered around the theme of America’s Recovery: Powered by Inclusion.

Creative Clay’s Virtual Gallery also includes the artwork of many of Creative Clay’s member artists. All artwork is for sale through our online gallery at

St. Pete Arts Alliance awards to help young artists

ST. PETERSBURG — Awards received from the St. Petersburg Arts Alliance’s Funding Futures Program allowed 14 talented Pinellas County students to attend an arts camp this summer.

These students aspire to be musicians, actors, dancers, writers or visual artists. Creative Clay, American Stage, St. Pete MAD and others nominated creative, aspiring at-risk and/or low income students to attend their arts programs for the summer while parents of these students filled out applications showing artistic and financial need.

St. Petersburg Arts Alliance’s Funding Futures programs are dedicated to helping students nurture their creative interests and develop their expressive talent by providing funding to eligible students and connecting them to local after school arts programs or summer arts camps.

“It’s not just about the art for these students,” said Tracy Kennard, associate director of the St. Petersburg Arts Alliance. “It’s about gaining confidence, understanding collaboration and feeling compassionate towards others and how the simple act of learning new artistic traits, can teach skills that are the building blocks of a promising future in any industry.”

The St. Petersburg Arts Alliance’s Funding Futures Student Award program is designed to identify and encourage talented at-risk and/or low income emerging artists, ages 10-17 in Pinellas County seeking St. Petersburg programs in the categories of dance, music, jazz, voice, theater, digital arts, photography, cinematic arts, literary or visual arts. Funding Futures is open to all talented artists regardless of ethnic, social or economic background, or ability/disability.

Major funding sources from Tampa Bay Times Employee Matching Gifts, Suncoast Credit Union Foundation, and the Jacarlene Family Foundation have helped build the Funding Futures Grant Program for the past six years. For information on supporting this program, visit

Livingston Taylor, Tom Chapin concert rescheduled

CLEARWATER — Due to a scheduling conflict, Livingston Taylor and Tom Chapin have rescheduled their concert at the Nancy and David Bilheimer Capitol Theatre.

Tickets purchased for the concert on Friday, April 1, will be honored on the new date, Sunday, April 3, at 8 p.m. Tickets, starting at $29, are on sale now. Visit

Sinbad show postponed

CLEARWATER — The Nancy and David Bilheimer Capitol Theatre recently announced stand-up comedian Sinbad has postponed his upcoming performance scheduled for Saturday, April 16, at 8 p.m.

Tickets will be honored on the new date to be announced soon. For more information, visit

Steep Canyon Rangers reschedule Capitol Theatre show

CLEARWATER — The Nancy and David Bilheimer Capitol Theatre recently announced that the Steep Canyon Rangers concert originally scheduled for Saturday, Nov. 13, at 8 p.m., has been rescheduled.

Tickets will be honored on the new date Saturday, Nov. 5, 2022, at 8 p.m. Tickets, starting at $25, are on sale now. Visit

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