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Amazon Reportedly Considering Deal With Top Movie Theater Chain in India

Reuters reported early on Tuesday that's (NASDAQ: AMZN) "India arm is in talks with several domestic players in film and media distribution including cinema chain Inox Leisure Ltd for a potential stake, the Indian Express newspaper reported on Tuesday, citing sources."

Inox denied that it was in any discussions with Amazon India, Reuters said, while Amazon India didn't immediately respond to the news agency's request for comment. Of course, we'd expect denials even if the information is accurate. Companies nearly always attempt to keep these types of discussions confidential.

Image source: Getty Images.

Inox Leisure is the No. 2 multiplex chain in India

Inox is India's second-largest multiplex chain by number of screens, behind PVR Cinemas. Inox had 153 multiplexes with 648 total screens in 69 Indian cities, as of March 2020.

For some context on relative size, in 2019, PVR had 812 movie screens, Inox Leisure had 612, and the No. 3 player, Carnival Cinemas, had 412, according to Statista.

Inox has "reported a net loss for at least five consecutive quarters since March 2020, when a nationwide coronavirus lockdown was imposed," according to Reuters. This information, of course, isn't surprising, as movie theaters across the globe have been one of the industries hardest hit by the pandemic.

Does it make sense that Amazon is interested in an Indian movie theater chain?

At first glance, it wouldn't seem like the e-commerce and tech giant would be that interested in getting into the movie theater chain business. A movie studio or production company would seem a better fit, as that type of acquisition or stake would expand the company's content library for its Prime Video streaming service.

Indeed, in May, Amazon announced that it was acquiring famed U.S. movie studio MGM for $8.5 billion. That deal immediately struck me as a highly synergistic, as content is king in the video-streaming business.

However, it doesn't seem out of the realm of possibilities that Amazon could be interested in acquiring a stake in either Inox or another similar Indian company involved in movie distribution.

India presents an attractive market in general due to its size -- it's the second most-populous country in the world -- and population dynamics. Big waves of consumers in this country of about 1.4 billion people continue to move up into the middle class, and this dynamic should continue for some time.

The country is one of the fastest-growing markets for Amazon and has a long runway for growth given the population dynamics mentioned above.

Moreover, the pandemic has presented financially strong companies an ideal opportunity to make acquisitions or acquire stakes in companies that are struggling because they are involved in businesses that have been particularly hurt by the global crisis. Some companies are probably considering making deals they'd not have otherwise considered had the pandemic not presented them with certain opportunities they view as financially attractive.

Whether or not Amazon (which is scheduled to report its second-quarter results on Thursday after the market close) makes a deal with Inox Leisure or another Indian movie theater chain remains to be seen. However, it makes perfect sense that the e-commerce titan would be on the hunt for attractive deals of some kind in the entertainment realm in India.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.


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