Why Are U.S. Theaters Battling Disney Over “Iron Man 3″?

In the midst of a nationwide slump in ticket sales, AMC (PINK: ACFL) and Regal Theaters (NYSE:RGC) are going to battle with Disney (NYSE:DIS) over the highly anticipated ”Iron Man 3″ release. Though the blockbuster was expected to kick off the summer season in two weeks, the two top theater chains have stopped selling advance tickets until they resolve an ongoing revenue-sharing dispute.

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At the heart of the dispute is an aggressive stance by Disney on the numbers it will receive for “Iron Man 3,” expected to have a huge opening weekend and follow with earnings that could reach above $400 million. Deadline Hollywood reports that Disney has not negotiated a new contract with the top theaters in years and considers itself on the short end of present and future releases (including the next “Star Wars” installments).

Yet AMC and Regal, which together control over 30 percent of U.S. theaters, have not blinked in the standoff.  As with any labor negotiations, their strength comes in numbers. On Wednesday, AMC announced it would stop advance ticket sales for the newest “Iron Man” picture starring Robert Downey, Jr. because of Disney’s hard-line stance on the revenue share. AMC CEO Gerry Lopez had some choice words for Disney in a report by the L.A. Times

“Clearly, [Disney is] under some kind of financial pressure,” Lopez said. “The depth and the breadth of the ask puts us in a very, very uncomfortable situation.” While the reference to Disney’s financial situation follows reports of studio layoffs, the company appears strong amid steady stock growth and smart investments.

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Yet much is riding on “Iron Man 3,” the latest installment in a highly lucrative franchise for Disney. Earnings topped $630 million domestically for the first two films in the series (against $340 million in production costs) and the number for the third is expected to top the figures of either picture.

That explains the posture in negotiations with theaters. Disney believes it has leverage with “Iron Man 3″ as well as “Star Wars” and the Pixar series. Domestic ticket sales are down at least 11 percent in 2013 according to Hollywood.com, suggesting a need for both sides to come to terms quickly. “Iron Man 3″ is slated for a May 3 release.

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