Cinemas evolve, do not die

Girl is watching a comedy movie in the cinema with her friend.

Rgstudio | E+ | Getty Images

LOS ANGELES – Movies are still big. It’s the multiplexes that are getting smaller.

Since 2019, the number of total screens in the US has fallen by around 3,000 to just under 40,000.

This consolidation was a direct result of the Covid pandemic, which temporarily closed cinemas and sparked a surge in streaming subscriptions. A number of regional chains have closed for good, while others have had to reassess their financial footing. For many, that meant closing sites or selling leases.

“Think of the retail industry out there in general, it’s repositioning, you don’t have that many stores of the same brand in the market,” said Rolando Rodriguez, chairman of the National Association of Theater Owners. “Consumers are a lot more selective and I think you’re going to stop seeing those 30 plexes for economic reasons.”

Rodriguez said most newly built locations will have between 12 and 16 screens, and those with larger, pre-existing floor plans will seek to reallocate some space for additional moviegoer activities such as arcades, bowling alleys or bars.

Theaters have been forced to innovate even as Hollywood production returns to normal and studios have more films available for release than they could in the earlier stages of the pandemic.

As space contracts are finalized, cinema operators are investing in the basics, improving sound, picture quality and seating, as well as strengthening food and beverage offerings, events and alternative programming. The aim is to improve the basic experience for cinema-goers regardless of the type of ticket purchased.

“We’ll do better as people get used to seeing it,” said Larry Etter, senior vice president of family-owned regional chain Malco Theaters. “And I think that will happen. I think we’re going to recreate the usual effect of going to the movies on Friday night or Saturday night or whatever.”

The premium push

The industry is already seeing improvements in ticket sales. According to data from Comscore, the box office topped $958.5 million in ticket sales in 2023 through Monday, up nearly 50% year over year and down just 25% from 2019.

This is a significant improvement from a meager $98.7 million at the box office over the same period in 2021.

Foot traffic has also improved but remains below pre-pandemic levels. In the two decades leading up to the pandemic, the industry sold an average of 1.1 billion tickets a year, according to data from EntTelligence. Even when Covid restrictions were lifted in 2022, just over half that number of tickets were sold for the year. And ticket sales should increase in 2023 as studios release more films.

While cinema operators are happy about the increase in studio production, they no longer take the audience for granted.

To this end, operators have started upgrading projectors. In recent years, cinema operators have removed traditional digital projectors and installed laser units, citing cost savings and better image quality for moviegoers over time.

“It’s a bit pricey, but it will produce a better product on screen,” said Malco’s Etter. “The more light you have, the clearer everything is and the better it is to see. And it will be much more economical. It’s sustainable because you use about 60% of what you used to use.”

Etter explained that traditional digital lightbulbs need to be replaced after around 2,000 hours and produce so much heat that theaters have to pay more to air-condition the projector rooms. And laser components have a lifespan of 20,000 hours, so they can work for years without replacement.

Many theater operators told CNBC they are planning similar sound system upgrades and said they have partnered with companies like Dolby to bring quality speakers to their auditoriums.

“We’ve invested in Dolby Atmos, we’ve invested in new screens, we’ve invested in laser projection,” said Rich Daughtridge, President and CEO of Warehouse Cinemas. “For me, that’s the baseline. I think you have to create the best audio and visual experience you can create to motivate people to spend money to go to the cinema.”

General atmosphere during the private IMAX screening of the film: ‘First Man’ at IMAX AMC Theater on October 10, 2018 in New York City.

Lars Niki | Getty Images Entertainment | Getty Images

Across the industry, theater chains large and small are replacing outdated stadium seats with lounge chairs to improve the overall cinema experience.

“[We are] We really look at our theaters and make sure they’re all amazing,” said Shelli Taylor, CEO of Alamo Drafthouse. “So if they don’t have loungers, we go in and stock up. We’re doing a face lift where needed and just really freshening up and making sure we continue to provide the premium experience that people love and have come to expect from the Alamo.”

These improvements are part of a broader trend that began before the pandemic. Consumers are increasingly opting for premium cinema experiences for blockbuster feature films, choosing to spend more money to see films on larger screens or in specialized cinemas.

In 2022, 15% of all domestic tickets sold went to premium shows, with the average ticket costing $15.92, according to EntTelligence data. A standard ticket averages $11.29.

So far in 2023, that premium ticket average is higher – $17.33 each – because so many moviegoers have seen it Disney’s Avatar: The Way of Water in premium formats and 3D.

Event cinema, niche programming

Big blockbusters have always been a driving force in cinema ticket sales. Before the pandemic, movie theater owners relied heavily on studio advertising—trailers, TV spots, and posters—to promote content and attract moviegoers to theaters. Now they’re putting more into that mix.

Loyalty programs, direct marketing, and special events are some of the recent tactics operators are using to attract viewers. AMC launched its first-ever advertising campaign in 2021, starring Nicole Kidman and the slogan “We Make Movies Better.” The company invested around 25 million US dollars in the campaign.

Budget-conscious smaller chains need to be a little more creative.

“I’ve had many discussions with distributors about better and more efficient ways to market their films,” said Warehouse’s Daughtridge. “Often that’s data marketing and paid social, better trailer placements and [putting] Tickets on sale at the right time.”

“I think there’s a lot of low-hanging fruit,” he said of email lists, loyalty programs, and social media for personalized marketing.

The Warehouse, which will soon be opening its third location, has also run promotions ranging from offering margaritas with movie tickets to special “father-daughter” date night screenings. In the midst of the pandemic, Warehouse Cinemas capitalized on the release of Solstice Studio’s Unhinged by hosting a car crash event during the film’s fifth week in cinemas.

More recently, the chain ran Pajamas and Popcorn, a promotion where customers who went to the movies in their pajamas received free popcorn. During this promotion, the company screened an Indiana Jones film and the classic animated dinosaur film The Land Before Time. Tickets were $5 each.

“The Land Before Time” screenings sold 1,400 tickets, Daughtridge said.

“It was one of those events that just happened,” he said. “We didn’t expect it to do so much business.”

For big chains like AMCshelf and Cinemamarkthere are alternative programming in the form of live events, with cinemas setting up streams for concerts, sports and even Dungeons & Dragons campaigns.

Mid-size chains like Alamo Drafthouse even delve into the quirky. When the Oscar-winning Everything Everywhere All at Once hit theaters, the theater chain gave out hot dogs to ticket buyers who went to their “Feast” event to celebrate the film’s famous hot dog finger scene.

Still from A24’s Everything Everywhere All at Once.

A24

The company also worked with the Lincoln Zoo prior to the opening of its new location in Chicago’s Wrigleyville neighborhood to host an outdoor screening of The Lion King in the zoo’s lion den.

Alamo isn’t the only chain innovating when it comes to food and drink. Concessions have long been a staple at cinema, but in recent years theater owners have expanded on the traditional popcorn and soda fare.

Cinepolis, which operates more than two dozen movie theaters in eight states, is a luxury dine-in theater chain that offers a wide variety of food and drink options, from chicken wings to lobster tacos. Cinepolis is hosting “Movie and a Meal,” a special dinner themed around a specific new movie release.

“For us, food is critical to the local experience,” said Luis Olloqui, CEO of Cinepolis, noting that more and more people have big HD TVs in their homes coupled with the ability to order from world-class restaurants.

That trend is unlikely to slow, and industry insiders are optimistic about the future of the cinema business.

“I think unfortunately we’ve had some very bad PR aspects as Covid has progressed,” said Rodriguez of the National Association of Theater Owners. “And now we need to rebuild that muscle in consumers and remind them, ‘Hey, you know, that’s behind us. Theaters are fine.’”