Cinemas don’t die, they evolve

LOS ANGELES — Movies are always important. These are the multiplexes that are getting smaller.

Since 2019, the total number of screens in the United States has shrunk by around 3,000 to just under 40,000.

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

“Think of retail in general, it’s repositioning itself, you don’t have as many same-brand stores in the market,” said Rolando Rodriguez, president of the National Association of Theater Owners. “Consumers are much more selective, and I think for the economy that’s needed, you’re not going to see those 30-plexes anymore.”

Rodriguez said most newly built locations will feature between 12 and 16 screens and those with larger, pre-existing footprints will seek to reallocate space for additional movie-goer activities, such as arcades, bowling alleys or bars.

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

As space shrinks, theater operators are investing in the essentials, improving sounds, picture quality and seating, as well as bolstering their catering, event offerings and alternative programming. The goal is to improve the basic experience for moviegoers, regardless of the type of ticket they purchase.

“We do best when people get used to seeing,” said Larry Etter, senior vice president of regional family chain Malco Theatres. “And I think that’s what’s going to happen. I think we’re going to recreate the usual effect that Friday night or Saturday night or whatever, we’re going to the movies.”

Already, the industry is seeing improvements in ticket sales. Through Monday, the 2023 box office totaled $958.5 million in ticket sales, up nearly 50% from last year and down just 25% from 2019, according to Comscore data.

This is a marked improvement from the meager total of $98.7 million at the box office during the same period in 2021.

Foot traffic has also improved, but continues to linger behind pre-pandemic levels. In the two decades before the pandemic, the industry sold an average of 1.1 billion tickets a year, according to data from EntTelligence. Even though Covid restrictions were lifted in 2022, just over half that number of tickets were sold for the year. And ticket sales are expected to increase in 2023 as studios release more movies.

While theater operators rejoice in the increase in studio production, they no longer take audiences for granted.

To this end, the operators began by upgrading the projectors. In recent years, movie theater operators have phased out traditional digital projectors and installed laser units, citing cost savings over time and better picture quality for moviegoers.

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

Etter explained that traditional digital light bulbs need to be replaced after about 2,000 hours and produce so much heat that cinemas have to pay more to air-condition screening rooms. And the laser components last 20,000 hours, so they can last for years without having to be replaced.

Many theater operators have told CNBC they are planning similar upgrades to sound systems, saying 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 feel like you have to create the best sound and visual experience possible to motivate people to spend the money to come to the movies.”

Across the industry, movie theater chains large and small are also replacing outdated stadium seats with recliners in an effort to improve the overall cinematic experience.

“[We are] really look at our theaters and make sure they’re all amazing,” said Alamo Drafthouse CEO Shelli Taylor. “So if they don’t have recliners, we go there and upgrade. We’re giving facelifts where needed and really freshening up and making sure we continue to deliver that premium experience that people love and expect from Alamo.”

These improvements are part of a larger trend that began before the pandemic. Consumers began to opt for more premium theatrical experiences for blockbuster feature films, choosing to pay more to see movies on bigger screens or in specialty theaters.

In 2022, 15% of all domestic tickets sold were for premium screenings, with the average ticket costing $15.92, according to data from EntTelligence. A standard ticket costs an average of $11.29.

So far in 2023, that premium ticket average is higher – $17.33 each – because so many moviegoers have seen by Disney “Avatar: the way of the water” in premium and 3D formats.

Big blockbusters have always been the driving force behind cinema ticket sales. Before the pandemic, theater owners relied primarily on in-studio advertising — trailers, TV spots and posters — to promote content and draw 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 have employed to attract audiences. AMC launched its first-ever ad campaign in 2021 featuring Nicole Kidman with the tagline “We make movies better.” The company has invested approximately $25 million in the campaign.

Smaller, budget-conscious chains need to be a little more creative.

“I’ve had many conversations with distributors who were just talking about better and more effective ways to market their films,” said Daughtridge of Warehouse. “A lot of times it’s about paid data and social media marketing, better trailer placements and [putting] tickets on sale at the right time.”

“I think there’s a lot of payoff out there,” he said of mailing lists, loyalty programs and social media for one-to-one marketing.

Warehouse, which will soon open its third location, also ran promotions ranging from offering margaritas with movie tickets to special “daddy-daughter” nights. Amid the pandemic, Warehouse Cinemas capitalized on the release of Solstice Studio’s “Unhinged” by hosting a car smash event during the film’s fifth week in theaters.

More recently, the chain ran “Pyjamas and Popcorn”, a promotion that gave customers who wore pajamas to the movies free popcorn. During this promotion, the company showed an Indiana Jones movie and the classic animated dinosaur movie “The Land Before Time.” Tickets were $5 each.

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

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

For large chains like CMATreat and Cinemarkalternative programming came in the form of live events, with theaters setting up streams for concerts, sports, and even Dungeons & Dragons campaigns.

Mid-sized chains like Alamo Drafthouse are even getting into the whimsical. When Oscar favorite ‘Everything Everywhere All at Once’ played in cinemas, the theater chain handed out hot dogs to ticket buyers who turned up at its ‘party’ event to mark the famous scene with the fingers of hot dog in the movie.

The company also worked with Lincoln Zoo ahead of the opening of its new location in the Chicago neighborhood of Wrigleyville to do 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 movie theater staple, but in recent years theater owners have expanded the traditional popcorn and soda fare.

Cinepolis, which operates more than two dozen theaters in eight states, is a chain of luxury dining venues that offers a wide variety of food and drinks, from chicken wings to lobster tacos. Cinepolis organizes “a film and a meal”, a specialized dinner that is tailored to a specific new film release.

“For us, food is crucial to the local experience,” said Cinepolis CEO Luis Olloqui, noting that more and more people have large high-definition televisions at home, coupled with the ability to order in. top notch restaurants.

This trend is not expected to slow down and industry insiders are optimistic about the future of the movie theater sector.

“I think we’ve had some really bad public relations aspects over Covid, unfortunately,” said Rodriguez of the National Association of Theater Owners. “And now we kind of have to rebuild that muscle with consumers and remind them, ‘Hey, you know, that’s behind us. The theaters are doing well. “”