Can Selling Saved Seats Save Movie Theaters?

Stan Meyers has two conditions for going to a movie: It has to be in an IMAX theater, and he has to be able to reserve a seat in the top two rows.

“The ideal seats are higher than you would think, because the screen is so tall,” he explained. “If they aren’t available, I just don’t go.”

Meyers, who analyzes movie-theater companies for Piper Jaffray & Co., knows better than most how increasingly easy it is to reserve a seat at the cinema. The rest of us will find out soon enough. All the major movie theater companies in the U.S. are steadily adding seat reservations across their tens of thousands of screens, in a bid to lure people away from increasingly impressive televisions and the vast, expanding universe of streaming video.

“It’s a tough game, and they’re experimenting,” Meyers said. “In five years, I would expect 50 percent of all screens to have reserved seating.”

Atom Tickets, a startup that sells tickets and concessions via app, said 20 percent of its 2,000 theater partners now offer seat booking. "We try to make everyone feel like a VIP, and reserved seating is definitely a part of that," said Atom co-founder Matthew Bakal.

The most aggressive adopter to date is AMC Entertainment; people can call dibs on seats at almost one-third of its 400 or so U.S. theaters. This month, the company added reservations to all eight of its Manhattan locations, and it expects the option to be a prerequisite for all of its theaters "in the medium-term future.”

Cineplex, meanwhile, says 14 percent of the seats in its 164 theaters in Canada can now be booked in advance. Cinemark, which has about 513 theaters, says about one quarter of its capacity will be bookable by the end of the year.

To anyone who's ever attended a sporting event or boarded an airplane, reserved seating in theaters will seem about as vanguard as the VCR. After all, seat assignments have long been standard in theaters in Europe and China. But there are valid reasons U.S. cinema executives have long eschewed seat-booking: It's somewhat expensive, and it's tough to model.

If moviegoers don't have to arrive early to snag decent seats, theaters may struggle to sell on-screen advertising slots before the show. While ticket sales and concessions make up the bulk of the movie business, nearly 6 percent of revenue at both AMC and Regal last year came from on-screen ads and such peripheral moneymakers as arcade games.

Switching to reserved seating may also make it harder to sell out shows: If customers see that the only seats left are those in the front row, they may put off buying tickets to a show they otherwise would see.

There are also some added costs. Some reservation software is involved, and seating configurations generally vary by theater, so the technology must be customized by location.

Then there's the potential headache of refereeing disputes between people who reserve seats online and those who prefer to buy tickets early and hunker down in the best spots. Viewers who don't reserve seats can typically still choose spots the old-fashioned way, as long as they're not reserved. With moviegoing masses used to a first-come, first-claimed model, mitigating this friction could take a while.

AMC now has a thorough “education” campaign, including signs and ushers assigned to show customers to their seats. “We’ve gotten much better on how to address this from a staffing perspective," spokesman Ryan Noonan said. Those costs are expected to subside once the moviegoing masses are used to seat assignments.

Cineplex, meanwhile, is passing on part of the expense. In its traditional cinemas, only two rows of seats can be reserved, each at an additional cost of $2. “We don't have a one-size-fits-all philosophy for anything that we do and that also applies here as well,” spokeswoman Sarah Van Lange said in an e-mail.

Those are all relatively small issues. In truth, theater owners have been slow to embrace reservations largely because they haven’t had to.

Movie attendance in the U.S. and Canada has been largely static for a decade, at about 1.35 billion tickets a year—even with the so-called golden age of television and a preponderance of films on streaming platforms. Box office revenue has steadily risen as growth in high-definition technology inflated average ticket prices. Last year, 38 percent of the country’s almost 44,000 screens could handle digital 3D, a format that generally commands a premium at the box office. As a result, 2015 was Hollywood's biggest revenue year on record.

So why are theaters all of a sudden hustling to let people pick their seats?

Young adults, for one, are staying home. From 2010 to 2015, Americans aged 18 to 39 bought 16 percent fewer movie tickets. These are the people most likely to be building careers and raising children; they have better ways to spend 45 minutes than standing in line at the local megaplex. Babysitters don’t come cheap, and HBO’s Game of Thrones is now à la carte, at $15 a month.  

“Competition from TV is very, very real,” said Ben Mogil, a media analyst at Stifel Nicolaus & Co. “Lots of people just don’t go to the movies at all anymore.”

Being able to show up promptly at showtime could keep some of these customers going to the movies, according to Mogil, and possibly lure others who never went at all.

Another major case for seat reservations: Hollywood’s increasing reliance on the blockbuster. Studios and cinemas are making a greater share of their money from a smaller selection of films these days. In 2014, the top 10 films accounted for 26 percent of box office revenue; this year, those films are raking in 39 percent of ticket sales, according to Bloomberg Intelligence.

What’s more, these movies are burning out at the box office more quickly, as the number of days it takes a movie to earn 90 percent of its total box office haul keeps shrinking. For top films, that figure stands at about 30 days, down from about 40 days two years ago, according to Stifel Nicolaus.

In short, theater companies need to get more people in the doors more rapidly. Seat reservations have proven particularly useful at doing just that by spreading crowds through the day. When consumers see a crowded theater with the best seats spoken for, they are more likely to buy tickets for a screen time they would not otherwise have embraced.

Regal Entertainment, the country's largest theater owner, did not respond to requests for comment, but it's been adding seat selection to many of its busier, urban locations. “Where we see a demand for reserve seating, we're sure going to offer it,” Chief Executive Officer Amy Miles said on a recent conference call.

Reservations are just part of a major overhaul of the U.S. movie business. Theater owners are swapping small seats out for big recliners, switching standard screens out for IMAX and 3D, and adding fancier (read: more profitable) food. “Moviegoing used to be a generic experience. Now the focus is to reverse that and turn it into an enhanced experience,” Meyers said.

AMC is systematically tearing out about half its seats, theater by theater, and seeing big net-attendance increases as a result, according to Noonan. Less really is more, in this case. In the business, this is called "reseating," and most major players are doing it. "It comes down to the industry becoming more guest-friendly," Noonan said.

Picture first class, instead of a bus with spotty Wi-Fi. And there's an additional airline amenity in line with seat assignments: booze. AMC will have bars in about one-third of its theaters by the end of the year—an incentive for some to arrive early, after all.