Coming to a Theater Near You: Subscriptions, Toys and Downloads

  • Cinema chains seek new revenue sources as box office slumps
  • AMC considers offering cheaper prices for front-row seats

Customers wait in line to purchase concessions at a Regal Cinemas movie theater in Los Angeles, California.

Photographer: Patrick T. Fallon/Bloomberg

With the movie business in the doldrums, theater operators are looking for new ways to make money.

Cinemas have been stuck at about 1.3 billion tickets a year since 2010, leading them to increase prices to get sales growth. That tried-and-true method has faltered in 2017, a dismal year for the North American box office with bombs ranging from “King Arthur: Legend of the Sword” to “Baywatch.” Revenue in the U.S. and Canada is down 4.9 percent so far this year, with the worst summer in decades and the bleakest October since 1996.

So movie-theater chains are getting creative.

  • AMC Entertainment Holdings Inc., the biggest cinema chain in the U.S., plans to test sales of movie-related merchandise in 35 theaters next year. If it works, expect to see more toys and tchotchkes at stores nationwide later in 2018.
    “In a venue where you would think the enthusiasm would be highest in a movie theater on your way out the door, we do nothing,” Chief Executive Officer Adam Aron said on a conference call. “We’re going to try it.”
  • AMC also plans to start selling online rentals of older movies through its website, working with partners who already provide films on the internet. Such an idea would’ve once been considered anathema -- a movie-theater chain giving film buffs a reason not to leave home.
  • Cinemark Holdings Inc. is testing Cinemark Movie Club, a subscription service that would compete with MoviePass, which lets customers go to one movie a day for $10 a month. Cinemark hasn’t provided a lot of details on the new service, but said it’s designed to boost attendance and revenue. 
  • Regal Entertainment Group is testing out demand-based pricing, which might let moviegoers pay lower prices for box-office flops and higher prices for top hits. AMC is also experimenting with demand-based pricing.

The new initiatives represent “an evolution of theaters trying to cater to what consumers are moving towards,” Eric Wold, analyst at B Riley FBR said in an interview. Wold, who advises buying AMC and Cinemark shares, noted that the theater chains have already boosted revenue from moviegoers by improving its food selection and serving beer and wine in some locations.

If Cinemark can get movie fans to turn out “more often and spend more dollars on this enhanced food and beverage program they’ve rolled out, the cost to get them in there on a subscription plan is relatively low,” he said.

Still, investors remain skeptical that the theater chains have a solution to their woes. AMC shares have fallen 67 percent this year, and the others have also slumped. Netflix Inc. and Amazon.com Inc are investing heavily in their own features, giving film fans more reasons to stay at home. And studios, historically allies of theaters, are pushing to be able to sell downloads just a few weeks after their films appear on the big screen, which cinema chains worry may give viewers less incentive to go to the movies. MoviePass, which got a surge in interest after cutting its prices this year, has also added pressure.

That’s why moviegoers should pay attention to ticket prices in the coming months. AMC has “very quietly” introduced a $1 surcharge for Friday and Saturday night shows at about 150 U.S. theaters, Aron said.

Aron, the former CEO of Vail Resorts Inc., also plans as soon as next year to start charging different prices for different seats in the theater - addressing viewers’ habit of avoiding the rows closest the screen, which Aron said are almost always empty.

“I would love to drop the price by a material amount in the first row,” he said. “It doesn’t cost you any money to cut the price of something that you never sell any of, and it might give us an opportunity to make moviegoing affordable for consumers who are willing to make the tradeoff to sit in those seats.”

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