Our company has written extensively about how at-home and mobile digital entertainment and social media is taking market share from bricks ‘n’ mortar entertainment venues. We maintain that to prosper in the future, location-based entertainment needs to become higher quality, what is called High Fidelity, to compete with the convenient, cheap and easy, what is called Convenience, of the digital and virtual worlds.
One segment of the location-based entertainment (LBE) industry that is definitely getting disrupted by the digital world is movie theaters. Movies are now available for streaming to both home televisions as well as all other types of stationary and mobile devices. It’s a lot easier and definitely much cheaper to sit back at home in a comfy chair while sipping a cold brew and watch some recent release on a large screen HD television. The impact on the movie theater industry has been significant. Since the year 2000, per capita movie attendance has decreased by one-fifth (20%).
AMC Theatres, the 2nd largest movie theater chain in the American market, has adapted the High Fidelity strategy in order to compete with the digital world and it is showing very positive results. Here’s what they say about their overall strategy:
“Through most of its history, movie-going has been defined by product – the movies themselves. Yet, long-term significant, sustainable changes in the economics of the business and attendance patterns have been driven by improvements to the movie-going experience, not the temporary ebb and flow of product. The introduction of multi- and then megaplexes, with their then-modern amenities and stadium seats, for example, changed the landscape of the industry.
“We believe the industry is in the early stages of once again significantly upgrading the movie-going experience, and this shift towards quality presents opportunities to those who are positioned to capitalize on it.”
AMC is undertaking a major upgrade to the movie-going experience. They have started full theatre renovations that involve stripping theaters to their basic structure and replacing all the finishes, upgrading the sight and sound experience and replacing the tradition theater seats with plush, electric recliner seats that allow the guests to use a leg rest and fully recline at the push of a button. This results in a 2/3s (64%) reduction in seating capacity.
Reducing peak-period capacity sure sounds counterintuitive to trying to increase attendance and revenue, as the cinema industry has traditionally been focused on quantity. However, the quality seating improvements they have made have resulted in an 84% increase in attendance at the renovated locations. As of August 2013, AMC has recliner seats in 25 theaters with a total of 271 screens and another 8 theaters under renovation. For the four renovated theaters that have been open for one-year, their cash-on-cash return has averaged over 100% and that is with only modest ticket price increases. Moviegoers are willing to pay a premium for the Higher Fidelity in-theatre experience.
AMC is implementing other experience improvements throughout their chain. In some of their busiest theaters, they now have reserved seating. As they see it, when a guest knows there is a specifically chosen seat waiting for them for a show that promises to be a sellout, it is comforting to them as it removes the anxiety of attending. In other words, AMC is removing a possible negative to attending by guaranteeing efficient use of customer’s valued leisure time.
AMC also understands today’s importance to food and beverage to an out-of-home entertainment experience. They are expanding the selection and quality of food and beverage available at their new Concession Freshen and The Café stands to include made-to-order hot foods, espresso drinks, smoothies, more healthful products and an expanded range of candies and frozen treats. This has resulted in an increase to their per capital F&B sales.
They have also introduced MacGuffins Bar & Lounges, again resulting in increased per capita F&B sales.
AMC’s greatest per capita F&B improvements have come from their new Dine-In Theatres that offer a full restaurant menu. Combining dining with movie viewing compresses what would otherwise be a four or five hour out-of-home experience into a time saving two to two-and-one half-hour hour experience. The Dine-In Theatres have resulted in a $6.15 increase to per capital F&B sales.
In addition to the new recliner seats and enhanced food and beverage offerings, AMC has enhanced the core visual and aural movie viewing experience with 4K digital projection, 3D-enabled screens, IMAX, their own ETX large format screens and upcoming Dolby ATMOS sound systems. Their 3D, ETX and IMAX movies are bringing in an increased per cap of $4.19 to the box office compared to 2D movies.
AMC’s move to a higher bar of High Fidelity (referring to overall quality) and the improved results they are getting as a result with higher per capita revenues and returns is evidence that to counter the increasing competition from the digital and virtual worlds requires both High Fidelity entertainment, great food and beverage and an overall High Fidelity experience. And as counter intuitive as it may be, the customers are willing to pay a higher price for the High Fidelity experience.
As we advise all our location-based and family entertainment center clients, move to a High Fidelity overall customer experience that includes great food and beverage or join the dinosaurs on the way to their extinction.
