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Cinemas continue attendance decline but are fighting back

Moviegoing isn't what it used to be, at least if we're talking about out-of-home movie theater viewing. The data is in for 2016 movie theater attendance (also know as box office) and the trend in declining per capita attendance that started back in 2003 continues. Per capita attendance declined 2% in 2016. We've seen per capita attendance decline by one-quarter from a high of 4.9 times a year back in 2002 to 3.7 times last year.

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There can be little doubt that at-home technology with Netflix and other on-demand streaming video and movie services are a contributing cause. However, there is another contributing cultural shift. More and more people would rather stay in than go out, what we described as Generation Homebody in our last issue. One study found that over two-thirds of all adults (69%) now prefer to stay home rather than go out. Couch time chilling out in front of the big screen TV is now the big trend.

Movie theaters are finding a way to fight back. They've figured out that it is not just the movie reviews or blockbuster quality of the movie that determines attendance, but rather the overall quality, the fidelity of the total moviegoing experience. They have come to realize they are just not competing on the screen with what they show, but rather with the at-home living room experience. So cinemas are adding electric leather lounge chairs and reservations. And forget popcorn and Milk Duds. They are making booze the new popcorn in their fight against flagging attendance.

“It's the fastest growing amenity in our industry,” says George Patterson, senior VP food and beverage to AMC Theaters. “Dollar for dollar, alcohol doesn't cannibalize candy, soda or popcorn. If I put a bar in, I can almost guarantee my food and beverage revenue will go up. Over 70% of our guests are over 21.”

178 of AMC's theaters now have bars. At AMC, the average customer spends $4.81 on concessions. That goes up by 30 cents if there's a bar. And with the markup on alcohol, that means huge profit margins and improved bottom line profits.

In 2015, AMC's food and beverage revenue was $910 million. Their cost of concessions was only $129 million, for a cost of goods sold of only 14%, about half the COGS for a typical restaurant and bar.

Movie theaters are partnering with Hollywood studios on themed drinks. AMC and Cinemark sold Fifty Shades cocktails over Valentine's Day when the movie Fifty Shades Darker opened. Last summer, AMC sold 110,000 special Ghostbusters cocktails using Dan Aykroyd's Crystal Head Vodka.

Implications for CLVs:

What's the lesson of all this for community leisure venues (CLVs), including FECs? It's that to get people out of the home today, you need far more than entertainment and attractions. You need a high quality and premium (high fidelity) overall experience that focuses on much more than just the entertainment and attractions. Great overall ambiance, comfort and food and beverage are now a very important, actually necessary component.

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