First appeared in November Issue of Film Journal International (VIEW)
By Mike Cummings, Principal, TK Architects Oct 28, 2015
First, I point out that several exhibitors are developing facilities more like an entertainment center. These normally include a significant cinema component; they are cinema people after all. The facilities will normally include bowling, a games arcade, a restaurant and bar/lounge. Most international markets are not keenly interested in this type of development.
Next, I mention that the cinema complexes of today are much different than those of a decade ago. While exhibitors do have different approaches and solutions, there are common themes focusing on three common factors:
- Market-adaptive approach
- Luxury and premium auditoriums
- Enhanced food and beverage service
To illustrate this point, I reviewed information from the large publicly traded exhibitors in the U.S. In the interest of full disclosure, some of the exhibitors are our clients, and some are not. All of the information presented is taken from investor presentations and quarterly investor conferences and is available on their public websites. Let’s look at what they are doing.
Market-adaptive Approach
The “one size fits all” prototypical approach of the 1990s is over. Exhibitors are carefully evaluating each location and deciding the appropriate type of facility to build or create through renovation.
For example, AMC described a three-pronged strategy (big core circuit, recliner re-seating, dine-in theatres) on page 18 of their 2015 Second Quarter Investor Presentation.
AMC Theatres Outlines Strategy in Their Investor Presentation
Tim Warner’s comments in the Cinemark Second Quarter 2015 conference call also reinforce this approach: “Elaborating further on our enhanced concepts, we continue our market-adaptive approach to the expansion of VIP and in-theater dining concepts, as well as repositioning of select underutilized theaters with reclining seats. We are encouraged by the exceptional results generated by these enhanced concepts, and remain opportunistic about further expansion on a global basis.
“Cinemark, I think, has been the leader throughout the industry and throughout the globe in this area. We also are focused on recliners and repositioning some of our underutilized theaters. It’s more market-adaptive, we don’t necessarily think that there is one solution that’s going to work everywhere, It’s the same with our Cinemark Bistro. We have some very successful bistros and food concepts.”
Marcus Theatres has created a total of five different auditorium types and three food and beverage concepts that are increasing financial performance.
Marcus Theatres has five Auditorium Types and three F & B Concepts
Luxury and Premium Auditoriums
Premium-large-format (PLF) theatres have been performing very strongly for the last few years and that trend seems likely to continue.
Tim Warner’s comments in the Cinemark Second Quarter 2015 conference call spoke specifically about XD:
“Shifting attention to our XD strategy, we continue to experience great success and remain the number-one private-label premium large format in the world, with 193 screens globally. We consistently generate a strong premium percentage of box office, and the second quarter was no exception. Nearly 34% of our worldwide second-quarter box office was generated from premium formats, including XD and 3D.”
Gerry Lopez indicated a similar result during the AMC Second Quarter Conference Call:
The truth is…we think the future involves IMAX. We’ve got 150 of them out there and are always looking for an opportunity to add more. And Dolby Cinema…when fully deployed over the next 10 years, we are expecting 100. So this is not an either-or to us, it’s an end game. It’s IMAX and Dolby Cinema combining to deliver the greatest value for our shareholders.”
Recliner-mania is sweeping the U.S. theatre market right now and everyone seems to be on board. AMC clearly started the trend and seems to be about halfway through their planned re-seat strategy of converting 35% of their screens.
Regal is very quickly converting many of their locations to recliner seating, as they noted in their 2015 Second Quarter Conference Call:
“As we look ahead into 2016 and 2017, we have a long runway of opportunity, and ultimately expect to outfit at least 2,000 screens with luxury seating.”
Marcus is also focusing heavily on recliners and has converted 30% of its screens to Dream Loungers.
Marcus Introduces Dream Lounger
And it does not stop there. Full in-theatre dining auditoriums are also a popular amenity and combine luxury auditoriums with enhanced food and beverage service. AMC expects nine percent of their screens to be dine-in theatres. Marcus’ concept is called Big Screen Bistro, while Cinemark’s concept is named Movie Bistro.
Marcus Introduces Enhanced Food Options as Part of Its Strategy: Big Screen Bistro
Cinemark Introduces Its Enhanced Food In-Theatre Options: Movie Bistro
Enhanced Food and Beverage Service
In addition to the combination of in-theatre dining, exhibitors are utilizing multiple food and beverage concepts.
Regal is focusing heavily on upgrading the food and beverage choices for their customers. Their second-quarter investor presentation indicated they have enhanced food menus currently at 164 locations and alcohol programs at 88 locations. During the conference call, CEO Amy Miles indicated their expectations to end 2015 with 185 theatres serving the enhanced menu and 135 sites with some type of alcoholic beverage service.
Regal Cinema Outlines Its Investment Option, including its Enhanced Food Menu
Marcus offers two signature food and beverage concepts beyond the traditional concession stand: Take 5 and Zaffiro’s Express.
AMC is focusing on three enhanced F&B options: F&B Kiosks, Marketplace and MacGuffins. As Gerry Lopez noted in the AMC Second Quarter Conference Call,
“The single most impactful initiatives from a financial perspective are the MacGuffins or loungers, the bars. We’re up to 108 as of the end of June and they are adding about $0.37 per patron when we put them into a building. $0.28 of the $0.37 is gross profit. So quite the successful run… It’s about a third of the fleet, a little less than that.”
AMC Presents its McGuffins F&B Strategy
While it might be natural to think that exhibitors are achieving better financial performance because of the great box office in 2015, they were achieving significantly better performance during 2014 using these strategies (a down year at the box office).
If you drill down into the luxury and premium auditoriums and enhanced food and beverage sections above, you will notice that exhibitors are creating unique brands for each of the concepts they are utilizing. This allows them to build customer awareness and appreciation, and at the same time create shareholder value.
Recliner-mania is definitely reinventing the U.S. cinema market. From my perspective, there are much more meaningful and broader underlying strategies that are driving this trend. Since the primary strategy is a market-adaptive approach, there are going to be new innovations and combinations to come.
View Full Article Here: Premium Auditoriums and Enhanced Dining Forge a New Era for movie Complexes
Links to Corporate Investor Information materials:
AMC: http://investor.amctheatres.com/GenPage.aspx?IID=4171292&GKP=305160
Cinemark: http://investors.cinemark.com/phoenix.zhtml?c=192773&p=irol-audioarchives
Marcus: http://phx.corporate-ir.net/phoenix.zhtml?c=99966&p=irol-presentations
Regal: http://investor.regmovies.com/phoenix.zhtml?c=222211&p=irol-calendar
References:
AMC, A Wanda Group Company, Goldman Sachs 24th Annual Communacopia Conference, Sept. 16, 2015.
Cinemark Investor Presentation, Q2 2015.
Regal Entertainment Group Investor Presentation, Fiscal Second Quarter 2015.
The Marcus Corporation, Investor Presentation, September 2015.
Thomson Reuters StreetEvents Transcript, Second Quarter, Regal Entertainment, July 30, 2015.
