Facing a lackluster summer box office and growing competition from video streaming companies like Netflix, movie theaters are investing in new ways to get customers back into their seats.
With tepid North American box office sales growing just one percent from 2012 to 2013, theaters must either convince movie watchers to come back more frequently or pay more for each ticket. To give moviegoers more reasons to return, theater chains are taking a cue from mid-market innovator Alamo Drafthouse Cinema, which serves made-to-order food, cold beers and other beverages directly to moviegoers’ seats.
Alamo Drafthouse has been disrupting the movie theater experience since it was founded in Austin, Texas, in 1997. Now having expanded to 15 locations in nine states, Alamo features sing-along and quote-along movie screenings, celebrity guests (Leonard Nimoy once showed up with a pre-release copy of the new “Star Trek”), and live bands accompanying silent classics.
“You need to think about the customer experience all the way through, from buying a ticket to arriving in the parking lot to watching the movie to leaving,” Alamo founder Tim League told Entrepreneur. “So much of what we do is trying to make the Alamo experience special.”
His efforts have paid off: when the movie industry was hit with a 3.7 percent drop in ticket sales in 2011, Alamo Drafthouse’s revenue increased 4.8 percent, including food and drinks, the magazine reports.
And in 2012, Alamo reported average revenue of $917,000 per movie screen, compared to $517,000 by AMC Entertainment Holdings, $442,000 by Cinemark Holdings Inc. and $407,000 by Regal Entertainment Group. “Tim is like the Willy Wonka or the P.T. Barnum of the cinema world,” actor Elijah Wood told the magazine.
Major movie chains such as AMC, Cinemark, and Regal took note, and are now upgrading their theaters with dine-in movie watching, digital projections, and luxury reclining seats. While some theaters have upgraded concession stands, others offer full dine-in menus that directly target mid-size restaurant chains by providing an all-in-one location for dinner and a movie.
AMC is also spending $600 million over five years to reseat 1,800 of its 5,000 screens with larger, comfier chairs that fully recline, reports the Wall Street Journal. Cinemark and Regal are following suit on a smaller scale. The bigger chairs can remove as much as two-thirds of a theater’s seating capacity. But with attendance up an average 80 percent in reseated theaters, movie chains are finding that quality can be more profitable than quantity.
AMC Chief Executive Gerry Lopez should know. As a former executive at Starbucks Corp, he’s learned the value of teaching consumers to upgrade their habits—whether it’s watching a movie or buying a $3 coffee, the Journal reports.
So far, AMC’s upgraded theaters pull in more midweek viewers and more adults — who pay a higher price for each ticket purchased. The focus on quality movie experiences for adults is another page taken from the Alamo Drafthouse’s playbook. Alamo Theaters don’t admit children under six, or minors of any age without an accompanying adult.
And don’t even think about breaking Alamo’s no talking and no texting policy. Views get one warning before they are escorted out of the theater. In 2011, a YouTube video featuring an angry uncensored rant from one such evicted moviegoer went viral, illustrating just how far Alamo is willing to go to create a quality movie experience for viewers. If Alamo’s model takes off, it will be interesting to see how far major chains will go to provide a competitive experience.