Saturday, December 7, 2013

Movie Theater of the Future

AMC (the leading U.S. movie chain) is currently preparing for an IPO, and as part of their materials filed with the SEC, they outlined their expansion plans for the next five years.

It was pretty interesting to look at the outline of what they expect to deliver, because as the dominant player in movie theaters, it's a pretty clear indicator of where the whole market is headed (plus, the theater two blocks from us is an AMC, so it will likely be highly relevant for us.

The report detailed nine different revenue growth strategies AMC will use to grow within their existing theaters. Essentially, what they're going to start up-selling us to or using as a justification for higher ticket prices. And the details are expectations for the next five years, so its also meaningfully close (I'd recommend checking out the report if you're interested in the movie industry at all, at least I found it interesting)

Below is what they published as expectations over the next five years. The lowest row in the chart is the number of screens AMC is planning to get to in the next five years (it's broken down by region, but that's not important here and the image was too wide if I included all the labels). The row right on top of that is the incremental revenue expected per customer, in case you were wondering.

What you'll notice is that a lot of these strategies still have lots of room to grow. In many cases, only a couple hundred of AMC's ~5000 screens are covered. If you look at them in order of expected expansion in 5 years, it's a pretty good sign to what you'll be able to do when they reboot the Dark Knight in 2017.

"Innovative technology featuring 120+ drink flavor options; Customer customized" - This one is a bit of a yawn, because it only means installing Coke Freestyle machines that you already see at certain restaurants all over the place. Yes, it allows you 120+ permutations of soda, but having tried a ton of them, it's clear there's a reason Coke never tried to sell Blueberry Sprite. Soon they'll be everywhere, but that just means we'll all have to wait behind the most indecisive of us as they explore all their options.

Guarantee of pre-selected seat; Arrive just-in-time and anxiety- free Pre-selected seats will be available at half of AMC's theaters within 5 years. It's a nice idea that I've never had the chance to use. What it will likely mean is that a good portion of the theater's 'best' seats, are going to be allocated to pre-select (and likely, with a price increase). That's good for people who show up late, not so much for those of us who like getting their early.

Motorized, plush recliners with leg rest; Relax at the push of a button Now we're talking. AMC wants to roll out nicer chairs? I'm all for it. Unlike the first two items, this is something I'd actually want to see. Of course, it's something that requires them to physically re-model theaters and take them dark for a bit. But I'd like to see nicer seats and the ability to recline sounds pretty compelling (as long as they keep people from ruining them)

Full service bar serving premium beers, wines and mixed drinks; Enjoy before or after movie I actually think the theater near us has this already, but I've never really considered it when we go to the movies. If we want to go to a bar, we do. Still, nothing wrong with putting in a huge margin business where they have the space.

Casual, in theatre dining provided via seat side service; Conveniently satisfies consumer need for "dinner and a movie" Less excited for this one. I'm a huge fan of popcorn at the movies, but the idea of having a full dinner delivered just strikes me as weird. Call me old fashioned. However, this is also only going to expand to about 500 screens, so only 10% of their space. I don't think I'll have to be too worried about someone getting a chicken quesadilla delivered next to me

Shopping experience featuring broadened menu offerings, including made- to-order options Like the prior comment, I'm not a huge fan of the concession expansion which now includes all kinds of meals. Hot dogs and pizza are sacrilege to me. But again, small numbers here.

The last couple ones are basically bringing in Imax or expanding 3-D. 3-D is the furthest along and is mostly tapped out, I'd argue in part because the movies that actually can take advantage of it are rare and people are sick of getting screwed with an upcharge that doesn't do much.

But regardless, it's cool to think about how the experience will change. Of course, studios will likely be still cramming the screens with existing franchises and reboots to guarantee big openings. No details in the IPO document that talk about how to fix that.

No comments: