December 26, 2017 • 22 mins
For many people, going to movies in the theater is more of a hassle than a joy -- why sit in an uncomfortable chair and spend upwards of $10 to get a ticket, plus the cost of popcorn and a drink? As the number of shows on television and subscription services surges and home theater systems improve, it takes a lot to get customers to leave their homes.
Lindsey Rupp and Jenny Kaplan talk with Anousha Sakoui, who covers the cinema and film industry for Bloomberg, about how the movie theaters industry got into this mess and the challenges that face them in regaining media dominance. Some startups, like MoviePass, which allows subscribers to see a movie every day for a month for $9.95 per month, are trying to getting customers to go to more films by offering them “bad-movie insurance,” says Chief Executive Officer Mitch Lowe. Cinemark, the third-largest movie chain, is also offering a subscription service and upgrading its theaters so customers can enjoy nicer seats and even perks like food and alcohol. Will these efforts to modernize be enough to win back consumers?
Every other week, hosts Jenny Kaplan and Lindsey Rupp guided you through the consumer universe, breaking down what's going on with all the things people buy. This will be the last episode of Material World.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
December is a month rife with traditions, Christmas, Hanuka, New Year's,
the Rockets, Mary Christmas, Charlie Brown, the same ten songs
playing on the radio over and over. But recently, a
new bullet point has been added to this seemingly endless list,
the premiere of a new Star Wars movie. I don't
(00:24):
know about you, but I've been getting pumped all fall
to head to the movies, get some popcorn, and enjoy
yet another chapter on the big screen. I was one
of the few Americans, it seems, who didn't see Star Wars.
Why break my streak of seeing none of them? But
it's a holiday tradition for my mom and I to
see a ton of movies. And this is undeniably prime
movie going season. A huge chunk of potential award winners
(00:49):
get released, and people want to cram to be in
the know at Oscar time. But actually more and more
people are doing that cramming at home. Despite our excitement.
People are going to the movies last unless I get it.
Unless you're desperate to see a movie the month it
comes out, and you can always wait and watch it
from the comfort of your own living room for less money.
(01:09):
Home theater systems are getting bigger, TVs are getting better
and also bigger. There's almost no reason to leave. Plus
there's all that other content out there that you've been
meaning to watch. There's so many shows on my list
of things I need to get around to watching someday.
It's a problem that movie theater chains are desperate assault.
(01:36):
I'm Lindsay Ruth and I'm Jenny Kaplan. Today on Material World,
we're talking about what movie theaters are doing to try
to win you back. What you know is if you
(02:00):
look at box office numbers, is that either the box
office revenue is edging up past recent years, like two
fifteen we had record box office in the US, but
attendance itself is not growing. Anushaskui is an entertainment reporter
at Bloomberg who covers the movie chains. The reason that
we are getting an increase in box office revenue is
(02:22):
because one of the main things that theaters have been
doing is increasing pricing. There being able to do that
because of the adventure of digital medium So the digitization
of theaters, also the proliferation of premium large format screens
like an Imax theater screen within an AMC cineplex for example,
they can charge premium pricing for that. And also the
(02:44):
chains like AMC and Regal have their own premium large
formats which they can charge more money for, and they've
been investing, you know, a lot of money in reseating,
so adding luxury seating, recliners so your experience is much
more enjoyable. You can also have in theater dining um.
More recently, in the past few months, we've seen theaters
(03:06):
take it up a notch and talk about other ways
that they've really going to try and push the boat
out and and and grow revenue, grow attendants, and they're
going to try different ticketing initiatives. So maybe, for example,
if you go to the theater that first road that's
always empty because it's way too close to the screen,
maybe they'll charge less for that. Or for example, at
(03:27):
quieter times they'll charge less, and at busier times maybe
they'll charge more. That brings it more in line with
you know, a concert or sports tickets sales process where
you know, there's really a kind of dynamic pricing of tickets,
and you know, we haven't really see theaters do that
and keep up with the airline industry or the sports
and live entertainment industry when they've come to pricing tickets,
(03:49):
so that those are the kinds of initiatives. AMC said
it might also send sell reset merchandise linked to films
in its theaters. It might also sell movies online. Those
are huge shifts. I for one, am very into the
new comfy chairs. I went to a theater in South Street,
support New York that felt like I was suddenly transported
(04:11):
into the future. And when I was back home in
North Carolina, the theater there had new seats too. Movie
chains have realized they really need to up their game.
This past year has been a real eye opener for
followers of the movie business because this summer we probably
had one of the worst summers in like a decade
at the box office, and that was driven by, you know,
(04:33):
some flops. Films really just weren't hitting as well as expected,
and that always happens to some degree. But compounding with
that has been the rise of digital distribution of original
films and and great TV content from the likes of
Netflix and Amazon. So there's much more online content to
keep people at home, and you know, people are more
(04:55):
consumed with their mobile lives, so being in a theater
is a bigger of people. So while proponents of the
theater industry, you know, CEOs of the major chains, will say,
you know, that this is a blip and that it's
it's a result of um, you know, poor film choices
(05:16):
by studios, that there are others that Wall Street analysts,
for example, that are much more bearish on the situation
and suggests that there is a issue with attendance. Movie
attendance in the US, which records show has been sort
of stagnating over the past few years. And you know
also that there's a lot of um supply amongst movie
(05:38):
studios that you know, there's maybe too many superhero films,
too many, too many films along the same the same line. Um.
So at the same time, what we've seen is theaters
really try to push forward and try and evolve to
meet these more challenging times. On top of that, studios
(05:58):
themselves are pushing to take a little bit of movie
theater power away from them. I broke the story with
with colleagues here in l A at the end of
last year and earlier this year, writing about how studios
were pushing theaters to accept that movies new movies which
they have a period of exclusivity of up to like
(06:20):
sort of three months currently that they wanted new movies
to be in the home sooner and talking about maybe
having you know, new releases available for rent at home,
you know, just two weeks after it opens and theaters.
That was a huge threat to theaters because they need
people to think that they can't see this movie anywhere
else unless they go to a theater. And the problem
(06:42):
for studios is that like, Okay, that's great for the
first month, but then we've got one or two months
when people can't see those films. So that's had a
huge impact on the share price of theaters. AMC for example,
it shares a down over fifty year to date um
that's five zero. So it's really had a huge impact
(07:04):
that sort of structural potential, structural change to the movie
business and that that whole windowing process. Mm hm. At
least one innovative company is trying to change the whole
business model of going to the movies. Yeah, this year
we saw in the summer, we saw Movie Paths, which
(07:25):
is a company that has been around since two thousand
and eleven. They got a big investment and we're able
to cut the price of a subscription plan to see,
you know, as a movie a day from month to
just under ten bucks, and that had a huge amount
of interest, and you know, it really sort of seemed
(07:47):
to make a light bulb go off on in the
heads of movie fans um that they could go to
the movies every day, you know. For movie Pass CEO
Mitch Lowe is no stranger to innovative tech disrupting Hollywood.
(08:07):
He was one of the early executives at Netflix and
was president of red Box. Now he wants to tackle
the movie going part of the business. I found out
about this company called movie Pass that had was really
trying to be Netflix for the movie theaters, and I
was fascinated by it, and I started advising these guys.
I found what they were really trying to do is
(08:28):
they were trying to address the movie goer who already
goes about eighteen times a year, that heavy movie goer,
and therefore their price was in the thirty to fifty
dollar range. And I, you know, after advising for a while,
I went off and did other things and then found
out about them again. At the Sundance Film Festival in
(08:50):
two thousand and sixteen, got introduced to their then uh
majority shareholder, a guy named Chris Kelly, and so he
and I hit it off, and we both realized that,
you know, there was a real big opportunity more for
a mass product that could re energize moviegoers who only
went to five movies a year. So, after about a
(09:12):
year of testing and surveys and research, in August, we
launched our new product at you know, it's it's aimed
at people who are only spending fifty dollars a year
going to movies and now getting them to spend a
hundred and twenty. We just passed a million subscribers in
four months, and that's faster than Spotify, faster than Netflix.
(09:37):
To finance the new product, movie Pass recently sold a
little more than of the company to data analytics firm
h M n Y. On one side of the coin,
for mobile and at home, you have all this innovation,
all these other ways to consume entertainment, you know, options
like subscription or bundling or ala cart. You know, different devices,
(10:01):
your phone, your laptop, your smart television, your old television.
In their airplanes everywhere whereas the theater hasn't you know,
kind of changed the way they transact with you. What
they have done though, over the last eighteen years is
almost doubled the price. So every year that the ticket
(10:21):
sales go down, the answer from the exhibitors as well,
let's just raise our price and we'll be even so
in the face of continuing rising prices and alternatives that
are incredible have a lot of flexibility and options. You know,
especially young people are kind of talking themselves out of
(10:44):
going to the movies. They go, oh, it's risky, it's
ten fifteen bucks. After all, I've got all the entertainment
I need, you know, on my phone. You know, I'll
go to the Star Wars, I'll go to the big
titles that are promoted, but I won't go to the
smaller titles. I'll just wait for them to come out
on on Netflix. And so what people the way people
(11:08):
use movie pass is number one, they go to twice
as many films as they went to before. So if
they went to five films a year last year and
they joined movie Pass, we they we see them going
to ten to twelve movies after they join, and almost
a hundred percent of that increase are small films, those
(11:29):
films that they used to say I'll just wait to
see them on HBO or whatever it might be. So
what that's doing, what's happening is instead of waiting, people
are actually seeing more films, and especially more smaller films
in the theater. And this is horrible marketing language, but
(11:50):
I think people consider this like bad movie insurance. So
I know I can explore and experiment seeing films I
generally wouldn't see and take the risk, and I know
if I don't like it, I'll just walk out and
it won't cost me anything. So that's how we're re energizing.
(12:10):
We're getting people to we're kind of removing the barriers
to decide to go to the movie in the movie theater. Still,
from a business perspective, movie pass has a long way
to go. They're spending a lot of money, they are
loss making. They had a qualification on their recent earnings saying,
you know, they would be question their viability long term,
(12:33):
you know, unless they get more cash. But they have
had some kind of impact, they claim on attendance. So
if they do have a real impact on attendance, maybe
they will get revenue from movie studios who will pay
to have advertisements on their on their website. But there
have been attempts from third parties to insert themselves into
(12:57):
between the movie theaters and and the studios and try
and make money by disintermediating them in a way and
causing disruption that you actively you know is overdue in
this space. Um, but they haven't been successful so far,
so we'll see. They said that to us at Netflix,
they said it to it at red Box. How could
(13:18):
you possibly rent a movie for a dollar at night
when blockbusters charging four or five dollars. And it's all
about getting the science of utilization right. And what we
see with our subscription customer is they end up going
to twice as many films, but that ends up after
(13:38):
the third or fourth month at about one film per month,
and that's approximately what they're paying us. So what we
hope to do is to break even after three or
four months on the on the amount of movies you
go to, and then over time, what we've found is
we we can be an incredibly valuable marketing to on
(14:00):
behalf of the content owners, especially for those small films,
whether it's market generating revenue from marketing movies, or it's advertising,
or it's selling our subscribers something else. When we break
even on the customer on the cost of goods versus
the revenue, and then make our money in other ways,
(14:21):
we kind of create a win for the whole ecosystem.
People go more often, they buy more high margin popcorns,
so the exhibitors make more money. The studios make more
money because we drive customers to those smaller films they
can't afford to market. Clearly, a movie passes doing something
right because they've got themselves a copycat. Cinemark, the third
(14:43):
largest theater chain in the US, recently announced its own
subscription plan. Cinemark has five hundred theaters around the world,
with about three in the US. The company has been
doing the work to try to upgrade customer experiences. Here
see Mark Sarati on what the chain is up to.
By the end of this year, we'll have over our
(15:06):
screens having the electric, lusher luxury recliners, and and more
than half of our theaters with expanded food, and many
of our theaters with wine and beer in some for
the alcohol, and and of course we're doing big marketing efforts.
So we we launched the first national subscription program called
Cinemark Movie Club. That's been it's been put in the
(15:29):
marketplace by one of the major exhibitors, so we're very
excited about it. You know that the the challenge is
that the consumer has got a lot, a lot of
additional options at home, and the television hardware and systems
are much stronger at home. So for us, the challenges
to motivate people to you know, leave their home and
(15:52):
go out and spend you know, somewhere between eight and
twelve dollars depending on where you live to go to
the movies. And so that's why we put all these
luxury loungers in and why we've improved our food and
and we've spent so much money to improve the guest
experience at the movies, and um, you know, our research
(16:13):
says that people are really really noticing the difference, and
and that's why, you know, we're gonna the industry is
going to be over eleven billion dollars again this year.
Zarati says, Cinemark launched Movie Club with one major objective
to drive attendance, and it uses things like perks to
do it. You know, people need a reason to to
(16:34):
come out. We wanted to reduce all the friction points
of going to the movie. So the first thing we
did when we were designing Movie Club is we talked
to a lot of our movie going guests and ask
them what would they want most in a subscription based program,
And we went out and designed a program around that
(16:56):
so that they could come to the theater for a
reason a reasonable price. They could reserve their seats or
their tickets in advance with no online fees. That if
they didn't use their movie credit for one month, because
we're charging for that, if they didn't use it in January,
it would roll over to February, and they would roll
(17:18):
over again into March, and they could bring friends and
family with them to use those as well. And when
you come, you could bring a guest with you and
you could have a companion seat. And then on top
of it all, we said, if you're a movie Club member,
we're going to give you a discount on your concession.
So when you you add all those up, it's a
very compelling offer for the consumer. And we've gotten rid
(17:40):
of all those friction points. So does all of this
stuff actually work? Here's Bloomberg's nusha again. I think in
the big picture, you know snopping enough to shift the
whole industry. Definitely. Obviously we see in the rising revenue
(18:02):
from the box office that reseating has had an impact
on being able to charge more. Question is long term,
if if that's really going to keep yielding you know,
those kind of results as people get used to, you know,
a reclining seat being standard. The question I I what
I hear theaters say and executives say, is like, if
(18:24):
we could just get people to turn out just one
more time a year, that would make a big difference,
which is it's kind of amazing. The secession is happening
at an interesting time because Star Wars, the new Star
Wars the Last Jedi is opening. That is huge for theaters,
so much excitement about that film, and um, it's going
(18:46):
to you know, probably very easily be the hit of
the year. There are fewer of those kinds of films,
and studios like Disney and I've really kind of shifted
their movie making strategy to be fewer but bigger event films.
They're more expensive, there are a few of them, but
that people will turn up for them. So they have
the Marvel movies, they have the Lucasfilm movies. They have
(19:07):
films like Frozen, and that's the kind of area that
that's kind of direction Hollywood is taking. And also we're
seeing potential consolidation in the Hollywood. We've also got a
pending deal for Fox and Disney, eliminating one of the
potentially one of the six studios. So this is a
time of major change for the movie industry. The movie
(19:43):
business is undergoing some serious change. Like lots of other industries,
it's been rocked by new technologies. It does have something
going for it though. Going to the movies is an experience.
Unlike retailers who are trying their best to make clothing
more of an experience and less of an object, movies are,
by nature a form of entertainment. Mark Seratti says that's
(20:05):
what draws people to theaters to begin with. I equate
it to this. You know, most people have a nice
kitchen in their home, and you know what, they like
to go out to restaurants, and the shared movie going
experience is one that people really like. Whether it's a
big action adventure, whether it's a mystery, whether it's a comedy,
(20:25):
a family movie, people like to get out of the house.
And I don't see that changing as long as we
as exhibitors create a great customer experience, and the studios
and content providers continue to make great movies. And from
what I see looking forward into eighteen and nineteen and
two thousand and twenty, there is a great lineup of
(20:48):
movies coming and we're every single month improving our theaters
and the guest experience. So I'm pretty bullish and positive
that the business is going to is going to continue
on for the next five years because people want that
shared movie going experience. Even still, the shared movie going
experience is going to keep evolving. It'll likely look pretty
(21:12):
different down the line. Theaters have already started showing live
events like boxing matches, operas, and old movies. You could
probably find a Star Wars themed event at a location
near you. Theaters are finally being forced to do more
to justify raising ticket prices. Some are even introducing virtual
reality experiences and other techy things. So think about that
(21:34):
next time you grab a big tub of popcorn, lean
back in your newly renovated comfy chair, and don a
pair of three D glasses to enjoy a movie. That's
it for this episode of Material World. Thanks for listening.
For more episodes, check us out on Apple Podcasts, Bloomberg
(21:58):
dot Com, or wherever you listen to shows like this.
For more of our regular coverage, follow us on Twitter.
I'm at l c Rupp and Jenny is at Jenny m. Kaplan.
For more on the movie, biz Anusha is at Anusia Sakui.
Material World is produced by Magnus Henrickson and Liz Smith.
Francesco Levies, the head of Bloomberg Podcasts. For our loyal listeners,
(22:19):
we have some news to share. This is going to
be the last episode of Material World as you know it.
We're taking some time to bring you something even better.
To stay tuned. Can you hear something? Can you hear me? Now?
(22:46):
Hold on? Hello? Can you hear now? Una? I can
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H Hi
December is a month rife with traditions, Christmas, Hanuka, New Year's,
the Rockets, Mary Christmas, Charlie Brown, the same ten songs
playing on the radio over and over. But recently, a
new bullet point has been added to this seemingly endless list,
the premiere of a new Star Wars movie. I don't
(00:24):
know about you, but I've been getting pumped all fall
to head to the movies, get some popcorn, and enjoy
yet another chapter on the big screen. I was one
of the few Americans, it seems, who didn't see Star Wars.
Why break my streak of seeing none of them? But
it's a holiday tradition for my mom and I to
see a ton of movies. And this is undeniably prime
movie going season. A huge chunk of potential award winners
(00:49):
get released, and people want to cram to be in
the know at Oscar time. But actually more and more
people are doing that cramming at home. Despite our excitement.
People are going to the movies last unless I get it.
Unless you're desperate to see a movie the month it
comes out, and you can always wait and watch it
from the comfort of your own living room for less money.
(01:09):
Home theater systems are getting bigger, TVs are getting better
and also bigger. There's almost no reason to leave. Plus
there's all that other content out there that you've been
meaning to watch. There's so many shows on my list
of things I need to get around to watching someday.
It's a problem that movie theater chains are desperate assault.
(01:36):
I'm Lindsay Ruth and I'm Jenny Kaplan. Today on Material World,
we're talking about what movie theaters are doing to try
to win you back. What you know is if you
(02:00):
look at box office numbers, is that either the box
office revenue is edging up past recent years, like two
fifteen we had record box office in the US, but
attendance itself is not growing. Anushaskui is an entertainment reporter
at Bloomberg who covers the movie chains. The reason that
we are getting an increase in box office revenue is
(02:22):
because one of the main things that theaters have been
doing is increasing pricing. There being able to do that
because of the adventure of digital medium So the digitization
of theaters, also the proliferation of premium large format screens
like an Imax theater screen within an AMC cineplex for example,
they can charge premium pricing for that. And also the
(02:44):
chains like AMC and Regal have their own premium large
formats which they can charge more money for, and they've
been investing, you know, a lot of money in reseating,
so adding luxury seating, recliners so your experience is much
more enjoyable. You can also have in theater dining um.
More recently, in the past few months, we've seen theaters
(03:06):
take it up a notch and talk about other ways
that they've really going to try and push the boat
out and and and grow revenue, grow attendants, and they're
going to try different ticketing initiatives. So maybe, for example,
if you go to the theater that first road that's
always empty because it's way too close to the screen,
maybe they'll charge less for that. Or for example, at
(03:27):
quieter times they'll charge less, and at busier times maybe
they'll charge more. That brings it more in line with
you know, a concert or sports tickets sales process where
you know, there's really a kind of dynamic pricing of tickets,
and you know, we haven't really see theaters do that
and keep up with the airline industry or the sports
and live entertainment industry when they've come to pricing tickets,
(03:49):
so that those are the kinds of initiatives. AMC said
it might also send sell reset merchandise linked to films
in its theaters. It might also sell movies online. Those
are huge shifts. I for one, am very into the
new comfy chairs. I went to a theater in South Street,
support New York that felt like I was suddenly transported
(04:11):
into the future. And when I was back home in
North Carolina, the theater there had new seats too. Movie
chains have realized they really need to up their game.
This past year has been a real eye opener for
followers of the movie business because this summer we probably
had one of the worst summers in like a decade
at the box office, and that was driven by, you know,
(04:33):
some flops. Films really just weren't hitting as well as expected,
and that always happens to some degree. But compounding with
that has been the rise of digital distribution of original
films and and great TV content from the likes of
Netflix and Amazon. So there's much more online content to
keep people at home, and you know, people are more
(04:55):
consumed with their mobile lives, so being in a theater
is a bigger of people. So while proponents of the
theater industry, you know, CEOs of the major chains, will say,
you know, that this is a blip and that it's
it's a result of um, you know, poor film choices
(05:16):
by studios, that there are others that Wall Street analysts,
for example, that are much more bearish on the situation
and suggests that there is a issue with attendance. Movie
attendance in the US, which records show has been sort
of stagnating over the past few years. And you know
also that there's a lot of um supply amongst movie
(05:38):
studios that you know, there's maybe too many superhero films,
too many, too many films along the same the same line. Um.
So at the same time, what we've seen is theaters
really try to push forward and try and evolve to
meet these more challenging times. On top of that, studios
(05:58):
themselves are pushing to take a little bit of movie
theater power away from them. I broke the story with
with colleagues here in l A at the end of
last year and earlier this year, writing about how studios
were pushing theaters to accept that movies new movies which
they have a period of exclusivity of up to like
(06:20):
sort of three months currently that they wanted new movies
to be in the home sooner and talking about maybe
having you know, new releases available for rent at home,
you know, just two weeks after it opens and theaters.
That was a huge threat to theaters because they need
people to think that they can't see this movie anywhere
else unless they go to a theater. And the problem
(06:42):
for studios is that like, Okay, that's great for the
first month, but then we've got one or two months
when people can't see those films. So that's had a
huge impact on the share price of theaters. AMC for example,
it shares a down over fifty year to date um
that's five zero. So it's really had a huge impact
(07:04):
that sort of structural potential, structural change to the movie
business and that that whole windowing process. Mm hm. At
least one innovative company is trying to change the whole
business model of going to the movies. Yeah, this year
we saw in the summer, we saw Movie Paths, which
(07:25):
is a company that has been around since two thousand
and eleven. They got a big investment and we're able
to cut the price of a subscription plan to see,
you know, as a movie a day from month to
just under ten bucks, and that had a huge amount
of interest, and you know, it really sort of seemed
(07:47):
to make a light bulb go off on in the
heads of movie fans um that they could go to
the movies every day, you know. For movie Pass CEO
Mitch Lowe is no stranger to innovative tech disrupting Hollywood.
(08:07):
He was one of the early executives at Netflix and
was president of red Box. Now he wants to tackle
the movie going part of the business. I found out
about this company called movie Pass that had was really
trying to be Netflix for the movie theaters, and I
was fascinated by it, and I started advising these guys.
I found what they were really trying to do is
(08:28):
they were trying to address the movie goer who already
goes about eighteen times a year, that heavy movie goer,
and therefore their price was in the thirty to fifty
dollar range. And I, you know, after advising for a while,
I went off and did other things and then found
out about them again. At the Sundance Film Festival in
(08:50):
two thousand and sixteen, got introduced to their then uh
majority shareholder, a guy named Chris Kelly, and so he
and I hit it off, and we both realized that,
you know, there was a real big opportunity more for
a mass product that could re energize moviegoers who only
went to five movies a year. So, after about a
(09:12):
year of testing and surveys and research, in August, we
launched our new product at you know, it's it's aimed
at people who are only spending fifty dollars a year
going to movies and now getting them to spend a
hundred and twenty. We just passed a million subscribers in
four months, and that's faster than Spotify, faster than Netflix.
(09:37):
To finance the new product, movie Pass recently sold a
little more than of the company to data analytics firm
h M n Y. On one side of the coin,
for mobile and at home, you have all this innovation,
all these other ways to consume entertainment, you know, options
like subscription or bundling or ala cart. You know, different devices,
(10:01):
your phone, your laptop, your smart television, your old television.
In their airplanes everywhere whereas the theater hasn't you know,
kind of changed the way they transact with you. What
they have done though, over the last eighteen years is
almost doubled the price. So every year that the ticket
(10:21):
sales go down, the answer from the exhibitors as well,
let's just raise our price and we'll be even so
in the face of continuing rising prices and alternatives that
are incredible have a lot of flexibility and options. You know,
especially young people are kind of talking themselves out of
(10:44):
going to the movies. They go, oh, it's risky, it's
ten fifteen bucks. After all, I've got all the entertainment
I need, you know, on my phone. You know, I'll
go to the Star Wars, I'll go to the big
titles that are promoted, but I won't go to the
smaller titles. I'll just wait for them to come out
on on Netflix. And so what people the way people
(11:08):
use movie pass is number one, they go to twice
as many films as they went to before. So if
they went to five films a year last year and
they joined movie Pass, we they we see them going
to ten to twelve movies after they join, and almost
a hundred percent of that increase are small films, those
(11:29):
films that they used to say I'll just wait to
see them on HBO or whatever it might be. So
what that's doing, what's happening is instead of waiting, people
are actually seeing more films, and especially more smaller films
in the theater. And this is horrible marketing language, but
(11:50):
I think people consider this like bad movie insurance. So
I know I can explore and experiment seeing films I
generally wouldn't see and take the risk, and I know
if I don't like it, I'll just walk out and
it won't cost me anything. So that's how we're re energizing.
(12:10):
We're getting people to we're kind of removing the barriers
to decide to go to the movie in the movie theater. Still,
from a business perspective, movie pass has a long way
to go. They're spending a lot of money, they are
loss making. They had a qualification on their recent earnings saying,
you know, they would be question their viability long term,
(12:33):
you know, unless they get more cash. But they have
had some kind of impact, they claim on attendance. So
if they do have a real impact on attendance, maybe
they will get revenue from movie studios who will pay
to have advertisements on their on their website. But there
have been attempts from third parties to insert themselves into
(12:57):
between the movie theaters and and the studios and try
and make money by disintermediating them in a way and
causing disruption that you actively you know is overdue in
this space. Um, but they haven't been successful so far,
so we'll see. They said that to us at Netflix,
they said it to it at red Box. How could
(13:18):
you possibly rent a movie for a dollar at night
when blockbusters charging four or five dollars. And it's all
about getting the science of utilization right. And what we
see with our subscription customer is they end up going
to twice as many films, but that ends up after
(13:38):
the third or fourth month at about one film per month,
and that's approximately what they're paying us. So what we
hope to do is to break even after three or
four months on the on the amount of movies you
go to, and then over time, what we've found is
we we can be an incredibly valuable marketing to on
(14:00):
behalf of the content owners, especially for those small films,
whether it's market generating revenue from marketing movies, or it's advertising,
or it's selling our subscribers something else. When we break
even on the customer on the cost of goods versus
the revenue, and then make our money in other ways,
(14:21):
we kind of create a win for the whole ecosystem.
People go more often, they buy more high margin popcorns,
so the exhibitors make more money. The studios make more
money because we drive customers to those smaller films they
can't afford to market. Clearly, a movie passes doing something
right because they've got themselves a copycat. Cinemark, the third
(14:43):
largest theater chain in the US, recently announced its own
subscription plan. Cinemark has five hundred theaters around the world,
with about three in the US. The company has been
doing the work to try to upgrade customer experiences. Here
see Mark Sarati on what the chain is up to.
By the end of this year, we'll have over our
(15:06):
screens having the electric, lusher luxury recliners, and and more
than half of our theaters with expanded food, and many
of our theaters with wine and beer in some for
the alcohol, and and of course we're doing big marketing efforts.
So we we launched the first national subscription program called
Cinemark Movie Club. That's been it's been put in the
(15:29):
marketplace by one of the major exhibitors, so we're very
excited about it. You know that the the challenge is
that the consumer has got a lot, a lot of
additional options at home, and the television hardware and systems
are much stronger at home. So for us, the challenges
to motivate people to you know, leave their home and
(15:52):
go out and spend you know, somewhere between eight and
twelve dollars depending on where you live to go to
the movies. And so that's why we put all these
luxury loungers in and why we've improved our food and
and we've spent so much money to improve the guest
experience at the movies, and um, you know, our research
(16:13):
says that people are really really noticing the difference, and
and that's why, you know, we're gonna the industry is
going to be over eleven billion dollars again this year.
Zarati says, Cinemark launched Movie Club with one major objective
to drive attendance, and it uses things like perks to
do it. You know, people need a reason to to
(16:34):
come out. We wanted to reduce all the friction points
of going to the movie. So the first thing we
did when we were designing Movie Club is we talked
to a lot of our movie going guests and ask
them what would they want most in a subscription based program,
And we went out and designed a program around that
(16:56):
so that they could come to the theater for a
reason a reasonable price. They could reserve their seats or
their tickets in advance with no online fees. That if
they didn't use their movie credit for one month, because
we're charging for that, if they didn't use it in January,
it would roll over to February, and they would roll
(17:18):
over again into March, and they could bring friends and
family with them to use those as well. And when
you come, you could bring a guest with you and
you could have a companion seat. And then on top
of it all, we said, if you're a movie Club member,
we're going to give you a discount on your concession.
So when you you add all those up, it's a
very compelling offer for the consumer. And we've gotten rid
(17:40):
of all those friction points. So does all of this
stuff actually work? Here's Bloomberg's nusha again. I think in
the big picture, you know snopping enough to shift the
whole industry. Definitely. Obviously we see in the rising revenue
(18:02):
from the box office that reseating has had an impact
on being able to charge more. Question is long term,
if if that's really going to keep yielding you know,
those kind of results as people get used to, you know,
a reclining seat being standard. The question I I what
I hear theaters say and executives say, is like, if
(18:24):
we could just get people to turn out just one
more time a year, that would make a big difference,
which is it's kind of amazing. The secession is happening
at an interesting time because Star Wars, the new Star
Wars the Last Jedi is opening. That is huge for theaters,
so much excitement about that film, and um, it's going
(18:46):
to you know, probably very easily be the hit of
the year. There are fewer of those kinds of films,
and studios like Disney and I've really kind of shifted
their movie making strategy to be fewer but bigger event films.
They're more expensive, there are a few of them, but
that people will turn up for them. So they have
the Marvel movies, they have the Lucasfilm movies. They have
(19:07):
films like Frozen, and that's the kind of area that
that's kind of direction Hollywood is taking. And also we're
seeing potential consolidation in the Hollywood. We've also got a
pending deal for Fox and Disney, eliminating one of the
potentially one of the six studios. So this is a
time of major change for the movie industry. The movie
(19:43):
business is undergoing some serious change. Like lots of other industries,
it's been rocked by new technologies. It does have something
going for it though. Going to the movies is an experience.
Unlike retailers who are trying their best to make clothing
more of an experience and less of an object, movies are,
by nature a form of entertainment. Mark Seratti says that's
(20:05):
what draws people to theaters to begin with. I equate
it to this. You know, most people have a nice
kitchen in their home, and you know what, they like
to go out to restaurants, and the shared movie going
experience is one that people really like. Whether it's a
big action adventure, whether it's a mystery, whether it's a comedy,
(20:25):
a family movie, people like to get out of the house.
And I don't see that changing as long as we
as exhibitors create a great customer experience, and the studios
and content providers continue to make great movies. And from
what I see looking forward into eighteen and nineteen and
two thousand and twenty, there is a great lineup of
(20:48):
movies coming and we're every single month improving our theaters
and the guest experience. So I'm pretty bullish and positive
that the business is going to is going to continue
on for the next five years because people want that
shared movie going experience. Even still, the shared movie going
experience is going to keep evolving. It'll likely look pretty
(21:12):
different down the line. Theaters have already started showing live
events like boxing matches, operas, and old movies. You could
probably find a Star Wars themed event at a location
near you. Theaters are finally being forced to do more
to justify raising ticket prices. Some are even introducing virtual
reality experiences and other techy things. So think about that
(21:34):
next time you grab a big tub of popcorn, lean
back in your newly renovated comfy chair, and don a
pair of three D glasses to enjoy a movie. That's
it for this episode of Material World. Thanks for listening.
For more episodes, check us out on Apple Podcasts, Bloomberg
(21:58):
dot Com, or wherever you listen to shows like this.
For more of our regular coverage, follow us on Twitter.
I'm at l c Rupp and Jenny is at Jenny m. Kaplan.
For more on the movie, biz Anusha is at Anusia Sakui.
Material World is produced by Magnus Henrickson and Liz Smith.
Francesco Levies, the head of Bloomberg Podcasts. For our loyal listeners,
(22:19):
we have some news to share. This is going to
be the last episode of Material World as you know it.
We're taking some time to bring you something even better.
To stay tuned. Can you hear something? Can you hear me? Now?
(22:46):
Hold on? Hello? Can you hear now? Una? I can
hear you? Can you hear them? No? I can't hear anything. Okay,
can you hear me? Say something over on the other side? Hello?
H Hi
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