Let’s talk about the big news that came in: Theater owners announcing that they’re going to be investing more than $2.2 billion back into the cinematic experience. Can you give us a little bit of context on this? What does that $2.2 billion figure mean, exactly?
Let’s put that $2.2 billion into context. That’s eight of our top members, so it’s not the entire industry. What’s important to note is that the reason we put out this release was to raise awareness about the investments that are being made throughout the entire exhibition industry. We had the data point for the top eight, so that’s why we used that in the release. But understand, it is not just eight chains that are investing in themselves. It’s all of them, and we’re really excited about that. It’s a trend that we heard when we would talk to our members; what we kept hearing people saying was, “We’re investing, and we’re investing in lots of different ways. Certainly, great sight and sound is very important. But there are lots of investments beyond that, in seating, in the facilities, in HVAC, in carpeting, in concessions. All of these things help make a better experience for moviegoers, no matter where they go. That’s what we want. That’s what our members want. They want to make this experience as amazing as it can be for all of their audiences. I’m glad that people are responding to this release, because this is great news for the industry.
It’s one of my pet peeves when someone who hasn’t gone to a theater in a long time, especially on the press side, complain about the “sticky floors, dirty carpets” sort of thing. That model of theater is very much outdated. The movie theater of today—and we’re seeing this across the industry, among independents, midsize circuits, and top circuits—is investing back in the experience. That $2.2 billion, as you mentioned, only encompasses the top eight circuits, which is about two-thirds of the domestic market. There’s a whole other third of the market that’s also investing. So, if anything, the $2.2 billion figure is lowballing the sort of CapEx investment we’re expecting to see in the coming years.
That’s right. That’s why, when we did the release, we were intentional about using the phrase “more than $2.2 [billion].” Again, we had the data for the top eight, so that’s why we chose to use [the $2.2 billion figure in] this release. But without a doubt, when you go to theaters of any size, you see it. I’ll give you a personal example. One of my favorite theaters is the Cinema Arts Theatre in Fairfax, Virginia. I’ve been going there for decades. You can see the investments that are being made. Not too long ago, they put in brand-new seating. They’ve upgraded the projectors. We love seeing any theater, any of our members, investing in making the experience better for all their attendees.
Another detail I think that’s important to point out here is that while PLF is one of the hottest trends, it’s not what CapEx is going to entirely. It can be reseating. It can be HVAC systems. It’s going back to an existing site and making it better, or going into a new space with an innovative concept. That’s happening not just at one auditorium per site, but across every auditorium across most sites in the United States.
That’s absolutely right. And there are so many different touchpoints. Another example of CapEx investment is on the technology side. It’s easier for moviegoers to get their tickets, to order concessions. Those systems require investment. People demand that nowadays. They want things to be easier. How do you make some of these processes more seamless?
It makes it a better experience for everybody when you see these investments, no matter what they are. Of course, PLF investments are great, and we love seeing that as well, because it’s providing different ways for people to see these movies. Investments in other parts of the infrastructure and the system pay big dividends as well.
Right now, every circuit is trying to figure out the best way to deploy cash. It can be investing in cinema entertainment centers. We’re seeing large circuits like B&B Theatres go big on CECs. Or in-house PLF. We see international circuits like Vue International reseating everything they can find in their circuit. Another big part of it, as you mentioned, can be the background tech aspect of it, something that the consumer might not see on screen but that will make their experience or ticket buying experience, for example, a lot easier. We know that the e-commerce revolution has changed the way we operate in this economy, and movie theaters really have to step up and be part of that. Ticketing is a great example of that. Do you have the right app? Do you have the right website? Are you making it easier for your consumer to buy tickets? Because that old model of finding the showtime in the newspaper and standing in line, that’s just not where we are today. And it’s great to see cinemas really step up to that challenge.
That’s right. These investments in technology allow theater owners to leverage the data that they get from these systems to better communicate with their audience. And that makes for a better experience. If you’re telling me about movies that I want to see because of what you know about me, you get better results, and it helps our businesses grow. These investments, we hope, will provide long-term dividends for our members. And we’re seeing that happen.
It’s something AMC CEO Adam Aron spoke about quite a bit at CinemaCon: expansion isn’t really about the number of theaters and screens. It’s about optimizing the ones you have. Aron mentioned “battleship theaters,” which is something that every circuit has. Your money-making theaters. It can be in a major town, it can be in a suburban area. Those sort of locations that you know are going to return on that investment. You have to assume that those are going to be invested in first, but the numbers we’re seeing in this release suggest more than simply investing in major city locations. It suggests a national effort to improve moviegoing for everybody.
Absolutely. This release backs up the information we’re hearing from our members on a daily basis, in all 50 states from all sizes [of exhibitors]. Everybody’s investing in their theaters, because they know that they have to in order to make sure that they’re providing the best possible experience. It’s not just limited to a handful of places, and we’re excited about that, because you want every moviegoer to to see the fruits of these investments. If you only see that in a few key cities then most people will walk away disappointed. No matter where you are in the country, you’re going to see these investments, and you’re going to see a better moviegoing experience.
NATO’s Fall Summit is currently underway; can you preview some of the conversations that you’re really looking forward to?
The theme for this year’s summit is innovation and focus on the future. The sessions that we’re having our members engage in are all aligned around that topic. I’m excited to hear some discussions from theater owners who’ve been making these investments in themselves. That’s actually one of the sessions this week: investing in ourselves. We’ll hear firsthand about some of these very interesting innovations.
There are a lot of best practices and lessons that our members can learn from each other. Also just fostering the culture of innovation. Innovation doesn’t just happen on its own. It has to be fostered. Throughout the entire organization, from top to bottom, the focus has to be on that innovative mindset. How do we get better? How do we improve the experience for everyone?
That is something that we’re going to spend some time talking about as well. These are great conversations to have at the summit. They’re tailor-made for the size group that we have there. Certainly, there’s going to be a chance to talk about what’s happening right now, but there will also be an opportunity to look forward.
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