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Debating the health of the theater business


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Debating the health of the theater business

By one metric, it could not be a better time to be in themovie-theater business. By another, the industry could be unraveling.   

Looking at the summer U.S. box office alone, revenue was down about10.9% during the first half of the season, but it rebounded to a year-over-yeargain of 3.0% by the end of the summer, boosted by titles like “Finding Dory,”“The Secret Life of Pets” and “Suicide Squad.”

However, admissions, the number of actual tickets sold, wereup only 0.2% by the end of the summer. This discrepancy — growing box officeand flat or declining ticket sales — has created a unique ecosystem of bullsand bears.

That tension was front-and-center during TheGrill conferencehosted by TheWrap in Beverly Hills, Calif., on Sept. 26 and Sept. 27.

Source: TheWrap

“We do bank dollars. We don’t bank bodies,” CEOAdam Aron said during a panel discussion. “When you look at your bank statementyou count the dollars. You don’t count the number of deposits you made.”

However, that explanation has rung hollow for many in theindustry. In a recent interview, when discussing the lack of a materialdisruption for the theatrical business, L.E.K. consultant Dan Schechter said,“Just wait a year.”

“Admissions per capita have been declining 3% a year for thepast 14 years. … That’s a big decline. It’s been masked by the price increases.But jeepers, Blockbuster went down about 5% to 7% per year and went out ofbusiness pretty quick,” he said.

Schechter is not alone in his concern. Panel moderator ThomGeier, managing editor of TheWrap, opened his talk on the future of movie-goingby asking if the theatrical business was “wringing more value out of a flatline.”

Aron said his company plans to invest $3 billion in thetheater business over 2017 and 2018, “so we clearly don’t think ours is anindustry that is surrounded by storm clouds. To the contrary we could not bemore bullish.”

He said the company plans to market “better than ever;” itplans to grow through acquisitions, like its recent with ; and it plans tomake the theater-going experience better by upgrading seats, concessions andlobbies.

But Aron seemed to point to growth strategies that onlywring value out of soft admissions, Geier noted. “It seems like you are goingafter the same 1.2 billion admissions and making that experience better forthem,” he said.

Aron shot back that the industry enjoyed four record yearsof the past five on a revenue basis, and that is expected to persist in 2017and 2018. He also said that AMC Theatres sold under 200 million tickets in 2015but expects to sell almost 400 million in 2017. When Geier pointed out thatthat growth was due to acquisitions, Aron acknowledged “yes.”

Still, Aron criticized Geier’s tone, saying “all the questionsso far have been laced with doubt about the movie business. … If we had thisconference Dec. 25, [2015] after Star Wars opened, would you still bepessimistic about the movie business?”

The AMC CEO, meanwhile, deflected a question about thepotential for alternative windowing strategies, saying, “We’re willing to havecreative discussions. We’ll see where they lead.”

To create new lines of income, many observers have beencalling for such alternative windowing strategies, suggesting that the industryshould be open to more ideas like Screening Room, a controversial startup that proposed tooffer streaming films for $50 to rent in home on the same day they are releasedin theaters.

Regarding home viewing, in a separate at the conference,Sony Corp.’sentertainment chief Michael Lynton also argued that something needs to replacethe income the industry is losing on DVD sales.

“I think people are going to keep going to theaters. I don’tthink that model is threatened whatsoever. I think we do need to figure out away to make up for the hole in the boat that the decline in the DVD business isshowing,” the executive said, acknowledging that the DVD business is “downdouble digits of late.”

That new revenue source should come from new technology andnew platforms, which have historically created new opportunities in theindustry, he said. However, those opportunities are sparse. During Lynton’skeynote, both he and moderator Sharon Waxman, CEO at TheWrap, said they havenot spoken to Sean Parker, celebrity investor and founder of Screening Room, inmany months.

“But I do think we need to figure out another window, longterm,” Lynton said.