How do you follow a $40 billion year? The global cinema industry reached the vaunted box office benchmark for the first time in 2017, setting a new record for worldwide receipts despite a 2 percent slide in the North American market. The domestic dip, however, brought with it the predictable hand-wringing from a spate of outlets ahead of CinemaCon 2018. The question, once again, was about the exhibition sector’s eminence within a rapidly evolving and fragmented media landscape. NATO President and CEO John Fithian addressed the question head-on at CinemaCon’s State of the Industry address. “The word ‘disruption’ is thrown around way too much,” he said. “Nothing needs to be disrupted when it comes to the basic goal of our industry: bringing people together to share a communal experience.”
In recent years, that basic goal has taken on an increasingly global dimension. The number of digital cinema screens around the world has risen from 111,329 in 2013 to nearly 170,000 in 2017. Emerging markets are growing at a rapid pace, not only in Asia, but also in the Gulf, where AMC Theatres made history by opening Saudi Arabia’s first commercial cinema in 35 years in the days leading up to CinemaCon. AMC is now one of several companies ramping up efforts to build out the newly reinstated Saudi market. The Asia Pacific region has also been a huge driver of the global growth, expanding its box office take by 44 percent over the same span. China, Japan, and South Korea currently represent three of the world’s five biggest markets outside North America, combining for a total of $11.5 billion in box office in 2017. Asia’s status within the global cinema industry only stands to grow in the coming years, according to David Hancock, director of film and cinema at IHS Markit. “Looking ahead in four or five years’ time, you’re going to have a situation where Asia is going to represent about 45 percent of the world’s box office,” the analyst noted during his CinemaCon presentation. “Nearly half the world’s box office will come from one region of the world.”
While China has dominated headlines when it comes to the region’s growth (the market is reportedly on pace to surpass North America as the world’s largest), a look at nearby South Korea offers insight into some of today’s biggest trends. Delivering the convention’s International Day Keynote address, Jeong Seo, CEO of CJ CGV, the country’s leading exhibitor, laid out the transformation his circuit went through in the face of increased competition from digital media. “To survive, we needed to embrace innovation,” he explained. “Several years ago we decided to redefine ourselves from being a multiplex to being a ‘cultureplex.’ For us, being a ‘cultureplex’ means to be a cultural playground, where people can gather to experience all different types of culture from film, music, performances, games, food, drinks, and so on.”
The “cultureplex” concept firmly positions CJ CGV as part of today’s experience economy, as it focuses its efforts on providing patrons with a memorable out-of-home experience. According to CinemaCon guest speaker Jay Baer, a digital marketing and online customer service expert, experiences will influence the majority of all customer decisions by 2020. “We’re in an era where the greatest companies in the world are setting expectation levels for your guests,” he said. “It’s not about providing a better experience than another theater chain or the cinema across town, but about how your experience compares to everything else.”
The experience economy has acted as a catalyst for many of today’s industry trends. Circuits like IPic Theaters and Alamo Drafthouse have built a loyal brand following by mastering the luxury and dine-in concepts, respectively. Among larger circuits, we have seen indications that the “big-box” multiplex model is on its way out as capex allocation continues to be dedicated to trends like expanded concessions, alcohol service, and recliner seating—ensuring moviegoers the options of what to watch and how to watch it at the cinema.
That does not imply that complete renovations are required to capture today’s audiences, but they are a reflection of exhibition focusing on perfecting the aspects of the business they can control. Movies, after all, continue to be the lifeblood of the industry; the content is mostly responsible for the demand. The movie theater’s role in a community, however, can prove to be an equally powerful selling point. Jon Landau, producer of box office juggernauts Avatar and Titanic, participated in a panel discussion at which he mentioned how his own moviegoing habits have been influenced by the efforts of his local B&B Theatres location in the Florida Keys. “We love going down there because it is community focused,” he said. “They reach out to the community through different programs; they use their space for community activities whenever they can. If you let people know that you’re there for them, they’re going to be there for you.”
The sentiment echoes Seo’s International Day address, which emphasized cinema’s power to bring people together. According to the CJ CGV chief executive, exhibitors can face an existential risk if they prioritize their function as a content platform over the role they play in their communities. “If that’s how we define ourselves,” he said, meaning simply as a place to watch movies, “then we will constantly be under the threat of being replaced by other channels for watching movies or other forms of entertainment. The value of CGV is to provide our customers the most attractive place in which to have a communal social experience.”
Innovation is a big part of CJ CGV’s global strategy, and the company’s activities aren’t limited to exhibition. CJ 4DPLEX, its cinema technology subsidiary, has made significant strides in expanding new experience-based concepts to movie theaters around the world. These include 4DX, its immersive seating platform, and the 270-degree panoramic screen format, ScreenX.
Adoption of immersive seating is on the rise according IHS Markit’s David Hancock, and while 4DX is one of several platforms currently on the market, it stood out at CinemaCon 2018 with its news of a milestone deal with Cineworld, the world’s second-largest exhibition circuit. Cineworld will equip an additional 145 auditoriums in its global circuit with 4DX seats, 79 of which are earmarked for Regal locations across the United States. That means 4DX’s domestic footprint will go from its six existing sites to a total of 85 in the coming years. Globally, 4DX crossed the 500-auditorium benchmark in April, the Cineworld deal single-handedly increasing its worldwide footprint by 29 percent. 4DX added two new markets to its portfolio before the end of the week through deals with Nigeria’s Silverbird Cinemas and Saudi Arabia’s Cinemacity.
Cineworld CEO Mooky Greidinger cited his company’s commitment to invest in new technology as part of the strategy behind the Regal acquisition, with 4DX playing an important part in its U.S. expansion. “For us it was clear, as part of the Regal deal, that our belief in technology would be part of the strategy—and we believe very much in 4DX,” Greidinger said at a press conference following the announcement. “We didn’t need to look at Regal’s results; we know what 4DX is and we have a strong relationship with CJ 4DPLEX. That’s why we went ahead with this; part of the strength of the format isn’t to have six, eight, or ten. You need to have a lot.”
Consolidation among multinational circuits has created a climate of innovation for cinemas around the world, with companies like Cineworld and CJ CGV helping introduce different concepts into new markets. “Today, the top 10 [circuits] are about 35 percent of the world’s screens. Last year, it was about 26 percent and the year before that it was about 22 percent,” noted David Hancock. “Exhibition has often been a national activity, but it’s changing as it’s becoming an international activity. It’s easier to market a concept if you have multiple sites across the continent, across the world.” It is not uncommon to find tomorrow’s trends in U.S. exhibition in today’s international markets. “We’ve actually taken a lot of lessons from outside the U.S. into this country,” admitted Cinemark CEO Mark Zoradi in a Q&A following a panel. “The first time we ever installed recliners in a theater was 10 to 12 years ago, in Latin America.”
In a similar vein, CJ 4DPLEX’s ScreenX panoramic screen format is the latest innovation to begin scaling its presence in the United States. B&B Theatres announced an agreement with the Korean company to install four ScreenX systems in its circuit—including the world’s largest in its Liberty, Missouri, location—more than doubling the format’s footprint in the market.
ScreenX isn’t the only panoramic screen format to have emerged in recent years. Barco competed in the space with its own format, Escape, before discontinuing the product earlier this year. “To me, that suggests quite clearly that you can’t just ‘do’ technology. There has to be something behind it … content really is the driver for cinema,” said David Hancock, who counted 36 Escape systems worldwide before its demise. CJ 4DPLEX has had better fortune securing content for ScreenX, announcing partnerships with Fox and Warner Bros. at CinemaCon 2018, with confirmed titles like Aquaman and Shazam! already on deck. The number of ScreenX auditoriums around the world increased by 33 percent in the past year alone, totaling 142 to date. There are only six ScreenX auditoriums currently in operation outside Asia.
ScreenX’s success is an example of the importance of securing a consistent pipeline of content for any new cinema technology. Ultimately, it might be the key factor that determines the fate of two of the biggest tech innovations at CinemaCon 2018. LED cinema screens turned heads when they were previewed at off-the-record demos at last year’s event; this year, CinemaCon began on the heels of the commercial launch of the first LED screen in the United States. Samsung’s Onyx, the first—and thus far, only—DCI-compliant LED cinema screen, made its debut at a Pacific Theatres location in Southern California days ahead of the convention. Although Samsung is the first company to release a DCI-compliant product, several other electronic companies are either rumored or confirmed to be developing a similar product for cinemas. “From what I understand, by the end of June there will be 31 LED screens in operation in the world,” said Hancock. “That’s not huge, but quite good growth in a matter of a few months. It’s something that wasn’t around last year … and has the power to disrupt what we do in the industry; digital to analog was built around a screen and a projector; now that may change. It may not, we’ll see in time, but it’s worth keeping an eye on.” The topic has been raised with several notable film directors who have reportedly provided mixed reactions about the concept. The support of the creative community might prove vital not only for LED technology to achieve its full potential, but to its very existence as a viable alternative for premium-format auditoriums.
Content will also be the key to two newly launched alternative distribution platforms announced at CinemaCon 2018. GDC Technology’s GoGoCinema and NAGRA Kudelski unveiled the plans for their respective on-demand cinema solutions at the event, though neither has formally launched. GDC’s GoGoCinema is touting a crowd-sourcing approach—borrowing a page from alternative distribution platform Tugg—in providing an on-demand cinema-booking platform for consumers. Through its app, users can collaborate to book a film at a participating auditorium at a time of their choosing. The platform will run on GDC’s Cinema Automation CA2.0 platform, which is capable of play back of over 1,000 titles to any auditorium in a cinema through a centralized server, eliminating the need for local storage in any one auditorium. The crowd-sourcing distribution strategy remains unproven at scale, however, and it remains to be seen if GoGoCinema—which is expected to go live in Q3 2018—will stake its future on a feature that will require significant B2C marketing investment. In fact, what is most compelling about GoGoCinema’s potential is its ability to streamline and expedite group sales, four-walling, private events, and corporate sales at any theater.
As an alternative distribution platform—offering consumers a catalog of films to enjoy at a cinema—it bears similarities to myCinema, NAGRA Kudelski’s newly announced event cinema service. With myCinema, exhibitors will be able to schedule live and prerecorded event cinema content at their theaters using the company’s broadband-based distribution system.
Both platforms will depend on an appealing array of content to draw an audience and are designed to help exhibitors increase the frequency of off-peak admissions. If successful, they might even become a compelling alternative to the value-added proposition claimed by third-party subscription services—getting more people to theaters, more often.
Subscription services have been a hot topic in the United States through 2018, as exhibitors study the value of implementing their own in-house solution or decide to work with a third-party provider. John Fithian voiced NATO’s concerns on the topic, highlighting three issues crucial to the successful implementation of the concept: sustainability, accuracy, and a respect for data privacy. “We do have these concerns about the concept of a subscription model, because some concepts work and some don’t,” he explained at a press conference following the State of the Industry remarks. “The first one is sustainability. You want to make sure that if an offering develops a huge following, that it’s sustainable. Because if it’s not and it goes under, you end up with millions of disappointed customers who complain to us and our members. Number two: for any model that you want to analyze out there, we seek accuracy. We’re a business that operates on data and on relationships; those have to be honest and forthright. Anybody proposing new models, we would love to see accurate data about how they are working or not. The third one is respect for the privacy of that data. As cinema operators, these are our guests—we invite them into our places of business—so either through acquisition of data ourselves, by third parties, or both, we have to respect their privacy and use it in appropriate ways.”
Subscription services aren’t the only approach today’s exhibitors can use to promote their own value propositions. Addressing the topic, 20th Century Fox Film Chairman and CEO Stacey Snider expressed her support for programs that can help make frequent moviegoing more affordable to a wider section of people. “It shouldn’t be a surprise, to be honest, that price sensitivity is one way to get people to come to the movies,” she said during a panel presentation. Exhibitors have already taken note; major U.S. circuits like AMC and Marcus Theatres, for example, have implemented discount ticket days with select midweek admissions priced as low as $5.
Exhibitors considering launching their own subscription program can now look at the example set by Cinemark’s Movie Club, the first plan launched in the United States by a major exhibitor. “All we tried to do was take the concept of subscription services and apply it to moviegoing,” said CEO Mark Zoradi, citing the company’s research into subscription models across a variety of industries. “When we did the research, we found there was a segment of the audience who wants to go multiple times a month. There is a niche segment looking for a plan that has an unlimited feature, yes, but there’s a broader segment of the audience that goes five to seven times a year.” Movie Club offers Cinemark patrons one 2-D ticket credit for $8.99 per month, with added benefits like waived online fees, a 20 percent concessions discount, roll-over credits, and options for a discounted companion ticket and premium-format upgrades. According to the company, Movie Club has signed up over 230,000 members since its December 2017 launch, accounting for 5 percent of the circuit’s April box office and increasing memberships to its loyalty program, Cinemark Connections, by a third.
In developing an in-house subscription service tied to its own loyalty program, Cinemark is effectively harnessing the potential of big data without relying on a third-party intermediary. Understanding one’s consumers is an essential part of today’s business world—and cinemas are only now beginning to realize its true value. Alejandro Ramírez Magaña, CEO of Cinépolis, Mexico’s leading exhibitor and the world’s fifth largest, emphasized the role big data will have in shaping the industry’s future in his Marquee Award address, “By digging deeper into audience data coming from social media, online ticketing, and loyalty programs, we can derive important insights that are as valuable to exhibitors as they are to our partners in distribution.”
As anyone following the last five years of this industry can attest, there is no one trend either dominating or defining the entire business. New technology, big data, and a renewed focus on creating unique and dynamic moviegoing experiences—they are all proof that innovation among cinemas goes well beyond installing a new row of seats. Perhaps the Cinépolis CEO said it best in his concluding remarks when accepting the NATO Marquee Award onstage in Las Vegas: “I am convinced that there is something deeper that makes our industry unique, something that has to do with the very nature of human beings and their love of storytelling and shared experiences,” he said. “What else in the world creates such communal feelings as a movie theater? Not many. Watching a film on a big screen with a group of strangers is still a unique and powerful experience. A religious ceremony, a political rally, the Olympic Games, the theater in the round: these are all collective experiences and all were borne to history long ago. The movie theater is one of the few communal inventions of the modern world. It is our job, our business, to see that it continues to thrive.”