North America’s Largest Cinema Chains Continue to Invest in Diversification

With quarterly earnings call season underway, the leadership or North America’s top five theater chains—AMC, Regal, Cinemark, Cineplex, and Marcus—are elaborating on their plans to strengthen their respective companies as the industry looks forward to summer 2022 and beyond. With strategies aimed at diversification and experimentation outside the “traditional” theatrical model, these chains hope to take hard lessons learned during the pandemic–including the dangers of relying solely on a studio slate–and use them to enact strategies targeted at long-term growth.

Diversification of Programming

Big-budget tentpoles may be the bread and butter of the cinema industry, with last December’s release of Spider-Man: No Way Home proving to naysayers that audiences are ready and willing to return to cinemas, but as the release pipeline remained somewhat scant in Q1 2022, cinemas looked to non-traditional programming to attract moviegoers. 

Citing Cinemark’s “consistent focus on multi-cultural films,” CEO Sean Gamble highlighted the success of historical epic RRR, after 2017’s Baahubali 2: The Conclusion the second highest-grossing Indian title in North America. Building on RRR‘s success and strong word of mouth, its distributors are re-releasing the film in select theaters for one-night-only screenings on Wednesday, June 1. In Canada, Cineplex has found success with Bollywood title Aaja Mexico Challiye, which per CEO Ellis Jacob “was very well received globally and generated nearly $100 million, with Cineplex leading the charge in North America and contributing 65 percent of the domestic box office.” Recent releases from Korea (BTS Permission to Dance on Stage – Seoul: Live Viewing) and Japan (Jujutsu Kaisen 0) were cited by multiple of North America’s top-five chains as films that were successfully able to draw in niche audiences.

Even among domestic titles, diversification is needed to attract moviegoers from demographics that have been slow to return to cinemas. Beyond blockbusters like Spider-Man: No Way Home and The Batman, says Marcus Theatres CEO Greg Marcus, “solid performances from an increasing number of films are showing there is demand for the theatrical experience for more than just the tentpoles, and we continue to see more customer segments returning to [the] movies.” Family titles like Sonic the Hedgehog 2 and The Bad Guys surpassed expectations in Q1 2022, says Marcus, while “films such as The Lost City and Everything Everywhere All at Once are seeing women and older adult audiences return to the movies.”

Diversification of Businesses

The pandemic has brought about an increased interest in non-screening ways for cinemas to make money, whether gaming parties, out-of-theater popcorn sales, or entertainment centers. The latter concept has long been a point of interest for Cineplex, which currently operates ten Rec Room and three Playdium locations across Canada. “Given the number of locations, we are starting to build scale in this business and it’s becoming a more significant part of our total revenue,” says Jacob, adding that in the future the chain “will look to drive results in this segment through organic growth from existing locations, the addition of new locations through the opportunistic and prudent rollout of the [location-based entertainment] concept, and by enhancing operational efficiencies to increase margins.”

Meanwhile, Adam Aron, CEO of AMC Theatres, called attention to the chain’s investment in a variety of non-film ventures, including a gold mine, a retail popcorn business, and NFTs and cryptocurrency. Discussions are currently being held with potential banking partners, added Aron, on the launch of a co-branded AMC credit card, which is intended to reach a “significant number” of AMC shareholders and customers within the year.

CEO Moshe Greidinger of Cineworld, which held its most recent investor presentation in March, noted that “diversity of the revenue base” will continue to be a priority moving forward. “We have all kinds of initiatives that are going well,” he notes, including several related to “new video games and attractions for the youngsters.” Outside the realm of family entertainment is Marcus Theatres’ new sports viewing auditorium, located in their Gurnee Mills, Illinois location. Said Greg Marcus: “This one-of-a-kind sports viewing experience, combined with industry-leading food and beverage offerings, debuted during March Madness to positive customer feedback, and we continue to refine the customer experience and develop the promotional strategy.”

Diversification of Premium Formats

With blockbuster films regularly over-indexing on premium screens as customers return to the movies, premiumization remains the word on every cinema owner’s lips–whether that’s a premium format, like Imax or motion seating, or the improvement of the standard moviegoing experience through the addition of premium technologies like laser projection. Per AMC CFO Sean Goodman, PLF auditoriums yielded 16 percent of the chain’s domestic attendance in Q1 2022, compared to 15 percent in Q1 2019. At Cinemark, premium-large format auditoriums (including Imax and XD, the chain’s proprietary premium format brand) brought in 14 percent of global box office in Q1 2022 despite making up only 5 percent of Cinemark’s total screen count. The chain’s revenue from motion seating company D-Box, meanwhile, is up 25 percent compared to Q1 2019. 

It’s no surprise, then, that future investment in premium formats is underway for North America’s largest exhibitors. Last month, AMC announced the installation of Cinionic laser projectors at 3,500 of their auditoriums–representing approximately half their domestic chain–by 2026. Cineworld continues to roll out laser projection following a pre-pandemic deal with Cinionic–”maybe the timing was not the best,” admits Greidinger, “but we are already enjoying 2,000 next-generation laser projectors.” 

Cinemark, meanwhile, has plans to add more XD and D-Box auditoriums in addition to further embracing laser projection. Says Gamble: “To ensure that our sight, sound, and content management capabilities remain best in class, we have continued moving forward with the plans we announced back in 2019 to convert our entire global circuit to Cinionic laser projectors. This transition will elevate our Cinemark moviegoing experience even further by delivering more vivid colors, sharper focus, and brighter on-screen imagery to showcase the incredible film content that is on the horizon as optimally as possible. While doing so, we will also derive meaningful cost savings and environmental benefits associated with laser projection.”

The economic impact of the increased popularity of premium formats is in evidence at Marcus Theatres, where moviegoers’ embrace of premium formats is one reason the chain’s average admission price in Q1 2022 increased 6.4 percent compared to last year and 18 percent compared to 2019. Says Greg Marcus: “Continued strong customer demand for our large-format premium screens was the primary driver of this overall increase in our average admission price, as well as more new films compared to last year, when a limited supply of new films resulted in a higher mix of legacy library titles shown at discounted ticket prices.”

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