In our March/April issue, Boxoffice Pro revealed our 2022 Giants of Exhibition, ranking the top 50 circuits in North America by screen count. Our rollout was accompanied by an online panel discussion, held on March 15, 2021, designed to explore the potential of cinemas amid a time of continued and substantial change for the industry.
Our panelists hailed from chains that represent a small part of the diversity of the North American cinema landscape: Bob Bagby, CEO of B&B Theatres (sixth-largest chain in North America), the market’s largest family-owned exhibitor; Anthony Laverde, CEO of Emagine Entertainment, a Michigan-based luxury chain that cracked the top 10 of Giants for the first time this year; and Tim League, co-founder and executive chairman of dine-in circuit Alamo Drafthouse (No. 12), which in 2021 emerged from Chapter 11 with a revised business model and an eye to the future.
The theaters may be different, but they all share one goal: providing the best possible experience to their guests. And all three executives share one opinion: Innovation is a necessity, not an option, as the industry emerges from the most turbulent period in its history.
Listen to a recap of this year’s Giants of Exhibition panel—with insights from Bagby, Laverde, and League—in this week’s episode of the Boxoffice Podcast.
For many chains, bouncing back from the pandemic has meant assessing financials and streamlining operations. That’s particularly the case with Alamo Drafthouse, which successfully emerged from Chapter 11 during 2021 and is now expanding into new markets. In this unique period in exhibition history, what factors do you look at when deciding to add new locations?
Tim League, Alamo Drafthouse: Chapter 11 was a new experience for us, one that I’d rather not do again. I’d never done it as a businessman ever before, and I didn’t really know what to expect. There were some silver linings from it. It was awful. It was very painful. But it did leave us with an opportunity to almost burn down the infrastructure of before and build it back up.
Over the last 20 years, we’ve been expanding with new theaters, but we had a little bit of a Frankenstein nature to our company, with things that were patched on. [In addition to its cinema chain, Fantastic Fest, distributor Neon, the American Genre Film Archive, and retailer Mondo are part of the Alamo brand] And there were also hidden expenses that we lost sight of. We made ourselves much more efficient. We have a much smaller overhead at our head office. And we’re trying to realize that we can’t do everything. We’re choosing the most impactful moments to key into. For example, we’re rebuilding a lot of our technology. We were big advocates, before the pandemic, of our subscription program, Season Pass. We’re also realizing that our loyalty program—I probably rate us a C on that. We’re dedicating some technology to increase a lot of minutiae to our technology stack, but also leaning heavily into subscription and what a loyalty program means in the wake of a successful subscription program.
Anthony, what’s been Emagine’s approach to expansion? You’ve added both locations and screen counts over the last year.
Anthony Laverde, Emagine Entertainment: We were lucky. We were very familiar with the seven sites we acquired, so it wasn’t the standard level of due diligence for us. We were either a building owner already or had the ability to acquire an in-market competitor. In the case of the [GQT Movies] sites we acquired, we were very familiar with them. We competed with them for years. It was our management team’s opinion that they had underinvested in their venues for many years and had seen a significant reduction in guest count because of that underinvestment. So it made a lot of sense for us to make them Emagines. We’re going to spend $28 million in the next three quarters rehabilitating these buildings to Emagine standards. I believe that will increase the guest count and bring folks back to the theater, when they have the luxury experience that I know Bob and Tim both provide their guests. I think a common theme between the three of our chains is, the guests come first. We’re not concerned about our competitors. We’re concerned about the guest experience.
Bob, for a family-owned company like B&B Theatres, the pandemic probably brought a lot of scary moments. But you’ve been able to bounce back and invest in your theaters. What has the experience of emerging from the pandemic been like for B&B?
Bob Bagby, B&B Theatres: We are a privately held family company. I believe we’re the largest privately held family company in the United States. When I say “family-owned,” we don’t have a big equity group behind us. Just our family dealing with 20 banks and going for it. We’re so thankful that all of our vendors and bankers and landlords worked with us to get us through this. We are so appreciative.
When the pandemic began, I sat down [with children Bobbie, Brittany, and Brock Bagby, who help run B&B Theatres along with Bob and wife, Bridget]. I told Brock, [EVP and chief content/development officer], “I want you to stay out of the weeds. There are going to be more opportunities for expansion than ever before.” He looked at over 400 deals over the last two years. We added 120 screens. We were very selective. They had to be in areas that were not overscreened, obviously. And they either had to have been remodeled, or there must be tenant improvement money available for a remodel, because you have to have recliners in today’s market. You have to have a nice facility with good sound and projection. That’s what we looked at. Of course, we had very strict terms that we had to have. It was family money, so we were not willing to put a lot of cash into any deal. We had to work with our landlords for funding, and we’re thankful that we made some really good deals over the pandemic.
From the very beginning, though, I was bullish for the future. I knew that once the pandemic ended, people were going to be ready to get off their couches. And I think the success of Spider-Man: No Way Home and The Batman show that I was right.
Also helping bring people back to theaters during the recovery are premium experiences. Tim, something that Alamo announced just prior to the pandemic and is now expanding is your premium format, The Big Show. What does having your own house-branded PLF mean to Alamo?
TL: It’s a question every exhibitor has to face, in terms of whether you go with one of the externally branded PLFs or go internal. We made the decision that we wanted to write our own specifications for what it meant to be premium large format. We have a pretty strict guideline in terms of light level. There are only a couple of sound options. And then the size of the screen. We also wanted to have fun with the brand. Our branding on The Big Show harkens back to something very important to me: the age-old tradition of ballyhoo.
We’ve had great success with it. Whenever we’re building new units or taking over others where we have room to put in a PLF [screen], it’s an integral part of anything new that we’re going to do. The results have been strong, and the response from our guests has been amazing, especially for the tentpole movies. For a movie like The Batman, watching it in PLF—there is no comparison [to having] the immersive picture and, almost equally important, the immersive sound. So it’s very much a part of the road map forward for our expansion.
Bob, have you noticed that premium formats have an impact on getting people back to B&B Theatres for some of these big-budget blockbusters?
BB: Yes. We are seeing the majority of our customers coming back and coming for premium large format or some other experience. We have ScreenX, we have 4DX. That’s what people are doing. They’re there. They want that experience. They’ve been sitting on the couch. A lot of people saved a lot of money not going out for a couple of years, so now they’re willing to pay. And they’re also eating more, which is pretty exciting!
Two innovative experiences B&B Theatres has invested in are screenPlay, which is a family-friendly auditorium, and the installation of a performance arts stage for live performances at your Shawnee, Kansas location. Can you speak to us about those concepts and the experience of integrating them into traditional multiplexes?
BB: screenPlay is something that we have in a few locations. We actually have a playground in the auditorium. Kids can play 30 minutes before the movie. You have a small upcharge. Then the kids sit down and watch the movie. And yes, they do sit down and watch the movie, because they’re excited to see the movie. We always say it gets their wiggles out right before the movie starts! I take my grandkids, and they are not good all the time. The young ones are talking and want to get up. But it doesn’t bother anybody else in there, because we all have kids and they all get it. We want to start them young in going to the movies and [establishing] their love for the movies.
A lot of us have big—18-, 24-screen, whatever—complexes that we obviously don’t need now that the market has changed. So we’re looking at how to use some of those auditoriums. Our sweet spot is [about] 12 to 14 screens. What do we do with those other screens? In our Shawnee [Kansas] location, we put in B&B Live, which is a live performance space. We work with a partner, a local theater group that does musicals and plays, but we also rent it out for dance recitals. We had the Miss America and the Miss Kansas pageants there, all kinds of things. But the clever thing that I did, after being a father raising two daughters: I built the bar right outside that auditorium. So you can go out, have a beer, watch the game, and then somebody from your family can text you, “OK, she’s getting ready to go on.” That’s been very popular.
We’re doing some other crazy things. In one of our places, we have taken out all the seats and put in bicycles for a spin class. And so you can be riding and watch [trailers and other short programming on] the big screen. We have a comedy club in one of our places. We’re just trying to think of anything out of the box that gets people into our buildings. When they’re in our buildings, they see our posters, and maybe they’ll come back and catch a movie. And while they’re there, hopefully they buy some popcorn.
Over the last year, Emagine has launched some interesting projects involving sports, including free-to-enter watch parties that help drive bar sales and a new sports betting lounge in your Royal Oak, Michigan location. Anthony, can you tell us a bit about how that concept came about and how it’s been doing since opening in December?
AL: We actually thought about this concept and began the process pre-Covid. With the advent of online wagering in the state of Michigan, and now many other states we operate in, we really wanted to bring Vegas to our guests. And we had the extra capacity to change an auditorium and give it the full feel of a Vegas-style sports book. It’s 42 feet of LEDs. It’s heated recliners. It’s wooden tables to hold your laptop or your device while you’re placing your wagers. It’s full service to your seat. You don’t need to fly to Vegas to have the Vegas experience of a sports book. In most cases, you don’t have to drive a few hours to your closest casino. It’s the first one, in our Royal Oak location. And we certainly intend to build more. We’re looking forward to partnering pretty soon with a national operator to really have some fun with it.
More and more chains are introducing non-movie-screening events, whether that’s a sports-betting lounge or a performance space or just having a fun area where people can have a drink after the movie. Given the evolution of that experience, how is the moviegoer of 2022 different from the moviegoer of 2019?
TL: We can debate this. I don’t see a significant difference between the moviegoer of 2019 and 2022. Over the past year, since we’ve been reemerging from the closures, there has been a different level of comfort, when people say, “I’m ready to regain my life as it was before and start behaving normally again.” And I don’t think everybody’s 100 percent there, obviously. But what I am seeing now, especially if you look at The Batman and the sold-out crowds that we’ve all been blessed with, is that it’s growing. There’s a sense of really moving from pandemic to endemic and coming to grips with going out with friends and enjoying the things that you loved before.
So I think it’s still the same. When we have something magic that we offer, when we’re at our best. I think this panel does an exceptional job of bringing showmanship and caring about the details of great sound, great picture, and a great experience at the movies. It’s a wonderful industry that I was drawn to when I was a young man and I still love. I’m still a pretty regular movie crier. The emotions are so strong. And so I think [the moviegoers are] the exact same people. It’s just [that] everybody’s got their own path toward resuming their normal life post-Covid.
Bob, have you seen a significant change in your patrons coming back now in 2022 compared to before the pandemic?
BB: The difference that I see is that they’re wanting the premium experience. They’re willing to pay for premium formats, and they eat more, and they just want to get out and experience [the movies]. No question that the young males were the first ones to come back. But we saw a significant amount of our guests return for [No Time to Die], and it was an older demographic that came. Every day that we get the pandemic behind us, we’re going to continue to see our business grow. I saw a person the other day in a mask, in their car, alone. There are still people that are scared. It’s going to take them time. But the biggest thing our industry needs is a constant supply of product with a fair and reasonable window from the studios. And then I think this business is going to explode.
AL: I echo Bob’s last statement loudly. [As to any difference between the moviegoer of 2022 and the moviegoer of 2019], it’s a tough question. Really, the only difference I see is a push toward technology. Ordering your ticket, ordering your food, having your seat, having it all done before you arrive at the cinema. And we’re delivering [the food] to your seat. People were enamored with the contactless, no-lines experience. We hope to continue to grow on that. Technology will only add to the guest experience. [Investing in technology] is something that’s very important for us to continue doing.
[There’s also been] a real push toward more privacy. We recently built a small, 25-seat theater at one of our locations that—and Bob will like this—has a glass wall, and on the other side of the wall is the bar. The parents can put their kids in the theater, and they can see into the theater to check if they’re behaving [while] they’re having drinks and spending money. More privacy, more intimacy, shorter lines, less contact are all waves that will continue. You have to invest in your infrastructure to provide those services.
Emagine Entertainment, Alamo Drafthouse, and B&B Theatres have all been able to bounce back coming out of the Covid-19 crisis. What are you actively considering investing in? When you’re looking at capex, what are your priorities for the next two or three years?
AL: PLF is definitely a must-have these days to provide a guest with an experience they want to come out and spend their money on. Outside of that, we’ve seen a lot of success with live music. We started the Emagine After Dark series, which is basically a speakeasy. It opens at 10 p.m. and runs till 2 a.m. It’s in a single auditorium. We’ll have local acts that can pull 300 to 500 guests at a time. They’ll perform on Thursday, Friday, Saturday night. We’ve seen impressive per cap numbers from holding this “music festival,” if you want to call it that. We think there’s probably an opportunity to expand that with some of our larger PLF screens to more national acts. We provide a luxury experience. You provide the content, people will come. If it’s live music, comedy, plays, or film—and if Hollywood puts out enough film, we’ll continue to put it on the screen. But to fill those holes, we’ll come up with alternative content. 2021 was a record year for us. We generated over 5 percent of revenue from alternative content.
BB: We put in our very first laser projector: the Cinionic, powered by CGS [Cinionic Giant Screen], in the Grand Screen [B&B Theaters’ in-house PLF brand] in our Blacksburg, Virginia theater. It was extremely impressive. That’s something we’re going to do with some of the [older projectors] that need to be replaced. Very expensive, so there are a lot of things we have to work on.
I mentioned earlier [that] some of these larger theaters have more screens than we need. We’re doing some things like taking out screens and gutting [the theater] and turning it into an entertainment center with bowling and an arcade and bigger bars and things of that nature. We found during the pandemic, particularly when things cleared up but the studios still weren’t giving us money, that bowling provided some steady revenue for us. It’s expensive to put in. But it’s something we’re definitely looking at. I think you’ll see us putting in several more entertainment centers in the coming years.
TL: The past six months, we’ve been quite cautious. We haven’t come back to our full-size team. Something that we have sacrificed, by design, are some of the more complex things that we execute. Some of the specialty programming and bar events and things like that. So the first thing we’re doing is getting back to full strength. We’re very close to getting the full team back together. Whereas we have some of our bars open—we’ve been longtime advocates of having a bar associated with the theater—we haven’t quite put all the strange, weird, and wonderful events back into the flow, because it’s labor-intensive to do so. But that’s something we’re going to be doing this summer.
I already mentioned the technology piece. It’s really important to us. [We first launched] online ticketing in 2001. We’ve always thought that some of the biggest differentiators can come from elegant touches to our user interface through the app and by making sure that we have a direct relationship with our customers, both through loyalty and by directly transacting with them.
The Batman is the first time [since the March 2019] we’ve come out with a significant [custom, film-specific] menu, which we used to do all the time. Maybe too many times! I’m not sure. We’ve rebuilt our culinary team back up to where it needs to be. We’re also putting a focus on training to make sure that when we quick-pivot and introduce new experiences, new shows, new content, new menus, that we do an exceptional job at rolling that out across our 38 locations.
Those are some of the main factors. We’re also looking at the revenue streams of private rentals, how that was really great during the pandemic and how that can continue and be a viable revenue source for the next couple of years. But honestly, I think for the next year it’s still cautiously rebuilding our team to full strength so we can operate at full capacity. Our revenue streams have been about 70, 75 percent coming from the blockbusters, 15 or 20 percent from independent film, and 8 or 9 percent from alternative content. I love the independent film sector, but promoting those films when you don’t have a national, multimillion-dollar marketing spend is more difficult. That means it’s on our shoulders. So, yeah, [the goal is] really getting back to what we did in 2019 as good as we were then. And we’re almost there!
The technology piece is so important—but so is providing the customer experience. With things moving more toward contactless, mobile technologies, how do you continue to provide that more personal touch when preferred by your guests?
AL: Our H.R. team is top-notch, and they’ve invested a lot into training and into software to help our staff know every aspect of running a building. I don’t think there’s anything positive about the experience we went through with Covid. But it was one of those situations, “If I only had to. …” There were a lot of items that we were able to check off during that time, and one of them was our own internal training software, to [give] all of our staff true knowledge of our expectations when dealing with our guests.
Secondly, I’d say that you can’t be singularly focused on one aspect of your business. If folks want to wait on line and pay cash and interact and ask one of our teammates how the film is, you still have to allow that experience to take place. Giving guests all of the options possible that would please them and give them a more enjoyable experience is what our job is.
We take an immense amount of data from our guests on a daily and weekly basis. And we’re listening to that feedback. One example is that we recently had been showing foreign films, but we didn’t really see any [significant per caps] from those films. We couldn’t figure out why guests weren’t really spending on concessions. Through a questionnaire that’s on the back of some of our movie tickets, we discovered that most of these guests were wanting to buy concessions during an intermission. So we put an intermission into those films. Sure enough, a week later, we were selling concessions during those foreign films. It’s listening to your guests, and it’s really giving your teammates the opportunity to understand your expectations.
What has been most successful in driving admissions and getting cinemagoers more engaged with their local theaters?
AL: [As long as] Hollywood gives us good content, folks want to have communal experiences. That’s what I truly believe. You have to provide a wonderful experience. You can’t have sticky floors, you can’t have dirty bathrooms, you can’t have stale popcorn. It’s the basics. It’s what guests expect. And if you’re delivering that, I think folks want to come out and have communal experiences.
In our case, we were really lucky [in that] we were able to scale [up] operations pretty quickly. We have real loyalty from our staff and our teammates. One of the things we did during Covid, when we had to unfortunately furlough quite a few folks, is we paid all of their health care, including their portion, throughout the pandemic. We have to thank our chairman [Paul Glantz] for making that difficult decision. It garnered some real loyalty from our wonderful team. When we were ready to ramp back up, it was not difficult to bring [them back]. Everyone was ready, willing, and able. I truly believe being able to ramp back up and give guests that full experience right away gave us a competitive advantage in our marketplace.
BB: As we’ve all said, it is the movies that bring people back. But [as to] what brings them back to our facilities—[there’s our strong] social media presence and our connection with our guests on a regular basis. We have a great creative team that’s always finding ways to engage with our guests.
We also reopened several of our theaters really early. We didn’t have product, but we felt like we had to get open. I think being the first [to come back], we kept people in the habit. With some of the theaters we’ve taken over that were closed during the entire pandemic, we’re seeing it taking much longer to get people back, because they got out of the habit. That’s why we need this constant supply of product, because when you go see The Batman, and you see a trailer for something else next weekend, it makes you want to come back.
We’re constantly experimenting. It’s very labor intensive, and it’s been very challenging with labor shortages. But we did the same thing as Emagine, where we covered [our team’s] health insurance. We definitely had a lot of loyalty from our staff. That helps so much. We try to have fun with them. That makes them have an enjoyable experience, and hopefully they relay that to our guests.
Tim, Alamo has always been a chain that’s programmed a wide variety of titles: tentpoles, indies, repertory cinema, special events. And each Alamo location has its own feel. What have you found to be most successful in bringing patrons back to your theaters?
TL: There is a particular type of film that’s so big and flashy and loud and experiential and communal. I think both The Batman and Spider-Man fall into that, where [you’re] a part of an audience that loves those franchises and loves those characters, [and you’re] having the best of the best bombastic experience in a cinema, [the kind that] that you can’t have on your laptop while you’re curled up in bed watching content. Those have been the strongest drivers.
But we’ve also had really good success with movies that have Q&As or when we can put forth a fun menu or there’s something experiential. People are making the decision, “Do I feel comfortable going out and having an experience indoors with others?” It’s important to lure them in with the best of the best that we have to offer. The table stakes of clean facility, big sound, bright picture. But [also] those experiential elements that you can really only do outside of the home. When you draw in those early adopters, people remember how special it is to come to the theater.
Do you have any advice on lessons you’ve learned that smaller operators—whether that’s a chain or an individual theater—can integrate into their cinemas?
AL: Hyperlocal marketing is really important. We have a saying: We don’t just build a building and take from the community. You give back. Our chairman is constantly going to local high schools and participating in contests. We invite high school bands to play in our lobby, and we reach out to high schools for employment. I can’t tell you how many parents have written us emails about how we were their son or daughter’s first job, and they’ve come out of their shell because they’re interacting with people. Becoming a real part of the community where each building is located is one of the real reasons why Emagine is successful. We’re part of the community. We’re not just a big, brick building.
Bob, with B&B Theatres being part of so many local communities across the country, what have been some experiences you could share with independent exhibitors?
BB: It wasn’t that long ago that we were a very small regional circuit. We’ve lived that life, and we’ve tried to carry that into the bigger market. What the small independents can do are the same things we’re talking about today. Get involved in your community. Give great customer service. Just get actively promoting your theater. You can bring a band in on a Friday night and have them in the lobby as people are leaving. Our facilities are so unique. In many small towns, [the cinema] is the social center of the community, other than high school football. Those are the two things to do in a small town. It is instrumental to keep these smaller markets alive. The communities have rallied around that, and they will support you. Just keep being involved with the community.
The recovery period has been met with a ramp-up of mergers and acquisitions [M&A] activity. Anthony, Emagine has been a part of that, acquiring a number of cinemas in the last year. On a macro level, what impact do you believe M&A activity is going to have on exhibition in the coming years?
AL: We’re still looking at opportunities. They [now] require a little more due diligence on our part, as we’re not as familiar with some of the markets we’re looking at. I certainly think that controlling your destiny is important—and building yourself a moat. In southeastern Michigan and some areas of Minnesota, we have a nice moat and brand loyalty. When you’re looking at acquisitions, they can’t be over-screened, and it has to give you the opportunity to reward that capital that gets deployed to make those buildings [up to] Emagine standards.
I certainly think we’re going to see a tremendous amount of M&A over the next few years. I think scale is going to matter in the business going forward. And hopefully we have more content to show. But if you have scale, you can produce your own content, and you can deliver it in different methods. You can film a band in one auditorium and stream it out to all your locations and have your own ticketed event. There are multiple ways to use scale to your advantage.
Bob, what impact do you think M&A will have on the industry?
BB: We’re just like everybody, still looking at a lot of opportunities. It’s a little more difficult to get the deals done now than it was in the midst of the pandemic. I believe there are going to be a lot of changes coming. There are a lot of theaters in this industry that have not been remodeled. If you don’t have an updated theater with recliners, people just don’t go. We’re 80 percent recliner, but there are still some [B&B locations without them, and] we see that people aren’t coming back as fast [to those].
I think you’re gonna see some closures. Some [locations] maybe need to go away, because [the market is] overscreened. But I think there will be some great opportunities for those people that are aggressive and willing to invest. We believe in the future, and if you provide that comfortable seat and a bar and a great, clean facility and good customer service, people are going to come back.
There will be some that will close, but I think most [theaters] are going to survive. We have to be innovative. We have to keep looking for the next best thing to keep our customers engaged. There may be some changing of hands with theaters, but I think you’re not going to see a big reduction in screen count.
Tim, as the co-founder and executive chairman of a smaller chain that saw substantial expansion in the years prior to the pandemic—and that has further expansion planned—what are your thoughts on industry M&A?
TL: It’s a complicated answer for me. Part of my answer hearkens back to the question before this, about what smaller theaters can do to be stronger during this reemergence. You refer to us as a chain, and we’re undeniably a chain. But I started as a single-screen, single-location theater. Mom-and-pop, with me and my wife. As we’ve grown, I found that the biggest challenge is holding onto what we were able to do much easier as a single location, which is be a local theater, be a community theater.
If local theaters can do the table stakes, you have a leg up, because you can instill loyalty within the local community just by being awesome and loving movies. I know we’re a chain, but can we see ourselves as a loose collection of local theaters?
[Regarding] M&A, we’re certainly pursuing growth opportunities. But when we tackle them, we can’t let the core experience and the dedication to being a part of the community and sharing our love of the movies and letting local folks in each market have a meaningful voice and provide the personality of our theaters [get left behind]. The big problem of the massive M&A that happened in the ’80s and the ’90s was a sanitizing of the experience. You lost all the personality, and it became a commodity business. So I fear M&A. And yet, we’re going to try to do some! But I do it with grave concern that we don’t destroy what I think is the most important thing about who we are, which is our personality and love of movies.