Business Insights: Regal vs AMC Theaters

I’m back from some extensive travel, thank you for your patience!

Let’s talk about the movie industry and in particular … theaters.

“Movie Theaters are dying!”

I’m sure we’ve all heard and muttered this phrase since around the time Netflix started streaming video around 2007, and it has only gotten louder since every media company has jumped into the internet streaming bandwagon.

In the past few weeks, I had the opportunity to see two movies in theaters. I only fell prey to 50% of the “Barbenheimer” hype.

One of the films I saw in an AMC theater, and the other, a Regal theater.

The experiences (apart from the films) were very different from one another and I believed that a fun dive into the Movie Theater market would be interesting to explore.

So are movie theaters dying? What are they trying to do to stymie this “inevitable” death?

The Attendance:

Tickets sales beaked between 1995 and 2023 in 2002, and have steadily decreased since then by a rate of 31M tickets unsold every year or about 4.76%.

There are two primary movie theaters that we think of in the United States. American Multi-Cinema Theaters, or AMC theaters is the largest movie theater chain in the United States with over 8,200 screens across 661 cinemas. In a close second by theater count, Regal Entertainment Group’s Regal Cinemas has over 7,300 screens across 564. This data seems to have been from 2017, I think we can assume that both grew in the following two years before COVID.

AMC’s attendance had actually peaked in 2018 - with a whopping 359 million attendees and had rival following year in 2019 - with 356 million attendees.

The Dollars:

Ticket prices have increased over time, and when we account for inflation, the Box Office - actually doesn’t seem to have any major changes until COVID-19, when all moves combined only brought in an adjusted $2B.

Surprisingly, looking at the data, the inflation adjusted Box Office aggregate tends to act in a highly consistent manner, landing between around $12.5B and $13.5B every year. Only until COVID hit were the box office movies really disrupted, and we can’t blame them for that. Hollywood and moviemakers have been fighting an uphill battle to reclaim box office values that reflect the previous 25+ year trend. Currently, 2023 early August, we’re recorded to be at about $9.5B in box office revenue. Considering that we’re halfway through Q3 and still have a full Q4 including December blockbusters to be aired - I’d say that we’re at least on-track to return back to our $12.5B to $13.5B historical trend.

So where does this “death by streaming” come into play?

One lesson that was learned during COVID in the entertainment industry was that shifting movies intended for cinemas to streaming platforms did not work very well. It was a huge experimental time with different models and attempts at replicating a ticket-buying, movie-going experience. It didn’t nearly bring in the audiences or revenue that they’d hoped.

We learned that A: Audiences still have demand for movies in theaters and B: There are differences in movie expectations between the two services

Movie Industries’ success is heavily reliant upon the movie-going audiences. Production costs are extremely high for movies, and the cinemas do the best job generating revenue to recoup those initial costs. There are also distribution channels such as Video-on-Demand, or VOD, Merchandising, foreign sales, etc that can help drive revenue, but in my opinion - those serve as supplemental revenue tributaries to the larger theater ticket-sales revenue.

Movies that are generated through a streaming platform don’t necessarily have to jump through as many hoops as the traditional movie making industry does - and the risk lies more in the success of the movie or television shows driving subscriptions and increasing “stickiness” to the platform.

So is there a death of theaters occurring?

Personally, I don’t see it. As someone who still participates in all of the streaming entertainment - I still have times when I prefer to go to the movies. The death in theaters that I’m seeing is actually a narrowing of expectations for audiences. This is the field of competition that I am starting to see AMC and Regal Cinemas battling over for the next generations of movie goers. AMC and Regal DO have to compete against your own couch and convenience, so they are thusly working on improving the experience.

This is where my two most recent experiences in theaters comes into play. Both AMC and Regal have done work in the improvement of their seating, removing the stadium-like seats to a much more luxurious offering. Leather or leather-like seats, oftentimes with reclining options. Seat reservation processes and a more inclined seating organization has improved the overall experience at the cost of the volume of people that can attend a theater at one time. Ticket prices go up, but so does the unique experience. These features are nearly standard across the major chains - with some differences overall in the type of seat, food offerings etc.

The big differences that I have experienced thus far have been in how these theaters are competing for more attendance.

AMC - which is where I ended up seeing Oppenheimer - ran a commercial for a “MoviePass-esque” card that allowed users to pay a subscription fee to attend the AMC theaters and see as many movies as they wished. This can compete and certainly attract audiences that really enjoy movies, but will it necessarily draw people in that prefer streaming over theaters? I recall doing research into MoviePass and their business model, on how there was a lot of difficulty justifying the MoviePass price compared to the value a simple ticket could bring in, especially when based upon the frequency of use. AMC seems to be betting against themselves here, justifying the overall average number of times someone would want to come to a theater to see a movie every month. It looks to me overall like a gym-membership model. You know, that gym membership that you still have and forgot to go the past three months? Movies have ebb and flows throughout the year depending on releases, individuals that have this pass will feel as if they benefit during the major releases - but at the cost of monthly payments. How many times have you wanted to see a movie in theaters more than once? twice? That’s the bet that AMC is making, and I think that overall - the A-list stubbs has a nice ring to it, but I’m not sure it’s going to gain traction in bringing more audiences to the theater. In my opinion, it’s going to solidify revenues from individuals who LOVE the movie theaters almost regardless of the movie they’re watching, which feels as if it’s a low % of people.

Regal - which is where I saw another movie “Haunted Mansion” - albeit not nearly as A+ tier as Oppenheimer was - the experience is what I began to notice. Regal is the smaller competitor to AMC, and I could sense that Regal’s goal was to corner different parts of the market instead of directly with AMC. Regal has spend a lot of time and investment, even more in my opinion than AMC, into their theater experience. This can be seen through their innovations such as the RPX - regal premium experience, and most recently - their 4DX. This is the experience that I had, and I was not ready. The 4DX is not for the faint of heart or those who do not enjoy any kind of simulation or roller coaster. Truly, this is what the Regal 4DX experience provided. Hydraulic seats, water mist/sprays, wind simulators, light flashes, searchlight simulation, and…..scent releases. Timed really well to the moments in the film when those same events are occurring. Regal truly is innovating in the experience space and I’m going to be interested to see what changes they make in the 4DX - and if this is a niche that’s going to open up new markets. Ultimately, I don’t know if 4DX is going to revolutionize the entire moviegoing experience, but I think that the experience really is where audiences are going to spend their money.

Overall, I don’t see a dying industry despite the claims that streaming is taking over. I’m personally feeling some streaming stress - it feels like cable is back under new management. Movies and theaters overall feel fresh, and the theaters that struggled a LOT under COVID are really pushing to find new and interesting ways to get us back. I appreciate the effort, and think that there will be a renaissance of movie-going if these efforts continue. I love my couch, but some movies deserve to be experienced, not just watched.

-Z