AMC's First Quarterly Report: Time to Reboot the Franchise

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AMC's First Quarterly Report: Time to Reboot the Franchise
Frederic J. Brown, AFP/Getty Images
Moviegoers aren't heading out the multiplex the way they used to, but that doesn't mean that Hollywood is toast.

AMC Entertainment (AMC) reported quarterly results Tuesday. The nation's leading exhibitor -- 345 theaters with 4,976 screens -- went public two months ago. The headline numbers are positive. Revenue increased a better than expected 2.3 percent to $713 million. Profitability also expanded nicely.

However, revenue increased as a result of a 5.5 percent increase in ticket prices and a 3.7 percent uptick in concessions purchased by patrons. Obviously you don't see those kind of gains against a mere 2.3 percent lift in revenue without dealing with more empty seats, and that's just what happened. There was a 3.2 percent decline in attendance.

AMC's ticket takers welcomed 50.4 million guests during the holiday quarter, well below the 52.1 million guests that it entertained a year earlier. That's bad, and what makes things worse is that it had fewer theaters -- from continuing operations -- a year earlier. It wouldn't be wise to hold out for a Hollywood ending.

Customers Want Bigger and Better Things

Apologists will argue that it wasn't a bumper crop of movies hitting theaters, but that's not accurate at all. Last year's biggest box office winner -- "The Hunger Games: Catching Fire" -- opened in November. Disney's "Frozen" also opened ahead of the holidays, and it's the family entertainment giant's biggest non-Pixar earner since 1994's "The Lion King."

Moviegoers still come out for the big movies, and they're also willing to pay more for a premium setting. IMAX (IMAX) reported blowout quarterly results a few days earlier. IMAX screens rang up a record $244 million in ticket sales worldwide. IMAX is also closing out the year with a record backlog of 384 commercial theaters to deploy.

RealD (RLD) is also holding up nicely as a leading provider of 3-D systems for exhibitors. It enjoyed a major boost with "Gravity," a visual treat that was begging to be experienced in more than just conventional 2-D. The sci-fi epic delivered more than $300 million in box office receipts to screens with RealD systems.

However, life isn't a feature presentation once you move outside of IMAX and RealD. Traditional exhibitors are meandering at best, and that's not a good sign in light of an improving economy that would typically suggest that consumers have more money to take in a movie more often.

Fade to Black

We're not consuming less video content. The problem for movie theaters is that there's a lot of competition. Home theaters are getting cheaper and the quality is getting better -- and no one is charged $5 for a cup of soda at home.

Let's also not dismiss Netflix (NFLX). It wasn't even streaming content seven years ago, and now it's serving up two billion hours of premium video a month. Why pay more for a single movie than an entire month of Netflix, and still have to put up with a block of ads at the beginning that you don't get with Netflix?

Exhibitors could also help themselves out by making the experiences more enjoyable.
The success of IMAX and RealD shows that folks still come out to the movies when it's an experience that they can't easily replicate at home a few months later.

Some theaters get it, carving out space to create unique upgrades, including fancier screens with fewer plush seats and in-theater dining. That isn't going to be enough. Exhibitors need to start rethinking everything from varying their concessions to how they market to patrons before their movies start. Is it that hard to enhance the menu with seasonal snacks themed to the movies that are playing? Is it that hard to push deal texts to willing recipients in the theater during pre-show rites? What's the harm in encouraging post-screening discussions within the theater in designated lounge areas so they're not losing the customer the moment that the credits roll?

Hollywood will survive because there are too many distribution options available these days after a movie's completed its theatrical run. Theater operators are the ones that will suffer if they don't hop on the reinvention process.

"Star Trek," "Batman" and more recently "Robocop" have tried to breathe new life into their franchises with cinematic reboots. It's time for the multiplex to do the same.

Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends Imax and Netflix. The Motley Fool owns shares of Imax and Netflix.


AMC Theaters Focused on Cushier Seats and More Traffic

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6 Comments

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RL

Until AMC can control people texting during a movie like the Alamo Draft House does.... they expel the offenders.... I am not spending money on a movie in the theater.

March 02 2014 at 5:33 AM Report abuse rate up rate down Reply
Richard

What happened to plans for audience interaction with the movie, such as picking to direction of the movie by audience vote? Gives something more than sitting for 3 hrs. Cut down the end of movie trailers by 75% and put in something of interest, even if America's Funniest. Or how about an audience video game? Can you imagine Tour of Duty with 50 people?

March 02 2014 at 2:36 AM Report abuse -1 rate up rate down Reply
jnkwilcoxies

SORRY!!! AMC is not the leading exhibitor in the US. That would be Regal Entertainment Group.

March 01 2014 at 11:38 PM Report abuse rate up rate down Reply
jvmd

Want to get more filled seats? Quit pushing movies out to DVD 3 to 4 months after they premier. Unless it's something like Gravity or a big action flick, people are waiting for Redbox to get a movie. For tickets, popcorn and a drink for two people it's $40+, that can buy you two bluray movies at BestBuy and you own them.

March 01 2014 at 11:14 PM Report abuse rate up rate down Reply
fschneider701

Stop raising the prices on tickets & refreshments. I am single and when a single movie costs me more than $20 to go see at the theater, I'll wait for the darn thing on DVD and watch at home where I can drink a beer and eat my own popcorn for a heck of a lot less than the theater. I pick and choose which movies I want to see on big screen now. If the tickets were back to $8 for late show and I could get a soda and a box of Mike & Ike's for less than $10.

March 01 2014 at 8:11 PM Report abuse rate up rate down Reply
jneal11254

I have to say the AMC theater here is a weak little brother to the Regal theaters in town. It is poorly located, has lousy refreshments, and feels like it is going to fail at any moment. Regal needs competition, but it is not getting it.

March 01 2014 at 5:28 PM Report abuse rate up rate down Reply
Dr. Cain

The problem is everything at the theater is too damn expensive! My wife and I never ago, nor do we take our kids. The price is ridiculous. $10 - $13 bucks to get in, costs us for a date more than $30 family - 45. I know why the seats are empty, we aren't willing to pay those prices. Let me pay $7 or 8 and less than 5 bucks for a drink and twizzlers , you would see me every week because l 've going to the movies, you can't be the setting and sound - until it costs me $.

March 01 2014 at 5:07 PM Report abuse rate up rate down Reply