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CinemaCon: Behind the Race to Retool Movie Theaters

CinemaCon, the annual love fest between theater owners and studios, kicks off this week in Las Vegas with the entertainment industry at an inflection point.

Over four decibel-pounding days, exhibitors will be treated to footage and trailers for upcoming blockbusters such as a “Ghostbusters” reboot and an “X-Men” sequel, as well as a screening of “Captain America: Civil War.” Hollywood executives and top talent hope to demonstrate that the odds remain very much in the business’s favor.

These studio presentations unfurl in the cavernous Caesars Palace Colosseum, usually home to the likes of Celine Dion and Elton John. Yet, the hottest action this week will be found on a smaller stage. In a hotel suite, far away from slot machines, star appearances and odes to the moviegoing experience, are signs of a possible future for the exhibition space. There, representatives of revolutionary startup Screening Room will try to convince theater owners they are the industry’s saviors, not the handmaidens of an apocalypse.

The company, backed in part by Facebook and Spotify guru Sean Parker, wants to release films in the home, for $50 a pop, on the same day they hit theaters. In addition to offering anti-piracy technology, it tries to get stakeholders around the table by cutting exhibitors and studios in on the profits. For all that, the reception could be chilly.

“Our membership understands that we have to be sophisticated about business models,” said John Fithian, president and CEO of the National Assn. of Theatre Owners. “But we have to work together, studios and exhibitors, to find ways to evolve and grow the pie. Those ideas won’t come from third parties. They will come from within the industry.”

“We have to work together to find ways to evolve and grow the pie. Those ideas won’t come from third parties.”
John Fithian, NATO

Tim League, Alamo Drafthouse founder, said he will attend one of the Screening Room presentations, but he also has concerns about the idea’s viability. “I have my doubts about whether it’s bulletproof in terms of piracy,” he said.

Other observers, such as B. Riley analyst Eric Wold, believe that at $50, the price point is low enough to cannibalize ticket sales. “They have to get it to a level where it’s priced effectively and doesn’t impact theater attendance, while remaining attractive to a large part of the population,” Wold said.

The Screening Room team declined to be interviewed for this article. However, supporters of the technology claim that it enables studios to reach a segment of the population, between the ages of 25 and 39, that has cut down on moviegoing. They have kids or other demands on their time, the reasoning goes, and by enabling them to see new releases for a higher price point, everyone stands to profit. The issue is that Parker and co-founder Prem Akkaraju are butting up against an industry that can be resistant to change.

“We’re afraid to experiment and do bold new things,” said Stacy Spikes, founder of MoviePass, a subscription ticketing service that exhibitors have eyed warily. “There has to be more Silicon Valley DNA in our culture.”

Despite the sturm und drang over Screening Room, there are signs that the industry is beginning to embrace more modern business practices. It’s true that the digital revolution has brought new challenges for theater owners, including streaming services and a panoply of entertainment options that make it easier than ever to resist the allure of the multiplex in favor of the comfort of home. But after being slow to the party, some theater owners are figuring out ways to use technology, and in particular data, to more efficiently target their customers.

“Today we don’t know who our customers are,” said Ameesh Paleja, co-founder of Atom Tickets. “The engineer in me cringes that every time somebody goes to the box office and buys four tickets, we lose all that information.”

Atom Tickets represents another path forward, one that has earned more buy-in from theater owners and studios, three of whom — Fox, Disney and Lionsgate — are investing in the venture. The company sells tickets and concessions via an app that also allows users to invite friends to showings. Atom’s technology could eventually be used for more dynamic pricing, raising prices when demand is high during, say, the “Star Wars” opening weekend, and offering discounts as a film moves into its second month of release.

Execs are celebrating a strong start to 2016 while awaiting the MPAA’s final 2015 box office data, to be presented at CinemaCon. Source: Nato

New forms of ticketing and day-and-date releasing aren’t the only 
modifications being touted in Vegas. There will be laser technology, new sound systems and enhanced 3D screens. But many of these improvements come with costs, and the question is how much appetite there is for experimentation. Theater owners have invested heavily in converting their venues from film to digital projection. They’ve shelled out for 3D. And they’ve ripped out seating and replaced it with recliners.

After those expenditures, a sense of complacency could seep in. It’s easy to see why: The Sin City confab unfolds as the box office is chugging along nicely, fueled by hits such as “Deadpool” and “Zootopia.” Why mess with a good thing?

Spikes argues that if the industry focuses only on cosmetic changes instead of being proactive, it risks being upended by an outside disruptor — one that might offer a reasonable approximation of the grandeur and spectacle of the cinema in the home.

“We should be like the Apples or the Teslas of the world,” he said, “not raise prices and add seat cushions.”

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