AMC chief Adam Aron believes the movie business is primed for a rebound and he’s sick of reading all the doom and gloom about the end of theatrical exhibition. Of course, he’s not the most unbiased observer. Aron is head of the world’s largest theater chain, a company that has grown at an impressive clip in recent years with the acquisition of the likes of Carmike and Odeon.
He’s also not a fan of MoviePass, the subscription service that’s been disrupting the exhibition space by offering customers the chance to see multiple movies a month for less than $10. He feels that skepticism has been validated by a recent auditor’s report raising doubts about MoviePass’s ability to finance its costly business model.
Aron spoke to Variety at CinemaCon, the annual exhibition industry trade show unfolding this week in Las Vegas, where he appeared to be feeling emboldened and in a stronger position than he may have just a few months ago. Although AMC’s stock has undergone a bruising period, weighed down by box office downturn in 2017, the company’s share price is beginning to rally. It also recently opened the first theater in Saudi Arabia in more than three decades and has big plans for the Middle Eastern kingdom.
You were quite dismissive of MoviePass when they first launched their new low-price model, predicting, for instance, that the company would fail and customers would suffer. Have your views changed?
I have nothing to add other than to say that what we said on the record on their very first day in operation continues to be our view. We predicted that their business model was unsustainable and that their price point was insufficient for studios to make quality movies and exhibitors to show quality movies. That was our view then and it’s our view now.
They are hemorrhaging money. Their losses are dramatic. Their auditors just went on record saying they had substantial doubt as to whether they could continue as a going concern. We had those same substantial doubts last August [when the new pricing launched]. If you go back and look at our statements from that day, we said that a subscription model was fine. It works in many industries, but you have to pick a price point that’s viable.
Will AMC introduce a subscription model?
I’d be careful about the word subscription, because subscription usually implies a sort of salad bar, all-you-can-eat service. AMC has a subscription program in Europe through our Odeon system called Limitless, which allows people to see an unlimited number of movies in the course of a year. It’s a very successful program. At some point, I would expect that we would launch some way to access AMC movie theaters other than one movie at a time, one ticket at a time.
Ticket prices have gone up steeply over the last decade as theaters have introduced recliners, 3D, and other amenities. Has cinema-going become too much of a premium experience at the expense of attracting more value-oriented customers?
In the United States we’ve introduced three brands — AMC, AMC Diner, and AMC Classic Theaters. The AMC dine-in theater is a different kind of theater, because it has a full restaurant. That’s not so much price-based. You’re going for dinner and a movie. So let’s focus on the two brands that are quite similar — AMC and AMC Classic. We do believe that those theaters that we designate AMC Classic should have as a major selling feature a low price value proposition to get consumers to come. The AMC branded theaters have a premium strategy or what I’d call an amenity-rich strategy with recliner seats and better food and better drink and bars and more premium large format auditoriums, more IMAXs, more Dolby Cinemas. We’re not afraid to charge the consumer for that. There is an old adage, you get what you pay for.
Are you optimistic about the movie business?
The big story of CinemaCon 2018 is not MoviePass. It’s the overall health of the industry. There’s been a lot of questioning, especially in 2017, about whether something is fundamentally changing about the movie business that threatens its long-haul viability. You could make the argument that in the era of Netflix and giant TVs and tablets everywhere and all the content that’s out there, the movie industry is the next newspaper movie industry. That came to a height last summer when, admittedly, the movie industry had a bad July and a bad August. It was a slump.
The conventional wisdom became that our industry was somehow threatened. But here are the facts. 2015 was a record industry box office year. 2016 was a record industry box office year. 2017 through April was a record industry box office trimester. We had a very strong September through December, but a lousy May through August when some films that were released were creative failures. AMC had record earnings in ’15, record earnings in ’16, and record earnings through the first quarter. Then this summer slump hits and there was so much doom and gloom about the end of the movie industry.
Here’s what’s happened since. September was a record September in the history of cinema. December was a record December. February was a record February. “Black Panther” is the third highest-grossing movie in the United States of all time. “Avengers” is going to open Thursday and it’s going to be significantly bigger than “Black Panther.” It is certainly going to be one of the biggest opening weekends of all time. The next eight, nine, 10 weeks are going to be booming. 2018 is going to be an up year.
Why hasn’t that been reflected in the stock?
Our stock is up 59% since mid-November, so Wall Street is starting to notice. 2017 was a tough year, in part because the industry box office was down. Facts are facts, if you look at what started in September and what will continue this year, our industry is looking a lot healthier and our stock is up.
Why are you investing so heavily in Saudi Arabia?
I was there Wednesday night for the opening of our cinema, the first one in 37 years. It was a glorious night and an emotional night for everybody because the symbolism of Saudis getting to enjoy movies in their own country is unmistakable. Saudi Arabia is the 20th wealthiest economy in the world. It has 32 million people who like movies. They watch them at home. They stream them. They go to Dubai and Bahrain to see them in theaters. It was our view that movies are made to be seen on the big screen and if they have theaters close to home, they’re going to come out.
The first public performance was Friday. We decided to put tickets on sale one day at a time, because we didn’t want to be in a position where we put tickets on sale for a month or three months and they sold out quickly and people were deprived of the opportunity to get tickets. On Friday, when we put tickets on sale for Saturday’s screenings, they sold out in 45 seconds. So the pent-up demand in that country is substantial.
Landmark Theatres is up for sale. Would AMC buy the chain?
Over the past two years we’ve become the number one exhibitor in the United States, the number one exhibitor in Europe, we’re now the number one exhibitor in Saudi Arabia because we’re the only ones with a theater. I don’t think AMC benefits that much from acquiring another circuit at the moment. What we’re interested in doing now is to either return capital to shareholders through stock buybacks and dividends, to pay down some debt, and this is where most of our money is going, to invest to upgrade the quality of our theaters.