As digital cinema sweeps the entertainment industry and the movie industry comes off a record-breaking summer with ticket sales of $4.7 billion projected by the end of the Labor Day weekend, there remains a nagging fear that 2013 will be a big-screen bomb as theaters witness a 3% decline in attendance.
Much like the rest of the industry's hit-or-miss nature this year, AMC Entertainment Holdings prepares to enter the public markets again with a $400 million IPO, the third time it's attempted to go public since 2007. This time analysts are more hopeful, however, believing Hollywood's got it more right than wrong and that the theater chain is poised to capture that growth.
While it's not exactly the best of times for moviemaking, as inflated box office receipts were largely due to ticket price increases of 3.2%, studios are still struggling to come up with a consistent lineup of hits. Audiences praised low-budget horror flicks like The Conjuring, which BoxOfficeMojo says has raked in $134 million stateside on a $20 million production budget, but panned big-budget films like The Lone Ranger, which cost $215 million to make but only managed to see $88 million in domestic receipts.
The manic moves have movie houses scrambling for customers. As the moviegoing experience gets consolidated into fewer and fewer hands, the environment becomes more competitive for them in attracting theatergoers to their shows. Regal Entertainment Group (NYSE:RGC), which has 7,344 screens across 577 theaters, is the largest theater operator in the country. It has ratcheted up the "premium" movie experience through its partnership with IMAX Corporation (USA) (NYSE:IMAX) for big-screen entertainment across 123 screens, which includes its own RPX brand, a custom-built environment featuring luxurious seats with high-back headrests, giant immersive screens illuminated by high-quality digital projectors, and state-of-the-art sound systems.
Similarly, Cinemark Holdings, Inc. (NYSE:CNK), with about 5,800 screens in over 500 theaters, has launched its XD large-screen format several years ago, and they now comprise 88 screens in the U.S. and 137 globally, with 20 to 25 more to be introduced by the end of the year. The XD experience features large wall-to-wall and ceiling-to-floor screens.
AMC, though, tries to go them one better. They've driven their dine-in-theater concept, with wide seats with extra legroom, an ability to recline, and food service, all of which takes the idea of "dinner and a movie" to new levels.
In its SEC filing, AMC says the first four locations they opened offered an 11% cash-on-cash return, but the next seven they opened saw those returns surge to 34%. They represent just 3% of the total number of the 343 theaters operated, but account for 10% of its entire food and beverage revenues. Not surprisingly, AMC plans to open another 20 over the next five years.
That's the same route Carmike Cinemas, Inc. (NASDAQ:CKEC) is following, offering giant screens, plush seating, and gourmet concessions in its large format "BigD" auditorium. It's making use of Barco's Auro 11.1 technology that offers three layers of sound: surround, height, and overhead.