Movie Theaters' Second Act

The Real Business of Exhibition

I love movies, but Avengers: Endgame is the first movie I’ve seen in theaters in months. Most movies don’t justify leaving my couch. This shift in consumer behavior is part of the problem, magnified by media fragmentation, risk averse studios, and the demands of a blockbuster-driven box office strategy. As Derek Thompson said in The Atlantic, “film used to be the dominant visual medium in the U.S. In the first half of the twentieth century, going to the movies was like going to church: Americans did it almost every week. Today, buying a movie ticket is more like going to the doctor—something many Americans never do and most Americans do only four or five times a year for routine cultural check-ups.” Or as Tom Rothman, the Chairman of Sony Pictures, recently said, “young people don’t go to ‘the’ movies, they go to ‘a’ movie.”

Yet with Endgame, press coverage trumpeted that movies still matter—despite figures from Comscore that show “ticket sales are pacing 7% behind last year’s popcorn season…putting the year as a whole nearly 10% below the same frame in 2018.”

Endgame isn’t a reminder that movies still matter; it’s validation that the blockbuster is all that’s left. But this isn’t the end of movies—it’s the end of being limited to seeing movies only at movie theaters, and the dawn of right-sizing stories to their platforms, formats, and end users. It was never the case that all movies needed to be seen on the big screen; it was the case that consumers didn’t have meaningful alternatives.

This transition invokes nostalgic sadness, and will lead to real creative changes. But stories are finding more creative freedom and new audiences as this era approaches. Movie theaters have opportunities, too—if they approach things with an innovation mindset.

Unfortunately, theaters are making incremental tweaks at best. Some have experimented with 4d screenings and some chains, like AMC’s Dine-In Format and Alamo Drafthouse, have added reclining leather seats and an upgraded food and beverage program with “dine in” options. This has improved the theater experience, but hasn’t truly innovated it, nor has it differentiated experiences by film type.

Yet when I see a movie on the big screen, there’s something wonderful about ignoring my phone for 90 minutes, and something spontaneously communal and amplifying about sharing the experience with friends and strangers. Movies can still matter, but theaters must redefine what it means to go to the movies by reimagining what business they’re in.

Theaters are actually in three businesses:

  1. The restaurant business. Movies have always been in the popcorn business; according to the Stanford GSB, “although concessions account for only about 20 percent of gross revenues, they represent some 40 percent of theaters’ profits. That’s because while ticket revenues must be shared with movie distributors, 100 percent of concessions go straight into an exhibitor’s coffers.” However, in an age where movies are competing not just with Netflix, but also with every other thing you do with your leisure time, from Instagram to Fortnite, some theaters have improved the food and beverage experience to drive attendance. This change is directionally accurate, but theaters are thinking of themselves as movies with food rather than as restaurants with movies.
    • What if movie theaters acted more like a restaurant?
      • What could foodie culture and celebrity chef collaborations look like?
      • Could moviegoers be invited to participate in a rotating menu of food, snack, and drink offerings to have some ownership over the experience?
      • Are there opportunities to customize menus to movies, creating limited time offerings that drive visitation and enhance the experience?
      • What if the restaurant/bar experience was good enough that people came to visit even if they weren’t seeing a movie?
  2. The community and connection business. The price of a movie ticket is more than a month of Netflix in many places, and with streaming there’s no switching cost for content. In this universe, theaters need to get creative about using their space to bring people together.
    • What if theaters opened up as a space beyond the show time?
      • What if relationships and social networks (friends, family, romantic, professional) could be served through programming and events?
      • What if theaters served other communal needs? For example, what if theaters hosted major sports viewings, presidential debates, or community events?
      • What if movie theaters became a third space that invited lingering and conversation before and after a show? How could that be part of a proactive strategy to tap into the dating landscape and bookclub networks since movies remain a big date night activity and many films are book adaptations?
      • What if consumers informed the events and programming at their theaters, providing valuable data to exhibitors and studios while building brand loyalty to the theater chain?
  3. The participatory experience business. As the dominance of the blockbuster continues, it’s a missed opportunity to not develop experiences around event films since fans are coming to a theater en masse in a moment of heightened interest. Moreover, as “Netflix and chill” champions passivity in home viewing, there may be an opportunity to create more dynamic experiences at the theater.
    • What could theaters look like if they weren’t just a place to see things 90 minutes at a time?
      • What if theaters created immersive experiences before and after shows (with food, drink, VR, events, etc.) to enhance the show itself, laddering into a fuller experience if fans wanted rather than just a one-off movie?
      • How could studios and franchise teams partner with theaters to build direct, mutually beneficial relationships with consumers?
      • What could an exclusive pop up retail experience look like at the movie theater, when fans are most excited to engage with–and further their engagement with–stories? “Exiting through the gift shop” is a feature of theme parks–why not theaters?
      • Some theaters have experimented with throwback and “catch up” showings, but what if additional events and activities around these showings (e.g., parties, trivia nights) could be lower-cost ways to test participatory experiences and monetize fandom?

In an age where you no longer need to go to the movies because movies come to you, theaters must innovate to create compelling experiences that bring people together and make stories come alive. Theaters can start by re-evaluating which businesses they are truly in. Doing so could drive differentiation, attendance, and new revenue streams. Theaters who think they’re just in the movie business are missing the bigger picture.

From defining growth strategies, to transforming customer experiences, to creating new products and services, Fahrenheit 212 has the expertise to help the Exhibition business innovate. Connect with us here to learn more.


frog, part of Capgemini Invent is a global design and innovation firm. We transform businesses at scale by creating systems of brand, product and service that deliver a distinctly better experience. We strive to touch hearts and move markets. Our passion is to transform ideas into realities. We partner with clients to anticipate the future, evolve organizations and advance the human experience.

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