How Will Theaters Adapt to New Market Realities?

New financial projections estimate movie theaters will bring in $12 billion this year, up 10 percent over 2017. An executive with the National Association of Theater Owners says the rise has a bit to do with subscription ticket services and other factors, including premium formats like IMAX and people taking advantage of lower matinee prices. A very good October, usually a slow month, has also helped significantly.

Still, actual ticket sales continue to be relatively flat year-over-year, meaning theaters and studios aren’t growing the market significantly, just squeezing more blood from the same stone.

Theaters are, as I’ve mentioned before, subject to the same market forces that have been roiling the rest of the retail industry for the last several years. While there’s been a wave of stories recently about how the “retail apocalypse” has subsided or wasn’t as bas as it was made out to be, but there are still major changes afoot that theaters will have to account for in some manner.

Recent comments at TheWrap’s media and technology conference put this in context with an attendee saying the theatrical distribution business will, within the next three years, be almost exclusively about movies with $100 million-plus budgets.

With that, as well as the corporate consolidation that has been and will be sweeping through the media industry, in mind it seems there are a few ways in which the theater industry is going to evolve and adapt to meet the changing expectations of consumers.

Embrace Exclusives

One of the key tactics pulled out by Netflix in the last couple years, and one that is common among other streaming platforms, is exclusive content. Disney’s upcoming OTT service will have a number of original movies and shows and those run by CBS and other media brands use exclusives as the main value proposition offered to viewers to attract them and their subscription dollars.

Of course it’s not just entertainment companies putting the focus on exclusive items. Target reportedly plans to launch a new house brand of soap, paper towels and other household staples that will be priced at $2 or less. That’s clearly meant to compete against places like Sam’s Club and Costco, where those are just the kinds of items consumers stock up on at bulk prices. And Amazon has been accused of engaging in underhanded and otherwise prohibited marketing tactics to boost sales of its exclusive items. There are so many house brands operating under so many different names it’s likely consumers don’t even know that’s what they’re buying.

It’s not unreasonable to think that theater owners at some point will even more substantially use exclusive material to bring in audiences. You already see that with things like MovieBill offering unique AR content and material offering through NCM’s Noovie pre-show entertainment package.

The whole thing will ramp up if the Department of Justice decides to take action following the news it’s reviewing the consent decree that’s been in place for decades and which broke up what was, at the time a studio/distributor monopoly. And Netflix is still considering buying some kind of theater chain to help with distribution and awards consideration for its original productions.

The takeaway: It’s not just enough to offer the same thing people can find elsewhere, you have to offer something unique and exclusive to really get people’s attention.

Embrace Experiences

Escape rooms, Instagram-friendly stores and more are all part and parcel of the retail environment these days, as young consumers in particular want something more than just the traditional mall experience. They want something they can share and which adds to their lives as both entertainment and practical.

Theaters often rely on the products they sell – the movies – to act as a proxy for the consumer experience. At most, they consider the presentation of the product, including comfy chairs and so on, to create that experience. But nothing of that is something that can be shared on social media. That’s part of the reason behind an expansion of the concessions menu to include more “signature” items that go beyond the simple popcorn and soda.

You’re seeing some of this in things like the VR experiences for Justice League and a couple other movies that have been exclusive to select theaters. And studios have begun regularly putting standees in theater lobbies that allow patrons to step in and become part of the key art, taking pictures that are hopefully then uploaded to social media.

The takeaway: These are all good starts, but there’s little about actually going to the theater that’s an inherently sharable experience. That’s going to need to evolve.

Embrace Niche

Just recently Netflix reported that 80 million of its subscribers had watched one or more of its high-profile romantic comedies from over the summer. Rom-coms are just the latest genre Netflix has tried to own following the mid-tier sci-fi category with titles like Extinction and others.

Coming back to the link above about the future of the theatrical industry, at some point theater chains will likely have to stop trying to appeal to a mass audience and come around to trying to reach a powerful and loyal subset of that audience. That may not be true for all chains, but some are going to focus on specific topics or even formats.

You can see some of this in how different social platforms have signed dials with Viacom, Meredith and other media companies for original content. There’s a belief that audiences have an appetite for different content forms on different platforms. That may or may not be accurate, but it’s the assumption we’re operating under at the moment. And certainly streaming companies like Shudder (horror) and CuriosityStream (documentaries) and more have embraced the idea that by going niche you can engender loyalty, even if you don’t grow exponentially.

The takeaway: People want something that speaks directly to a specific need or interest. Theaters can tap into that in a powerful way.

Embrace the Showcase

Called Amazon 4-Star, the new retail space that’s opening in New York City doesn’t offer everything or strive for a cross-section of goods. Instead its purpose is to make available only items that have earned 4-star reviews (natch) on the company’s core website. Pulling out even further, there’s a trend for retailers to embrace all-out experiences that often don’t have workers and don’t even have products to buy on-site.

Similarly, Best Buy’s continued survival has been attributed to the fact that it tweaked its business model to turn its stores into showcases for products, revitalizing its website to fill in the gaps and complete the experience.

There’s an opportunity for theaters to become the leading edge of the retail sword, one that includes home video sales or streaming subscriptions. Home video sales were once the bright shining light for studios, but those days have past. It doesn’t mean they can’t be revitalized in a different way, one that allows for the audiences to have a series of experiences and interactions – and transactions – with a movie.

The takeaway: A movie is just a single touchpoint between the audience and an entertainment property. Studios and theaters should start acting like it.

Author: Chris Thilk

Chris Thilk is a freelance writer and content strategist with over 15 years of experience in online strategy and content marketing. He lives in the Chicago suburbs.

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