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» Film-Tech Forum ARCHIVE   » Operations   » Ground Level   » AMC Spending $600 Million to Remodel Theaters With Larger Chairs, Fewer Seats (Page 1)

 
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Author Topic: AMC Spending $600 Million to Remodel Theaters With Larger Chairs, Fewer Seats
Terry Lynn-Stevens
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From: Toronto, Ontario, Canada
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 - posted 07-27-2014 12:31 AM      Profile for Terry Lynn-Stevens   Email Terry Lynn-Stevens   Send New Private Message       Edit/Delete Post 
Now at the Movies: Fully Reclining Seats

The nation's second-largest movie theater chain is spending hundreds of millions of dollars outfitting a number of theaters with La-Z-Boy-type seats that fully recline—a conversion that removes up to two-thirds of a given auditorium's seating capacity. It's a less-is-more approach to a business that has long thought bigger was better.

But AMC's counterintuitive success with the program has converted skeptical competitors and become integral to the company's pitch to new investors.

The conversions are AMC's highest-profile campaign since it was purchased for $2.6 billion by China-based Dalian Wanda Group Corp. in 2012 and went public last December. The company plans to spend about $600 million over the next five years to "reseat" 1,800 of its nearly 5,000 screens. The renovations typically cost $350,000 to $500,000 per auditorium, with landlords often shouldering some of the cost.

Theater operators spent years building tricked-out multiplexes with more than a dozen huge auditoriums. AMC Chief Executive Gerry Lopez says he is now banking on quality over quantity. AMC plans to wait about a year after upgrading its theaters before raising ticket prices.

The conversions highlight a liability facing the country's biggest film exhibitors: a supply of outdated theaters that rarely sell out, yet would be costly to tear down and rebuild.

Attendance in renovated AMC auditoriums has leapt 80%, on average, despite the drastic reduction in capacity to sometimes fewer than 70 seats. The company declined to say what the average before-and-after attendance numbers were, though Mr. Lopez acknowledged that the biggest attendance boosts would come in theaters that were weak performers, some of which were losing money.

The conversions are occurring only in certain places: Busy venues in major markets like Los Angeles or New York don't need cushy seats to attract customers, so it doesn't make sense to cut their capacities. In a second wave of conversions at better-performing theaters, AMC is planning to install seats that don't recline as far back, so just half of the capacity is lost.

Box-office revenue was up more than 60% at the 37 AMC theaters that had been fully reseated in the first quarter of this year, said Mr. Lopez.

Removing seats and filling more of the remaining ones "doesn't conceptually make sense," said Eric Wold, an analyst at B. Riley & Co. But he is encouraged by data showing the changes bring customers back more often and siphon traffic from competing theaters in an area.

Overall domestic movie attendance has stayed relatively flat over the past 10 years, with the number of tickets sold in the U.S. slipping 1.5% from 2012 to 2013, according to the Motion Picture Association of America. The decline comes amid growing competition from video-on-demand streaming services like Netflix Inc. NFLX -0.83% and other entertainment options.

"There are no more bodies coming through the door," said Mr. Wold. "So you have to find something to get them to come back more often or pay more."

To that end, the country's major movie-theater chains have beefed up the concession stand with options like chicken fingers and mozzarella sticks; expanded the number of 3-D and large-format offerings; and shifted to digital projection that many viewers think produces a sharper image on screen.

"For all of us, it becomes part of the arrows in our quiver," said Tim Warner, chief executive at Cinemark Holdings Inc., CNK -1.06% which has some recliner theaters.

Regal Entertainment Group, RGC -3.20% the country's largest exhibitor, has ramped up its reseating efforts in the wake of AMC's success, and plans to have 25 theaters across its circuit outfitted by the end of the year—some in markets where a competitor has introduced the concept, said David Ownby, Regal's chief financial officer. The chain is taking a more-cautious approach than AMC, spending less on the conversions and waiting to see how the theaters perform before planning more.

Mr. Lopez, a former Starbucks Corp. executive who joined AMC in 2009, was told by industry peers that the program would never work. But he had come from a company accustomed to teaching consumers new habits—like the $3 coffee, he said.

Mr. Lopez attributes the jump in attendance to several factors. Some reseated theaters have full dine-in capabilities, offering a food-and-drink menu comparable to an Applebee's restaurant. That allows moviegoers to consolidate their evening activities.

The reseated theaters attract more midweek audiences than normal theaters, and tend to draw more adults, who pay higher ticket prices than teens or young children.

AMC typically doesn't change ticket prices in the first year after construction to "seed" behavior, said Mr. Lopez, but the admission fee goes up in subsequent years. Then, if a regular theater raises ticket prices 25 cents, tickets to a reseated auditorium might go up $1 or $1.25, he said.

Collecting those pricier tickets allows for some bargaining power with Hollywood studios. AMC can argue for better terms on how it splits ticket revenue with studios if it can show higher-priced sales are coming from its theaters. "We remind them of that all the time," said Mr. Lopez.

Costs quickly move beyond the auditorium, said Mr. Lopez, who realized at the chain's first reseated theater that customers in cushy seats wouldn't tolerate subpar bathrooms or lobbies. "If we're going to do this, we do the full monty," he said.

Now at the Movies: Fully Reclining Seats

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Geoff Jones
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 - posted 07-27-2014 08:11 AM      Profile for Geoff Jones   Author's Homepage   Email Geoff Jones   Send New Private Message       Edit/Delete Post 
Fewer people paying higher prices... It seems to be a common theme in the last few years.

I wonder if that is a good long-term strategy.

Bravo to the journalist for the accuracy of this statement:
quote: Terry Lynn-Stevens
and shifted to digital projection that many viewers think produces a sharper image on screen.

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Martin McCaffery
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From: Montgomery, AL
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 - posted 07-27-2014 08:38 AM      Profile for Martin McCaffery   Author's Homepage   Email Martin McCaffery   Send New Private Message       Edit/Delete Post 
quote: Terry Lynn-Stevens
"If we're going to do this, we do the full monty," he said.
I don't think this means what he thinks it means [evil]

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Terry Lynn-Stevens
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From: Toronto, Ontario, Canada
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 - posted 07-27-2014 08:35 PM      Profile for Terry Lynn-Stevens   Email Terry Lynn-Stevens   Send New Private Message       Edit/Delete Post 
quote: Geoff Jones
Fewer people paying higher prices... It seems to be a common theme in the last few years.
]

That seems to be the reality. Until the studios figure out how to get the 16-24 into movies like the generations before them, declining attendance and higher ticket prices will continue.

I am all for the better seats idea, while adding a dollar or two to the ticket price, it is not something I like to see, but it is the reality of the situation.

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Jonathan Goeldner
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 - posted 07-27-2014 10:14 PM      Profile for Jonathan Goeldner   Email Jonathan Goeldner   Send New Private Message       Edit/Delete Post 
and yet AMC has great comfortable seats in the 'over 21' screens/auditoriums at Mazza Galleria - but the upkeep and maintenance of the seats is a joke. So you put in nice seats and yet they let them go to pot. And don't get me started how patrons think and act they can put their nasty ass feet and legs all over the seat in front of them - I don't want to see your gross as !@#$ feet in flip flops in my field of view of the screen, or even to the left or right of my shoulder - this isn't your goddamn living room.

Landmark Bethesda added new nice larger seats, but somehow they completely forgot about the distance from the edge of the seat to the back of the seat in front of it. Trying to get to your seat with patrons not standing up, is an obstacle of sorts, not stepping on their feet or accidently socking the patron in the head that's sitting front of that person.

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Buck Wilson
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 - posted 07-28-2014 12:05 AM      Profile for Buck Wilson   Email Buck Wilson   Send New Private Message       Edit/Delete Post 
That digital projection quote is pure gold.

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Lyle Romer
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 - posted 07-28-2014 06:09 AM      Profile for Lyle Romer   Email Lyle Romer   Send New Private Message       Edit/Delete Post 
This is part of the direction that the industry needs to go. Movie theatres have to move from being like a McDonalds to at least a TGI Fridays.

If people are going to pay a premium (and even regular prices are a premium in this era) to see a movie at a theatre, they need to be given an experience.

In addition to better seats, hopefully they will have properly masked screens. Icing on the cake would be Atmos in the largest several auditoriums of a complex, and well equipped 7.1 in the rest.

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Frank Angel
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 - posted 07-28-2014 08:21 PM      Profile for Frank Angel   Author's Homepage   Email Frank Angel   Send New Private Message       Edit/Delete Post 
1) I never really understood why, to enjoy a movie, people needed to strap on feeding bag.

2) I will never really understand why, to enjoy a movie, people need to fully recline, except maybe in an Omnimax theatre. We are always complaining that people now act like they are in their living rooms instead of in a cinema; now they are going to act like they are in their bedrooms.

Keep the silly reclining seats and how about putting in some masking and even (gasp!) a screen curtain. How about, now that they are going raise the price yet again, doing away with screen advertizing?! Better they spend those millions on upgrading their sound systems (Atmos anyone?) and how about going to dual projection or even installing laser light engines? People want a real CINEMA experience, not a sleeping car experience.

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Randy Stankey
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 - posted 07-28-2014 09:46 PM      Profile for Randy Stankey   Email Randy Stankey   Send New Private Message       Edit/Delete Post 
People don't go to theaters because the movies are great.
They don't go because of super duper sound systems or because of digital or film projectors.
They don't want extra cushy seats or gourmet snacks to eat.

We've seen Hollywood take in record figures in years when most people would classify the movies as mediocre at best.
We've all seen theaters with crappy projection and terrible sound systems that stay in business when logic might tell us that they shouldn't.
We've gone through eras where theaters had wooden seats, to upholstered, high-back, rocking seats, to stadium seats and, now, to extra-plush, reclining seats.

All of this crap goes in cycles. The expense to build and run a state of the art theater keeps getting higher and higher. It might never send.

People don't return to theaters, over and over again, because of some gimmicks or gewgaws. They go back because they were treated well. The people who work at the theater made them feel welcome and helped them have a good time.

It isn't simply "customer service." It isn't simply smiling and giving people what they want,

It is all about talking **TO** the customer and not talking AT them.
It is about listening to people. Hearing what they have to say, not just when they have a complaint. Looking them in the eye when you sell them tickets. Occasionally telling (situationally appropriate) jokes.

You don't have to be best friends with your customers but you do have to be friendly. That is what 90% of theaters lack... Friendly employees who act like they give a shit about the customer.

Theaters could install vibrating, shiatsu massage chairs but it wouldn't mean anything if their employees are surly and treat customers like cattle.

AMC could probably save a lot of money if they took one tenth of the amount they are spending on cushy, reclining chairs and spent it on hiring employees who give a rat's ass about customers.

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Buck Wilson
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 - posted 07-28-2014 10:27 PM      Profile for Buck Wilson   Email Buck Wilson   Send New Private Message       Edit/Delete Post 
It's hard not to treat customers like cattle when that's how every theater for the last 30 years was designed to run.

I don't go a single weekend without thinking "This is disgusting. This is just a money factory. Pump the thousands of cattle to box, squeeze the wallet. Pump them to concession, double squeeze the wallet. Pump them into a holding tank and then pump them out ASAP." It's just a cattleyard, no doubt about it.

Cleaning auditoriums, I can't help but think they likely wouldn't at all need cleaned save for the rare true accidental spill IF the establishment actually respected the customer as a person rather than a dollar sign.

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Scott Norwood
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 - posted 07-28-2014 10:52 PM      Profile for Scott Norwood   Author's Homepage   Email Scott Norwood   Send New Private Message       Edit/Delete Post 
quote: Randy Stankey
AMC could probably save a lot of money if they took one tenth of the amount they are spending on cushy, reclining chairs and spent it on hiring employees who give a rat's ass about customers.


This! [thumbsup]

It's not as if movie seats have just been so uncomfortable that people have stayed away from cinemas for the last hundred years. Actually, many live theaters (especially older ones) have truly uncomfortable seats, yet have no trouble charging $100 and up per ticket. And people still pay that because they enjoy the entertainment that is being provided. Same for many sports venues, especially older ones.

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Mike Blakesley
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 - posted 07-28-2014 11:13 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I'm against recliners, because people will just fall asleep in them, or they'll be too tempting for horny youngsters to have sex in them. I'm all for softer, more cushy seating but people should stay upright.

I guess I don't really understand the whole "Money factory" argument. If you want to have a complex with a lot of screens you're going to have a lot of people coming through, and if you have that you need things to be efficient. Efficiency isn't bad, but it can seem "cold."

These days with land prices what they are, a single screen castle-plex won't work in a big city; you need multi-screens to stay afloat. This is all because of the "gotta-have-it-RIGHT-NOW" mentality we have fostered in our society, combined with the 90-days-or-less-to-video mentality of the movie industry, combined with the high cost of being in this business today. You HAVE TO have those thousands of people coming through like cattle or else you don't have a business. There aren't enough weekends in the theatrical window for it to work any other way. The studios have done this to the industry by flogging the release date of their movies in advertising, and then releasing the video too soon.

Having said all that, and I don't know about everywhere of course, but here are my biggest pet peeves of the "big" theaters I've been in (mostly in Montana, Utah, Colorado and Florida):

- Not enough people staffing the ticket counter (such as 5 ticket stations, but only two of them staffed even though it's Friday night)

- Similar problems at the concession. There is a Carmike in Billings which has at least 10 concession stations at two counters. I swear the counter on the right has never been used, or at least I've never seen it being used.

- Concession people who look disgusting (too many piercings in the lips or whatever) and aren't friendly, or can't understand a simple request such as "extra ice"

- Concession prices -- they are ridiculous. I know that's where most of the profit has to come from, but $7 for a kiddie tray? $6 for a soda when you can buy the same thing at a gas station for $1? Come on. Four bucks for a "theater size" box of Dots? Our large soda is $2.75 and we sell a buttload of them.

- Auditoriums not cleaned between shows

- An overall "don't-give-a-shit" feeling among the staff. This is something you can feel in the air when a place has it.

Now having said all THAT, I am convinced that if many of the gripers about the state of today's exhibition could magically transport back to the 1940s and see what moviegoing was like then, they would beg and plead to come back to 2014. I have a picture of the outside of my theater taken in 1942, and guess what's in the picture? A horde of people waiting to get in. Inside the building, back then there was no concession stand at all; we had 500 seats, about a third of which had no padding (today we have 194 Greystone loungerbacks); and movies that were six months old, or older, because there just weren't many prints made in those days. In the biggest city in Montana, Billings, back then there were only three screens (as far as I know) and the movies were old by the time they got them, too.

Today's moviegoing isn't perfect but it isn't all bad either.

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Buck Wilson
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 - posted 07-29-2014 12:00 AM      Profile for Buck Wilson   Email Buck Wilson   Send New Private Message       Edit/Delete Post 
Oh I never said the days of yesteryore were better, I wouldn't even know. I wasn't there. I was only suggesting the megahuge plexes in even larger theater chains just push from every angle for it to be that efficient sterile heartless environment. Employees typically act like "I don't give a fuck" for a reason. And there's only two registers out of 10 because the district manager wants to look good so he cuts payroll allowance by half. It's all about the profits, not the customer, is all I'm saying. It drives me crazy.

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Mike Blakesley
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 - posted 07-29-2014 12:15 AM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I agree you on those points. I guess it's happened because these are public companies that have to answer to shareholders, and the only language they speak is "dividends" (or lack thereof). I wonder how many stockholders Regal or AMC or Carmike have that never go to movies?

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Buck Wilson
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 - posted 07-29-2014 01:02 AM      Profile for Buck Wilson   Email Buck Wilson   Send New Private Message       Edit/Delete Post 
Too many apparently.

Even if they do go, do they know better? Do they know what they're missing? Do they care?

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