The death of movie theaters has been widely exaggerated. They took a serious hit during the pandemic — as movie studios were forced to release movies through streaming platforms, and consumers realized that they could just as easily rent a movie at home than go to the theaters.
Black Widow had a $70M opening weekend in theaters while generating $60M in digital rentals for Disney through their streaming service. Studios will continue to release movies in a hybrid format putting pressure on theaters.
Theaters aren’t just competing with home setups — which are consistently getting better — but with other entertainment activities such as live shows, sporting events, and nightclubs. So it’s no surprise that movie theaters have been trying to innovate on their model for years.
If you have watched a movie any time in the last 10 years, you have likely seen some of these innovation attempts. 3D movies, surround sound, better picture quality, and wider screens. Unfortunately, I don’t think consumers care much about these types of improvements.
The only movie that likely justified 3D was Avatar back in 2009 and that was due to novelty. And yet, almost every movie is released in 3D today, and consumers are forced to pay extra for something that they didn’t ask for. That’s not innovation but simply adopting technology for technology’s sake.
The price of watching a movie has been on the rise since 2001. In the US, it averages around $9.11 while in Canada, it consistently tops the $20 mark. The strategy for movie theaters over the last few years has been to put as many people as possible inside a room while charging increasingly higher prices.
If you look at the revenue structure for movie theaters, this strategy of ever-increasing ticket prices — justified by technology improvements — makes sense. Movie theaters make close to 60% of their revenue from ticket sales while food accounts for around 30%. However, the profit margins on food are astronomical. Popcorn isn’t expensive to make!
Thankfully, movie theaters have realized that this strategy will not work in the long term. Why pay to sit in an uncomfortable seat and watch a movie through 3D lenses? You might as well watch a movie at home on your comfortable couch and with your own food. After all, your at-home setup is good enough in terms of sound and picture quality.
Movie theaters have started to realize their mistake and they adopted what I think is their most impactful innovation in 20 years: reclining chairs. If you haven’t seen them in a movie theater before, this is what these chairs look like.
The chairs are really comfortable and you have plenty of space around you as well. In Vancouver, I’m now seeing entire theaters that only offer these chairs as options. New theaters aren’t even building the older style of classic movie theater chairs that are tight and uncomfortable.
The movie prices have stayed the same but now, it’s easier to justify the experience. Not only that but movie theaters are starting to double down on two other elements of what the customer wants: better food and a better viewing experience.
Some movie theaters have installed fully-featured kitchens that can serve all kinds of food: tacos, wings, burgers, etc. The food is tasty and can be easily eaten in the reclining chairs (they have small tables).
For the viewing experience, movie theaters are creating 19+ rooms where only adults are allowed. No one likes to watch a movie while a baby is crying or while teenagers are talking. Making a room adult-only also allows them to serve alcohol alongside the improved food. Some theaters call these rooms “VIP” which I think it’s a fantastic name.
Innovation isn’t about what is possible but what the customer wants. Customers don’t particularly care about improved surround sound or better picture quality because the current options are pretty good. They do care about being comfortable while watching a movie and having better food options including alcohol.
Companies can get caught up in what they think will make the difference for their customers instead of simply asking them or looking for the simplest options. I think the future of movie theaters is bright in our post-pandemic world.