Even before the pandemic shut cinemas down worldwide – either because of local ordinances or because of a lack of products being released – small cinemas faced an uncertain future.
In June 2019*, IndieWire* published “Here’s How Movie Theaters Will Survive the Next 10 Years” which outlined what small cinemas had to do to survive in the era of streaming… and that was approximately six months before most of the world had even heard about COVID-19. It was just the latest in a long line of think pieces that questioned the viability of small cinemas, following a March 2019 article in Variety questioning how small cinemas could survive against the increasing domination of blockbusters and the popularity of streaming. After a decade of the box office being dominated by superhero films and franchise sequels, it seemed like a fair question how the local cinemas screening the latest films from Screen Gems or A24 could survive when similar fare could be found on any of the ever-increasing number of streaming services.
Yet more than two years after the pandemic seemingly derailed the entire media landscape, there has been a surprising outcome – it’s the multiplex chains that have suffered the most, not the small, independent cinemas. Major cinema chains have been decimated. Multiplex chains Pacific Theatres and Arclight Cinemas did not reopen after closing in March 2020, Cineworld – the world’s second-largest cinema company and parent company of Regal Cinemas – filed for bankruptcy in September 2022, and AMC Entertainment’s stock has faced wild fluctuations. Even a smaller chain popular with cinephiles, Alamo Drafthouse, filed for bankruptcy in March 2021, though emerged three months later after restructuring.
The opportunity is there for independent cinemas to absorb audiences whose former go-to multiplex is now closed. In fact, the future of cinema is all about experience and authentically connecting with your community through cinema marketing. Luckily, independent cinemas are the ones who understand that and have a head start in taking the industry there.
What Cinema Industry Insiders Have to Say
Insiders within the cinema industry have observed changes in the business models of cinema exhibition over the years and have insight into how the models are changing.
John Donnelly has 32 years of experience in the cinema industry. He launched the first UCI Cinemas multiplexes in Ireland in the 1990s before moving to Poland to establish multiplexes under the Multikino brand as Managing Director. In 2004, he became Managing Director of UCI Kinowelt in Germany heading up the turnaround of the company’s operations in Germany. Following the acquisition of UCI/Odeon by Terra Firma, John moved to Spain as Operations Director for the group responsible for the expansion of the company in Spain, Italy, Portugal, Austria, and Germany, opening and acquiring 54 cinemas. In 2014, he was promoted to Strategic Programmes Director for Odeon and was part of the executive team that completed the sale of the Odeon Group to AMC. John joined Dolby Laboratories in 2018 as Business development of EMEA and was also on the board of Usheru, a company specializing in movie marketing. Currently, John is Group General manager for Light House Group, an independent chain of cinemas in Ireland. Needless to say, John is an expert who has seen the industry evolve with time, so his predictions about the future of multiplexes are very valuable and insightful.
Jenny Sidorova is the head of Marketing for DX, a tech for cinema technology that has powered great experiences for cinemas in Norway for the last 25 years and just launched in Sweden in November 2023. DX is focusing on launching its international footprint with Sweden, Finland, and the UK in 2023 and beyond in 2024. Jenny has over ten years of marketing experience, helping legacy companies pivot with the era of digital and social media. An expert in brand building, she feels that now is the time for cinemas to deliver a true experience, with storytelling at the heart. Relying on distributor provided marketing is simply not going to be enough to get an audience through the door. Providing a seamless online and offline cinema experience as well as focusing on community building is going to be key for cinemas if they want to survive and appeal to the younger generations in the value-driven era.
These two industry and marketing experts are collaborating on a shared passion: independent cinemas. The rebels. The ones who know that cinemas sell more than a product (a film), but rather an experience, a connection, and what multiplexes can learn from them.
How Independent Cinemas Lead the Way
Despite the vast challenges faced by multiplexes, the business model will likely survive in some form as an important segment of the entertainment industry. The important question is how – especially since it is likely more multiplex locations will close.
“The major multiplex chains have huge debt levels to service in the coming years due to the aggressive expansion over the past 10 years,” notes John. “On top of this, there is extensive investment required to bring their existing estates up to standard given the majority of their estates are over 30 years old. It is important to note that many of these multiplex chains have a small number of cinemas that generate the majority of their profits. In some cases, 20% of the estate can generate over 80% of the companies EBITDA. Therefore, we will see the major chains closing locations that are not profitable or where the lease is coming to an end, where there maybe the opportunity to leave or to renegotiate rent levels. In the case of bankruptcy, we may see the likes of Amazon, Netflix, etc. looking to move into theatrical to support the launch of their films on streaming platforms. Either way, we are likely to see a reduction in the number of cinemas in mature markets, which in many cases are over-screened.” John is spot on as Netflix has announced that it will release Glass Onion: A Knives Out Mystery for a limited one week theatrical run before debuting the film on its platform a month later.
While a multiplex chain cannot follow the same model as a single independent theater, there are important lessons for the industry to learn to survive:
Fewer blockbusters mean less product… but also an opportunity to connect. Blockbusters are the lifeblood of multiplexes. What happens when that supply is cut off? We are seeing this play out now. Many multiplexes that were able to reopen found themselves without major releases to show in theaters.
For example, in the final four months of 2022, there are only four releases expected to hit blockbuster status: Black Adam, Black Panther: Wakanda Forever, Strange World, and Avatar: The Way of Water. In contrast, in 2019 there were over twenty blockbuster-style films released in the last four months of the year, including three films that each grossed more than $1 billion worldwide: Joker, Frozen II, and Star Wars: The Rise of Skywalker. And as the theatrical release window for blockbusters shrinks as studios clamor to use these titles to draw viewers to their streaming services, the few blockbusters that make it to theaters don’t stay very long (with plenty of potential audience members instead opting to wait to watch the film at home).
This shift has been much less of a concern for independent cinemas that do not only show blockbusters – or don’t show blockbusters at all – because their business models were never built on the latest releases from Disney, Warner Bros., or Universal. Yet independent cinemas might now consider increasing their blockbuster bookings to not only fill the void left by shuttered multiplexes but also to introduce the cinema to audiences who might not have been there before to become their new cinema of choice. Cinemas may also consider first-visit promotions like a gift bag or free concession as a way of welcoming new customers to the theater. This is a tactic that Jenny has seen in other industries she has worked in. “Welcome programs, referrals, or anything that can encourage awareness and eventually loyalty are great marketing tactics to make sure that a business reaches its target audience and beyond,” says Jenny. “While independent cinemas might not dream of appealing to the masses, they also offer something for everyone which allows them to segment based on audience. Gen Z might have a different experience than a Boomer and that is not only okay, but smart and what leaves a customer feeling like they have had a personalized experience. Personalization is key to a marketing strategy in 2022.”
However, this “shortage” is not likely to last forever – yet that poses new problems. “There is likely to be a large increase in the number of film releases going forward as production begins to ramp up following COVID and the acceptance by exhibitors to show streaming content in recent months,” predicts John. “While this bodes well in terms of a content choice, it will also make it difficult for customers to be aware of what’s on offer given the necessity to balance studio marketing spend between theatrical and streaming.”
As streaming platforms have diversified their content, multiplexes may follow in a similar vein. “Multiplex chains are likely to expand their content offer as audiences become aware of alternative genres of film through streaming platforms,” notes John. “They may also look to offer screen serials ahead of releases on streaming to boost revenue from various platforms and increase awareness. In addition, we have seen a move by studios to more arthouse-focused productions. On top of this, the repetitive nature of blockbusters may be beginning to wane and with shorting windows and pricing alternatives, people may choose to watch more of these at home.”
That’s why the question remains, what is going to make people leave their phones or leave their couches and get into a movie theater? “The answer” says Jenny, “is going to have to be in the experience. Something more than the product. This may seem obvious and yet, my last two movie theater experiences proved the opposite. Cinemas also tend to forget that the online customer experience is just as important as that offline. In fact, most customers will have their first encounter with a cinema online. So they have to be wowed from the start and most cinema’s websites do not do a great job of wowing today, let alone the online ticket buying experience. Let’s not forget that people walking into a cinema also have apps like Uber, Airbnb, and so on. They expect a seamless and interactive experience online as much as offline. The storytelling of a film has to start much earlier than once in their seat at the movies.”
Independent cinemas have experience in community building.
While many multiplexes have implemented loyalty programs, they are largely passive rewards programs and do not actively engage with customers. “While cinemas have introduced subscription-based models, loyalty schemes, and dynamic pricing initiatives, their ability to connect with audiences online and segment audiences has been poorly implemented,” remarks John. “This is an area that needs more external expertise given the large amount of data the cinemas have at their disposal. On the other hand, local-based cinemas have kept their loyalty programs simple and have engaged their audiences on social media platforms in a more personal way than the larger multiplexes which struggle with older audiences and teenage audiences' choice between paying for cinema, streaming or getting content free through piracy.”
Instead, initiatives in independent cinemas like clubs, marathon screenings, offering unique food and drink, partnering with a local charity, and special pop-up events have created more engagement with their patrons. “Arthouse cinemas and localized/niche chains such as Everyman and Curzon are seeing a positive uplift in attendance and market share against multiplex chains post-COVID for several reasons,” explains John. He lists:
The experience: More appealing offer in terms of comfort, retail, and film selection that appeals to the higher disposable segments (35 to 50 years of age). The experience is better and there is a wider selection of drink/foods of a more adult nature.
The atmosphere: Many multiplexes suffer from teenagers engaging in unsociable
behavior, i.e., using phones during films talking, etc.
Location/Convenience: The shift to working at home benefits many arthouse /less mainstream cinemas. People have saved on travel time and tend to go local with many of these cinemas situated in satellite towns rather than just shopping centers and major cities.
Customer service: Many of these chains are double the price for retail and box office admission but because they offer great service in comfortable surroundings, together with a wide variety of foods and drinks which create a warm and friendly atmosphere, the customer perception is of value and a great communal experience.
“Looking at the marketing angle of the above strategies,” Jenny explains, “one can clearly see that these cinemas have understood that they are not just running a business but rather building brands, telling stories, building relationships with customers. Where they continue to fall short sometimes, mostly due to lack of staff, but sometimes due to lack of resourcefulness, is the digital side of things. Coming into this incredible industry almost a year ago, I was surprised at how often the experience doesn’t translate online, yet most people today prefer to make their transactions online. Even in CineEurope in 2022, I was surprised that online ticket sales were not discussed when talking about the customer journey. It certainly is a big part of the experience.”
More control over marketing leads to localization.
Independent cinemas have a localized audience and can connect with audiences by marketing to local flavors, interests, etc. DX software can indicate what content is selling tickets and the cinema can book to reflect that. They can also book films and documentaries of local interest (e.g., if they were shot locally or feature talent who is from the area).
How Multiplexes Can Follow
Multiplexes must think of themselves as more than just exhibition houses for blockbuster films. Community, authenticity, and connection are the keys to the future. Storytelling should start much earlier in the customer journey because stories are what hook people’s attention.
“The music industry is a great place to look to see where the film industry is headed,” John points out. “In the music world transformation happened faster because of flexibility, less large conglomerates, and smaller file sizes making it easier to share. The music industry has figured out a way to monetize its product at the expense of artists that have suffered a reduction in royalties. Technolog has also allowed an enormous increase in content that has left the customer with so much content that they require recommendations to keep abreast of what’s new, what’s popular, and so on. Basically, the world has fragmented into niches in every sector and we need AI to tell us what to listen to or view!”
The cinema industry can learn from the music industry in aspects like how customers find new content, how they determine where to watch it, and how long content will be exhibited theatrically versus streaming. However, John notes, “Film is more complicated than music. How do we market to relevant segments? How do we cut through the vast amount of noise, including TV, streaming, piracy, YouTube, and social media? Albums are not listened to anymore, it’s all about playlists. Will audiences of the
future not have the attention span to watch 2 to 3-hour films and prefer serials of
half-hour chunks? How do we reach film lovers, segment them and tell them what’s coming out in the theater given the vast amount of noise and demand for their time and money?”
Jenny feels similar in that the cinema industry will have to evolve and accept the evolution of customer behavior. “This is also going to be true of content, the way films get created and distributed,” she adds. “There’s already a big gap between what distributors provide and what exhibitors need in terms of content that builds an emotional connection with audiences, and content that can simply get people through the door. Not all content is equal, yet most marketing materials received from distributors continue to be a one size fits all model. This simply won’t work in the future, especially as we look to web3. More and more creators are going to be part of the distribution process of their content and more and more fans will get to participate in earlier stages of content creation. Web3 will enable the cinema industry to evolve into something even more inclusive of all people, but only if the industry allows it to. As I’ve always said in every single industry I’ve worked in ‘get on board, or get left behind.’”
Whatever comes next for multiplexes, it’s clear that independent cinemas will have the opportunity to attract audiences if they take the opportunities. Based on the points of view of these two industry experts, multiplexes can choose to follow the lead of independent cinemas in attracting the next generation of moviegoers.