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Front Page - Friday, December 22, 2017

Screen Wars: The Theaters Fight Back

Battling streaming, HDTVs with recliners, bars, real food, more

It’s May 25, 1977. Word about a new space fantasy adventure called “Star Wars” has spread like wildfire overnight and lines for tickets are winding around theaters and snaking down streets. As shows sell out, people stand their ground, like they’re waiting for a three-minute rollercoaster ride instead of a two-hour movie.

Inside, theater lobbies are crammed not just with salivating sci-fi geeks but regular people eager to see a film that promises sights, sounds and thrills unlike any other cinematic offering in history.

Memories were made that summer not just of heroes and villains in a galaxy far, far away but also of the blockbuster movie experience. All a theater had to do to attract a crowd was post “Star Wars” on its marquee, pop truckloads of butter-soaked popcorn and schedule enough staff to handle the hysteria. No one minded the spring-loaded seats, lack of elbow room or sticky floors; they were there to see a movie.

Fast forward to Dec. 14, 2017. The movie-going public has known about the existence of “Star Wars: The Last Jedi” for a couple of years. Tickets went on sale in October, with many early shows quickly selling out.

A modest line starts to form outside an auditorium at the Regal Hamilton Place 8 in Chattanooga about 20 minutes before “The Last Jedi” is scheduled to premiere. No one seems to be in a hurry to jockey for position because many of the patrons selected their seats when they purchased their tickets on Fandango or Movetickets.com.

The only real lines in the building are forming in the lobby, where hungry moviegoers are ordering not just popcorn and soda but also appetizers, salads, pizzas, tacos, burgers and a variety of locally produced draft beers.

For $10.99, patrons can purchase a Black Angus bacon cheeseburger, which comes cooked to order, and a side of house fries or kettle chips. They can wash down that meal with a bottle of Blood Orange Cream Ale from Big River Grille & Brewing Works next door.

Customers who buy with abandon are rewarded with ample points on their Regal Crown Club cards.

While the lobby of the Regal blurs the line between a movie theater and a restaurant, the concept of the living room has invaded the auditorium where films are shown. Gone is the tightly packed, saddle-sore seating that has filled theaters for decades, and in its place are rows of plush, spacious power recliners, each of which faces a small but adequately sized screen.

The Regal is not alone in offering these amenities. Rather, theaters across the country are embracing the premium experience.

So, what happened during the 40 years between “Star Wars” and “The Last Jedi?” Simple: the movie business has done what it’s always done in response to new competition, which has included high-definition television, home video rentals and video-on-demand: it’s upped its game to offer an experience that gets people off their couches and into theaters.

The Age of Netflix

When George Lucas’ space opera hit theaters in 1977, movies were locked in a decades-old battle with television for the eyeballs of America. But the entertainment landscape was less diverse and expansive than it is today.

There were fewer channels on TV, and home video rentals had not yet arrived, so if someone wanted to see a film, they either went to a theater or waited for the CBS Friday night movie.

Not so in 2017, when streaming giants like Netflix, Hulu and Amazon can beam untold hours of content to a variety of mobile and stationary devices. What’s more, by releasing entire seasons of popular shows like “Narcos” (Netflix), “The Handmaid’s Tale” (Hulu) and “The Man in the High Castle” (Amazon), these companies have made binge watching a cultural phenomenon and caused satellite and cable TV executives more than a few headaches.

Plus, people are still renting physical discs. Although VOD ended the reign of Blockbuster and its ilk, upstarts like Redbox found a lucrative niche in offering cheap rentals of new DVD releases through street-level kiosks. Redbox’s 41,500 kiosks handles 39 million disc rentals a month, according to a Variety article from May 10.

So, if someone wants to see a movie, they can turn on their TV, connect their tablet or smartphone to the nearest Wi-Fi, download digital content to their computer or, if they don’t mind the inconvenience, drive around the corner to Walgreens, where a Redbox stands ready to pop out Blu-rays like soda cans from a vending machine.

The mounting popularity of streaming content has coincided with painful dips in box office revenues. In 2017, one mega-budget bomb after another landed in theaters with a thud. The carnage began in May with the release of “King Arthur: Legend of the Sword,” which cost Warner Bros., $175 million to make and squeezed a mere $39 million and change out of the American public.

The costly failure of “King Arthur” was an omen of things to come. “Valerian and the City of a Thousand Planets,” “Baywatch,” “Pirates of the Caribbean: Dead Men Tell No Tales,” “The Mummy” and “Transformers: The Last Knight,” all of which cost a pretty penny to make, also raked in woefully disappointing returns.

A handful of movies hit big, including crowd-pleasers like “Wonder Woman,” “Guardians of the Galaxy Vol. 2” and “Spider-Man: Homecoming,” but these were the exceptions to the new norm.

The 2017 summer box office season was the worst the industry had seen in a decade, Variety reports, with the 14.6 percent drop in revenues from May-August putting the year 6.5 percent behind 2016.

Ticket sales are down, too. As of Dec. 18, 2017, moviegoers have purchased over 153 million fewer tickets this year than all of 2016, according to movie industry data website The Numbers.

All this has been a body blow to movie theaters, which are seeing fewer butts in seats and shorter lines at concessions stands. Regal Entertainment Group, which has 7,315 screens in 561 theaters in the U.S. and abroad, announced revenues of $716 million for the third quarter ending Sept. 30, 2017, down from $811.5 million for the same period in 2016.

AMC Theatres, which sports 11,046 screens in 1,006 theaters worldwide, saw a boost in revenues from close to $780 million to nearly $1.2 billion during the third quarter of 2017, but the company’s shares took a tumble when it reported a net loss of as much as $178 million between April and June, compared to a $24 million profit during the same period a year ago.

Meanwhile, the numbers tell a happier story at Netflix. During the third quarter of 2017, the king of streaming added 5.3 million subscribers (boosting the company’s subscriber base to 109.3 million) and collected $2.98 billion in revenues, according to an Oct. 16, 2017 article in the Financial Times.

At first glance, the math appears to paint a picture of a nascent industry giving a century-old business a sound thrashing. First, video on demand brought the rental chains to their knees; now streaming services are doing the same to the movie industry.

Not so fast, says John Fithian, president of the National Association of Theatre Owners (NATO), in a Feb. 16, 2017 guest column published by The Hollywood Reporter.

In the column, Fithian says that while a weak economy and cheap home entertainment options have eroded theatrical admissions slightly, domestic revenue is still strong.

“Box office has topped $10 billion domestically for seven straight years, $11 billion for two straight years, and set records in five of the past seven,” Fithian writes. “Some analysts will downplay that performance by noting that this has been accomplished through increased pricing rather than admissions growth, but that suggests that theaters have done nothing but raise their prices.

“Instead, the cinema industry has reinvented itself with stadium seating, digital projection and sound, premium large-format screens, cocktail and food service in the auditorium and luxury power recliners.

“All those billions of dollars spent on improving the movie-going experience come with an average ticket price that, adjusted for inflation, is lower than it was in 1976.” (The average ticket price in the U.S. is $8.95, according to NATO.)

Fithian makes a strong argument for the glowing health of the movie industry and the film exhibition business. So, how does one account for the dramatic box office failures of 2017? People said no to bad movies.

“You have to give audiences credit for being intelligent,” says Chris Dortch, founder and director of the Chattanooga Film Festival.

Dortch was among those who chose to see director Christopher Nolan’s visually spectacular World War II drama “Dunkirk” at the Tennessee Aquarium’s IMAX 3D theater, which not only boasts a six-story tall screen but also features 12-channel audio and a 4K laser projection system that delivers sharp, bright digital images.

“I’d already seen ‘Dunkirk’ but went back a second time because I wanted to see the amazing presentation,” he explains. “Many of the people I talked with were seeing the film for the second or third time.”

Audiences are interested in more than spectacle, as they’ve proven by rewarding small but gratifying independent films like “Lady Bird” and “The Big Sick” with their movie-going dollars. They will turn off their TVs, silence their tablets and leave their homes to see a good film.

“I’m not worried about the future of theatrical exhibition,” Dortch says. “Movies like ‘It’ or ‘The Last Jedi’ provide such a visceral experience that they warrant being with a bunch of like-minded people who are ready to have fun.”

As the film industry licks its wounds and carries the lessons it’s learned from its successes and failures this year into 2018, the movie exhibition business is working harder than ever to do its part to make seeing a film in a theater a special experience.

Therein lies a bigger challenge than Netflix: Can they find a way to offer a premium experience without going under?

Dollars and sense

To entice people back to theaters, the industry rolled out several technical innovations in the 1950s, including 3D, CinemaScope and VistaVision. But box office receipts would not return to pre-television era levels until 1974, Fithian adds.

This lean period in the history of the film business hasn’t stopped the theatrical exhibition industry from striving to stay on the cutting edge in the modern era, which is defined less by what’s new and more by what’s next.

Evolution is necessary, says Ryan Noonan, AMC’s public relations director, not because the specter of Netflix makes it so but because the public is demanding a more complete and immersive entertainment experience.

“About a decade ago, AMC was looking at the movie industry and seeing how it could reinvent itself,” Noonan acknowledges. “We started making some changes, and I don’t think anyone realized that it would change the landscape as much as it has.”

Noonan points to AMC’s MacGuffins Bar and Lounge, a full-service bar placed in some theaters so moviegoers can enjoy a cocktail before heading into their screening.

AMC also expanded its food offerings and began to install recliners in some theaters in 2010. (Except for offering an expanded menu at some local theaters, the chain has yet to introduce many of these extras in Chattanooga.)

Noonan says the markets to which AMC has brought its upgrades have responded favorably. “When we rolled out the recliners, the response was phenomenal,” he says. “Movie-going skyrocketed. So, we tried it in another location and got the same result.”

Soon after, visits to AMC theaters nearly doubled, other chains, including Knoxville-based Regal, began experimenting with premium options.

The Regal even did what AMC has not: bring these amenities to Chattanooga. (Regal, which is undergoing acquisition by Cineworld, did not respond to requests for an interview.)

Fortunately for AMC, Regal and other chains, enough customers have been willing to pay for the add-ons, which can bump the price of a ticket to north of $20 for an IMAX 3-D presentation, to warrant the investment.

“If you can figure out what the guest wants – what gets moviegoers excited about being in a theater – you can build traffic,” Noonan points out. “For the longest time, it was about building the biggest auditorium with the most seats. (And) that worked.

“But as more entertainment options became available, and as people became more discerning with their time, something needed to change. So, the movie theater industry ... began to focus on creating a great experience.”

Reserved seating, plush recliners, mobile ticketing and enhanced food and beverages were unheard-of options 20 years ago, Noonan says, but theaters that don’t have them today are going to lose market share. (Again, the chain has yet to bring recliners and other extras to Chattanooga.)

Theaters that do install recliners face another challenge: making enough money to stay afloat with fewer seats. Noonan brushes this concern aside.

“What we’ve done is build popularity for a location, so even if it loses 50 to 60 percent of its seating capacity, we’re up in attendance,” he says. “More people are coming, and they’re coming more often.

Reserved seating has helped with that, Noonan adds, because the guest can select the seat he or she wants, at the time he or she wants it, and it’ll be there, waiting.

“It all ties into convenience, and how the whole package of the movie theater experience is getting better,” Noonan says.

While Noonan and general audiences are pumped about the upgrades, AMC is still giving discerning patrons fodder for criticism. Dortch, who’s arguably

Chattanooga’s leading cinephile, is grieved about the chain’s lack of masking, which involves expanding or shrinking the borders of a theater screen so a film fills its dimensions.

Most movies are released in one of two aspect ratios: flat, which is the taller of the two, and scope, which is the wider of the two. Masking ensures that both aspect ratios can be displayed on the same screen without losing any of the image or allowing the unused portions of the screen to be visible.

Failure to do this can be distracting, Dortch says. “AMC is being taken to task for not caring about theatrical masking. They just let a movie float in the middle of an abyss,” he moans.

AMC can afford to not care in some markets because of the lack of competition. In Chattanooga, AMC has 76 screens versus Regal’s eight screens at a single location.

But they need to care, Dortch says, because audiences are getting smarter and more discriminating.

“You shouldn’t shrug your shoulders at presentation. A movie has an aspect ratio for a reason,” Dortch explains. “And the fact that people are flocking to IMAX presentations of Christopher Nolan movies shows they care about these things.

“But if their expectations aren’t met, or if they can create better conditions at home with a 4K television, that’s increasingly going to be their choice. The big chains need to focus on the experiential side of going to the movies if they want to hold on to their audiences.”

The fans speak

While the musings of public relations directors and industry experts have their place, the only opinions that truly matter are those held by the people who hold the life and death of the film industry and theatrical exhibition business in their hands – or, rather, their wallets, purses and Apple Pay accounts: the customers.

As part of the movie-going public, Chattanoogans Rickie and Shellina Blevins speak not from lofty executive offices but from where the rubber meets the road – the place where regular people decide how and where to spend their money and free time. And the powers-that-be need to hear what they have to say.

Rickie, 44, and Shellina, 39, have plenty to say. But most of the time, they let their costumes do the talking.

The couple is part of an organization called Chattooine, which gleaned its name from the words “Chattanooga” and “Tattooine,” the planet that served as Luke Skywalker’s childhood home.

Chattooine is an organization of genre buffs who dress up as characters from “Star Wars” and other genre properties and then appear at attractions like Lookouts games and the Chattanooga Zoo to bring attention to charitable causes such as Siskin Children’s Institute and Ronald McDonald House.

Rickie enjoys suiting up as “Star Wars” villain Darth Vader when he’s not working in the advertising department at Southeastern Salvage, while Shellina has been known to appear as (spoiler alert!) Vader’s daughter, Princess Leia Organa, when she’s off duty as a dispatcher at US Xpress.

Rickie and Shellina and their friends at Chattooine also see a lot of movies, with the AMC 18 and Regal being their most frequent haunts. This has made them experts on the amenities both theater chains claim are wooing people to theaters.

Rickie and Shellina agree buying tickets in advance and choosing where to sit are huge plusses – and not just because it allows them to secure seats before a showing of a new movie sells out.

Shellina, for example, likes the peace of mind that comes with having tickets in hand.

“I want to know where I’m going and when I need to be there,” she explains, her handmade necklace of Boba Fett’s ship curving across the collar of her “Darth Vader lives” T-shirt. “I like everything to be in order, including where I’ll be sitting.”

Shellina has friends who also like to buy tickets ahead of time because they prefer to sit in a particular section of the theater.

Rickie appreciates being able to see which seats are available as well because there are areas he wants to avoid. “When the front row is the only thing open at the Regal, you know you need to pick another time,” he says, smiling below his Deadpool baseball cap. “Or when you want to see a movie with a group of friends, you can choose another showing if there aren’t enough empty seats in a row.”

As members of a large fan group, Rickie and Shellina are enamored with the Atom movie app, which not only allows them to purchase tickets and choose their seats but also enables them to add friends and vote on movie times. “That’s great for us because we sometimes have close to a hundred people wanting to see the same movie together,” Shellina explains.

Although there’s a surcharge for using Atom and other similar apps, the couple shrugs it off as inconsequential, especially considering the conveniences the services provide.

Besides, they say, the fees have dropped as advance ticket-buying has become more widely used.

Rickie and Shellina also give four thumbs up to the luxury seating at the Regal, with Shellina saying the comfort is exceptional. “I’m fidgety. When I watch a movie at home, I’m all over the place. It’s even worse when I’m in a theater,” she says. “The recliners help.”

Rickie and Shellina’s friend, Mike Taylor, however, has a different idea of what constitutes a premium movie-going experience.

“I go to drive-ins,” the 41-year-old truck driver says. “My assigned seat is the front seat of my car, and the sound system is just the way I like it. It’s comfortable and I don’t feel crowded.”

The one time Taylor joined his Chattooine pals at the Regal, he fell asleep. “I passed out five minutes into the movie and then slept through the whole thing,” he admits, laughing. “Those seats are so dang comfortable.”

The future

As a believer in the power of movies to touch people in unique ways, Dortch says he’s confident in the future of film exhibition.

And he’s a proponent of MoviePass, a subscription-based ticketing service that allows subscribers to purchase one movie ticket per day for a flat monthly fee.

“I make myself watch everything, so my MoviePass has absolved me of all the guilt I felt when I would spend money to see a Madea Halloween movie,” he says. “I pay $10 a month and I wear it out. I like the model because it’s making movie-going attractive again.”

AMC is less excited about MoviePass, dismissing it as “a small fringe player” and that its model “is not in the best interest of moviegoers, movie theaters and movie studios.”

The end

The history of the movie business suggests the film industry won’t be disappearing any time soon.

Despite the challenges it faces, it embodies the sentiment Dr. Ian Malcolm expressed in “Jurassic Park” when he said, “Life will find a way.”

If the studios respect the filmmakers who make their product and the audiences that consume it, and if theaters continue to offer an appealing experience, the movies will find a way. Dortch hopes so, anyway, not because films are a $10 billion business, but because they’re important to the fabric of this country.

“I remember being in a packed lobby before seeing ‘Jurassic Park’ and it being a huge deal. Those experiences log themselves in our memories and are as important as seeing the Grand Canyon,” he says.

“I’m not disparaging the Grand Canyon, but I believe films are a valid part of our culture. If film exhibitors remember that, then audiences will hopefully follow.”

Joe Morris contributed to this story.