Innovation is Helping Movie Theater Chains Stay Alive While Small Theaters Quickly Fade

In 1894, the Lumière brothers created a device called the Cinématographe which was used to photograph and project film. The Lumière brothers would shoot footage of everyday life in France and began opening theaters in London, Brussels, Belgium, and New York after hosting numerous private screenings at the Grand Cafe in Paris. The Lumière brothers have pioneered the way for how we view films. Now you can find a movie theater in almost every town across the United States and many throughout the world. With technology evolving, the film industry is continuing to stay lucrative but the distribution methods are now continually changing. Movie theaters are no longer the sole method of distribution for films which means that their business model needs to change to stay competitive in the current market. For movie theaters to thrive in the future they are going to need the change the customer experience as well as figure a way to create a pricing model that can retain continual customer loyalty.

The film experience was changed forever in 1905 when the Nickelodeon opened in Pittsburg, Pennsylvania. Films went from being a middle act in vaudeville shows to a novelty that brought out the masses. Movie theaters have become an experience where all age groups could come and enjoy a theater experience at a reasonable price while getting to enjoy concessions with the film. As film studios grew larger and movie theaters began to expand, the number of movies that hit the theaters continued to grow. Studios began creating deals with movie chains such as AMC, Regal Entertainment Group and Cinemark, where they agreed to take a percentage of ticket sales depending on the film that was being screened. But since the great depression, theaters were able to notice early on that popcorn and concessions are where the real revenue could be generated. According to the Smithsonian, during the days of the depression popcorn was a relatively cheap investment for purveyors and $10 bags would be able to last for years. Many theaters were unable to accommodate for having popcorn machines in their lobbies because of the lack of proper ventilation. Vendors quickly jumped on this opportunity and were able to gain “lobby privileges” which allowed them to sell popcorn in front of the theaters. Eventually, theaters realized that they could cut out the middleman and profits rose significantly once they began selling their popcorn. This helped many theaters stay around through the depression. Any theater that failed to start selling varieties of snacks through the 30s struggled significantly and eventually went out of business. In 1945, more than half of the popcorn consumed in the United States of America was consumed in movie theaters.

According to Time Magazine, movie theaters make around 85% of their profit from the concession stands. In 2015, AMC announced that they say a drop from ticket sales from $1.85 billion in 2013 drop to $1.77 billion in 2014. But as for concessions, revenue went up to $11 million from 2013 to 2014. Now that films are becoming more accessible within your own home, theaters are going to need more than just provide tasty snacks to draw in more customers.

When Netflix was created in 1997, the internet was in its early stages and people didn’t realize that this website would be able to compete with a rental movie chain as large as Blockbuster at the time. The film industry did not see that this website would become the behemoth of a streaming service that it is at a market capitalization of $130.29B. This has completely changed the distribution method of films by not only beating out film rental services but also now taking out movie theaters as the middleman. Now Disney, Warner Brothers, and even Apple have created their own streaming platforms. These large studios are deciding to even put certain films straight to streaming. Ted Mundorff, President and CEO of Landmark Theaters, spoke with IndieWire about the future of theaters in the streaming era and he states that the money is still there, “We have gone through theatrical slumps forever and we always recover. Some bloggers love to talk about attendance going down every year. Well, attendance goes down at baseball games and football games. You want to name a place where attendance is going up? It’s not. Our $10.5 billion-$11-billion-a-year business is very strong.” People are still coming out to the theaters but are only there to see the blockbuster of the season. According to Variety, this past year Avengers: Endgame earned $853 million in the domestic box office which makes it the second-highest-grossing film behind “Star Wars: The Force Awakens” ($936 million). In an interview with the New York Times, the director Kumail Nanjiani spoke about how it’s only the large budget films that are getting people out of the house, “I read a stat somewhere that the average person goes to the movie theater around four times a year, and these huge movies come out and kind of suck up all the air. You look at comedy especially, and it’s been pretty tough going at the box office for the last couple of years. I think it’s because there’s this sense that only certain movies are worthy of watching at the movie theater.” In 2011, a San Francisco based company named Movie Pass began a monthly subscription service that allows you to see one movie a day in a theater at a monthly rate. This service quickly faltered after being unable to generate profits and certain theaters stopped accepting the subscription. In 2018, AMC decided to create their own subscription service that charges $19.95-per-month subscription. The service has earned more than 860,000 subscribers. The theater chain Regal, a competitor of AMC, saw this success and created its own service as well titled Regal unlimited. Having a subscription service for the handful of movie buffs may work temporarily but other companies are seeing that theater chains are going to need to do more to improve the overall experience for consumers.

Source: The Wall Street Journal

According to The Wall Street Journal, AMC renovated 247 of its 640 locations to add recliner seats into all of its auditoriums. A Mississippi based company named VIP Cinema seating created a large business out of this and now controls 80% of the market for luxury seating. AMC has been tracking the data of moviegoers and they noticed that consumers are not looking at what movies are playing but rather which theaters were playing around them. AMC’s executive vice president of global development stated to The Wall Street Journal “A traditional movie theater sees attendance decline 1% or 2% a year as the facility ages. Attendance overall at Lakewood ( an AMC theater location) doubled within 18 months of all auditoriums getting the recliners.” China’s Dalian Wanda Group Corp. is the majority shareholder in AMC and they plan to invest $600 million in re-modeling their auditoriums. AMC compared to other chains are pushing innovations in the traditional movie theater model and are even embracing technological advancements as well.

In 2016 a company titled Dreamscape opened up its flagship location in Los Angeles that provided an immersive virtual reality storytelling experience. In the early stages of the company Bruce Vaughn, former head of Disney Imagineering, was appointed CEO and helped build the company into what it is today. This immersive storytelling experience could best be described as a Disneyworld dark ride that is at the cost of a movie and located in the middle of your mall. AMC saw this as an investment opportunity to continue to change the movie-going experience by partnering with Dreamscape and allowing them to set up the VR experiences inside their theaters. They are currently testing out the first AMC location in Dallas Texas with plans to develop in more locations by the end of 2020. What has been a noticeable trend since the great depression is that movie theaters are forced to innovate or else their existence will fade. For chains like AMC, it is easier to invest in innovation and completely remodeling because they have the capital for it. But as for local theaters, it is very hard to stay competitive as well as save enough money to stay around. As Eric Handler, an exhibition industry analyst at MKM has pointed out, “Your revenues are inconsistent. Your rent keeps going up. Unless you have some deep-pocketed investor, you don’t have the capital to do what they’re doing in theater chains by investing in high-end food items and fancier seating.” The failure to innovate is a common theme across all industries but in an era where entertainment is more accessible than ever, old practices can become stale very quickly. Large theater chains will be able to thrive if they continue to invest in new customer experiences but only if they continue to innovate and adapt to current market trends with technology. But once again we are seeing that technology is making our lives more convenient but at the cost of the local mom-and-pop shop.

ADDITIONAL SOURCES:

https://www.history.com/news/the-lumiere-brothers-pioneers-of-cinema

https://fortune.com/2015/02/18/movie-theaters-concessions/

https://www.theverge.com/2019/1/15/18156854/dreamscape-immersive-virtual-reality-los-angeles-walter-parkes-bruce-vaughn

Sneaker Startup Allbirds is Learning Amazon’s Role in The Retail Game

In the past few years, there has been a brand of sneakers that has taken the country by storm. A sneaker based startup that began with crowdfunding and a $200,000 development grant from a New Zealand wool industry research group has grown into a $1.4 billion-dollar company. This brand of sneakers that is seen being worn by many notable Silicon Valley CEOs is Allbirds. But what this rookie retailer is learning is that just because they broke out in a largely saturated retail market, they are still going to need to face the internet behemoth that is Amazon.

Tim Brown, a former professional soccer player, launched Allbirds in 2016 alongside co-founder Joey Zwillinger. The goal of the company was to create a sneaker that isn’t designed in the same flashy way as Nike or Adidas sneakers but to instead make a sleek shoe that also is produced in a sustainable fashion. Last year, Allbirds introduces a sole made of SweetFoam which is a renewable, sugar-cane based replacement for ethylene-vinyl acetate which is a substance that is made from fossil fuels.

Similar to Warby Parker, an investor of Allbirds, the company was able to break out in an already saturated market. According to MSNBC, the brand has found itself receiving $50 million in funding from T. Rowe Price, $80 million in revenue last year with a total of $77.5 million from outside investors.

The company has been extremely successful at creating ad campaigns that resonate with younger generations and have used social media for their benefit. The company decided to have a direct to consumer model with e-commerce. This essentially means that they decided to not use Amazon as a distributor of their shoes. Nike, the largest sneaker company, has decided recently to pull their shoes off of Amazon for similar reasons. But when you are as powerful as Amazon, you don’t just let this type of business go unsettled.

Since Amazon acts as the gatekeeper for consumer data across almost all retail industries, they are able to track consumer trends and use it to their advantage. Once the company saw the high search results for Allbirds on their platform they decided to design a similar-looking show called the “206 Collective”. The Amazon version of the shoe is also slashed in price to $45 for a pair compared to the $95 Allbirds.

Allbirds CEO, Joey Zwillinger, came forward to CNN on this and doesn’t have an issue with the competition but rather how Amazon is making their knockoff version “If we share that openly with everyone, it’s fantastic for the planet,” he said. “It’s also good for business, it drives cost down … So sharing this is altruistic but also quite pragmatic.”.

A spokesperson from Amazon responded by saying “206 Collective’s wool blend sneakers do not infringe on Allbirds’ design. This aesthetic isn’t limited to Allbirds, and similar products are also offered by several other brands.”

Going forward the company plans to try and stay on the path and hopes that if competitors are going to copy their design, they should copy their model of production as well.

Plant-Based Meat Companies ‘Beefing’ up their Presence in the American Economy

In the past few years that has been a sudden boom in the plant-based meat industry. The trend has become so popular that many of your favorite fast-food chains have deals cut out with the big name brands such as Impossible Foods and Beyond Meats. With chains releasing new plant-based menu items recently, it has shown that the potential for this industry may have not hit its peak quite yet.  

According to reports by the Plant-Based Food Association, sales from plant-based foods in 2018 were higher than $3 billion. Despite all the excitement and craze for plant-based meats, many are still skeptical that this isn’t going to help drive revenue for fast food chains. With a reduced number of beef products hitting the shelf, the benefits for our ecosystem are positive but this will come at the cost of the farmers who have dedicated their lives to the industry. Plant-based products have the opportunity to completely change the fast-food market but will leave behind the cattle farmers in doing so.

In October, following the addition of the “Impossible Whopper” to their menu, Burger King’s parent company Restaurant Brands saw a 5% rise in sales for the quarter which is the highest growth the company has seen since 2015. Burger chains weren’t the only ones to capitalize on the hype. As for fast-food giant KFC, the company partnered up with Beyond Meat for a plant-based chicken nugget. The chain test trialed the product at an Atlanta location and it sold out in the same month it was released.

The repercussions of the meat industry are evident with a rise in deforestation due to cattle as well as the carbon emissions in the atmosphere. But many benefits show us that we should not cut out beef entirely.

Cows essentially convert cellulosic energy which is then turned into a tasty meal that can be consumed by humans.  According to Frank Mitloehner of UC Davis, half of all land in California is marginal land and without cattle, you could not use that land and that two-thirds of all agricultural land could not be used for food production for people. In addition to that the excretions from cows help fertilize the soil which helps to bring us the best quality of crops to consume.

Around the world consumption for meat is still on the incline but as for the United States and the United Kingdom, the “meat peak” may have been reached in 2010. The alternative meat industry is proving that this “fad” isn’t going away anytime soon. The cattle industry is going to need a major re-adjustment for their business model now that the fast-food chains are going to be the central distributor for their products. The stigma of a different kind of fake meat has now turned into a positive market ploy for the chains to stay relevant in a culture seeing a rise in vegans.

Additional Sources

https://www.cnn.com/2019/10/28/investing/restaurant-brands-earnings-burger-king-popeyes/index.html

https://www.cnbc.com/2019/06/18/meatless-alternatives-are-on-the-rise-so-is-global-meat-consumption.html

Googling for the Next Recession

One of the many ways that scholars and economists try and predict the state of the economy is through what is known as an economic indicator. Recently it has been discovered that popular search engines such as Google have been able to predict economic trends in times of a nearing recession. But if America’s searches on Google are close to any sign of the state of the economy, then a recession is not as near as we may believe.

The future trends of the economy can be measured through a type of economic indicator known as a leading indicator. A research company by the name of DataTrek followed American Google searches for words such as “coupon” and “unemployment” leading up to the Great Recession. Google searches for the word “coupon” began to increase by more than 5% starting in 2005. Then there began to see a spike in the search from the term in which it rose to 45% in 2008 which was the start of the Recession. The peak of “coupon” being searched was 2011 when searches were 200% above where they were in 2005.

(Source: Google)

Searches for the term “coupon” is a result of consumers looking to spend less on items or to not even spent at all. DataTrek has found that as of June 2019 searches for this word were 7% lower since the previous summer. Other phrases tend to have an insight into the concern and curiosity of the American consumer.

According to the Washington Post, August of 2019 marked the first time that the numbers for people searching “Recession” + {current year} exceeded the numbers that were seen during the Great Recession. The likely cause for this immediate spike in searches could be linked to the Dow Jones falling more than 800 points in August and with an inverted yield curve showing troubling signs.

While this can be rather helpful in trying to find new ways to predict the direction of the American economy, there are many flaws with using this as a measure to accurately depict what is going on because each time someone is searching any of these words.

One may simply be inclined to study what a recession is for a class, looking for a coupon before making the weekly trip to the supermarket or even finding themselves being autocorrected while misspelling the tv show “Succession” There are numerous possibilities as to why one would be inclined to search for “coupon” or “Recession” and not all are directly related to the actions of the economy.

In the same study from DataTrek, keywords related to television and entertainment were linked to signs of unemployment given that people had more free time and also limited money on spending for entertainment outside of their home.Economists across the country including JPMorgan Chase’s chief economist Bruce Kasman told Bloomberg, that he believes that chances are low for a nearing Recession. Within some time it will unravel if there is a Recession nearing and if the Google data can indicate the foreseeable future of the United States economy.

Additional Sources:https://www.bloomberg.com/news/articles/2019-01-24/google-searches-signal-u-s-consumption-intact-economist-says

The Morning Beverage Brewing The American Economy

American adults are drinking record high amounts of coffee and the price of coffee is dropping along with it. According to Reuters, sixty-four percent of American adults had a cup of coffee in their previous day as of 2018. Some have labeled coffee as “black gold” because of its value in the global economy.  

Yet, the world’s largest coffee chain, Starbucks Coffee, is closing its doors at over 150 store locations in 2019. To many, it may feel like there is a Starbucks on every corner and the closing of these locations may seem insignificant but in the past, the trends of Starbucks have indicated the state of the economy as well future consumer trends.

In 1983, Starbucks CEO, Howard Schultz, began shifting the stores focus as a coffee bean retailer into a chain of American cafes. According to CNBC, sales soared from $2B to $9.4B between the years 2000 and 2007. There was a significant hit in 2007 and the American economy began to face the great recession. According to the New York Times, Starbucks had to close 600 of its stores at the height of the American recession in 2008. The company laid off more than 12,000 employees and the stock price dropped more than 24 percent of that year. The annual percentage change (rate of inflation) was at 3.8% in 2008 during this time.

In a study done by the NCA USA Economic Report, consumers spent $74 billion on coffee in 2015. With the coffee industry accounting for 1.6% of the total U.S GDP. The industry is keen on depicting consumer spending given the majority of adult Americans are drinking coffee.  

(Graphic created by NCAUSA)


Starbucks will be closing 150 stores in 2019, which is triple the number of stores that it closes annually. The result of this can be mere over-saturation of Starbucks cafes that flood the corners of American cities which leads to a lack of store loyalty to individual locations. This may also be a result of consumers beginning to show less interest in sugary beverages. Whatever the cause may be, the important takeaway is that  there is a possibility of an American recession in the near foreseeable future. 

The Dow Jones dropped 800 points on August 14th as a result of a global economic slowdown. The U.S is currently facing a trade war in China which can hurt chains like Starbucks who have 3,300 stores sprawled across their country as well as imports for various mugs and equipment that are produced in China. The global influence that Starbucks has, stands as a representation of  not only what is happening with American consumers but also for what is yet to come. Starbucks began experimenting with a new line of luxury store locations named “Starbucks Reserve” and has seen wide success, but if consumer spending does not reflect positively, This shift towards a fancy coffee cafe may hurt them in the future of their business.

Additional Sources:

https://www.reuters.com/article/us-coffee-conference-survey/americans-are-drinking-a-daily-cup-of-coffee-at-the-highest-level-in-six-years-survey-idUSKCN1GT0KU

https://fortune.com/2018/06/19/starbucks-store-closing/

https://www.nasdaq.com/markets/coffee.aspx?timeframe=10y

http://www.ncausa.org/industry-resources/economic-impact