AMC Theatres Earnings Rise as Exhibitor Tests Flexible Movie Ticket Pricing
The Dalian Wanda Group-owned circuit, which is led by CEO Adam Aron, has launched a pilot program in four U.S. cities to test dynamic pricing for select Hollywood tentpoles.
Exhibition giant AMC Theatres, which is owned by China's Dalian Wanda Group, on Thursday posted an improved second-quarter profit as it cited "record attendance" in both its North American and international markets.
AMC on a pre-market analyst call also announced that it is experimenting with dynamic pricing for high-demand Hollywood tentpole movies.
CEO Adam Aron told analysts that a pilot program at 30 AMC theaters in four cities on Aug. 2 began test-marketing a 50 cent, $1 and $1.50 per-ticket surcharge "for a handful of high demand blockbusters." Aron argued the exhibition industry has talked about the controversial practice of dynamic pricing for select Hollywood titles, and his company was moving ahead with test marketing.
"These pricing strategies have been commonplace across our European theaters for years. Industry observers have talked about this idea coming to the United States also for years. Moving from mere talk at AMC, we're trying it right right now, in the United States, to determine the consumer response," Aron said of dynamic pricing used already by the hotel and airline industries.
No U.S. chain has yet to test dynamic pricing in a serious way. In late 2017, then-CEO of Regal Amy Miles said her circuit would try the practice in certain markets in partnership with Atom Tickets. But the experiment was soon abandoned after Cineworld said it was buying the mega-circuit.
Several European chains have a long practice of offering dynamic pricing depending on the time of day and day of the week.
Mega-exhibitor AMC posted an earnings gain of 122 percent to $49.4 million, compared with a year-earlier $22.2 million, on a 4 percent revenue gain to $1.5 billion. Earnings per share came in at 17 cents, which just missed the Wall Street consensus forecast for a profit of 18 cents per share.
The latest quarter saw AMC sell a record 97 million tickets across its global circuit, up 6 percent from year-earlier levels, with around 72 million of the tickets being sold in the U.S. market.
"In a quarter that generated the second largest domestic industry box office for any quarter in the past 100 years, we are especially gratified that AMC outperformed the rest of the U.S. industry...in attendance per screen by 800 basis points and in admissions revenue per screen by 400 basis points," said Aron in a statement. "Additionally, AMC generated record U.S. food and beverage per patron of $5.58 and total food and beverage per patron of $5.08, representing year-over-year growth of 5.5 percent and 3.9 percent, respectively."
Aron during the analyst call gave "special mention" to Disney and Marvel's Avengers: Endgame for bumping up its second-quarter box office, which he argued underlined a healthy industry box office performance this year amid competition from streaming services.
"Market share has been moving our way," Aron said during the call as he touted AMC outperforming its domestic exhibition rivals.
On Wednesday, AMC Theatres reported that its AMC Stubs A-List cinema subscription program had crossed the 900,000-member mark since launching in June 2018. Subscribers get three movies per week in any format at a cost of $20 to $24 a month, depending on the moviegoer's location.
Aron discussed the A-List program on the analyst call as he argued, "We continue and have increasing confidence to firmly believe that the A-List program is driving incremental attendance for AMC and this is one of the reasons we're outpacing industry growth."
AMC is also introducing in October a new subscription offering, AMC Stubs A-list Entourage, where couples or groups of friends will be able to join the A-List membership individually, yet collectively make A-list movie reservations. That will allow block-seating reservations for a Hollywood movie in one transaction, rather than force A-List members to make individual reservations and risk not being able to sit together.
The A-List program and other promotional pricing, however, dampened admissions revenue as the average U.S. ticket price during the most recent financial quarter fell by 4.8 percent, due also to declines in Imax theater attendance and an increase in the number of family-friendly films. The international average ticket price fell 8.8 percent due to foreign exchange rates and strategic pricing initiatives.
AMC Theatres did offset the average ticket price declines with record global attendance.
Aug. 8, 6:30 a.m.: Updated with comments by AMC CEO Adam Aron made during a morning analyst call.