Games in Movie Theaters? Experiments Seek to Fend Off Streaming Threats

Illustration by Wren McDonald

As film attendance dips and Netflix, Hulu and Amazon dominate the zeitgeist, exhibitors and entrepreneurs are going with a try-anything approach to entice audiences.

Ahead of three VIP screenings of Black Panther the week of Feb. 15 in New York, Chicago and Los Angeles, theater auditoriums were under attack from space aliens. About 500 media insiders in attendance used their smartphones to shoot down the flying marauders, racking up points along the way. The game, Cinevaders, comes from National CineMedia, best known for its "Noovie" show that unspools ahead of trailers in theaters nationwide, and it could be considered Exhibit A in the movie-exhibition industry's quest to stay relevant in the digital era as Netflix, YouTube, Facebook and others present more convenient and affordable forms of video entertainment.

After all, something is clearly amiss. The number of movie tickets sold in North America in 2017 was 1.24 billion, off 21 percent from a peak in 2002, and the decline has spooked many, as shares of most publicly traded theater chains trade lower today than they did three years ago. Even iPic Entertainment, a luxury chain that is popular with consumers, has seen its stock head steadily south since its Feb. 1 IPO. Some worry about a trickle-down effect that is damaging studio financials, given that three of the six major studios (Disney, Fox and Sony) posted smaller profits in 2017 than they did the year before, according to The Hollywood Reporter's research.

Cinevaders is just one in a series of games National CineMedia is launching as part of its ARcade platform (the AR standing for "augmented reality"), which should be available at 1,700 theaters in the spring. Prizes for high scores could be offered and, naturally, National CineMedia is lining up advertisers for the platform. "The ergonomics of theaters are practically built for gaming," says chief digital officer Lawrence Snapp. "It's a visceral experience; two minutes of Cinevaders and you sweat — hard."

Exhibit B in exhibitors' case for moviegoing is the theaters themselves — which are seeing major upgrades in comfortable seating, quality of food and better sight and sound systems. Sometimes overlooked is that about 900 digitally equipped theaters in the U.S. (and more on the way) offer big-screen entertainment options beyond the latest film titles from Hollywood. Fathom Events, owned by AMC Entertainment, Cinemark and Regal Entertainment, charges up to $40 a ticket when it screens live rock concerts, operas, ballets, boxing matches and more from around the world, splitting revenue — $74 million last year — with theater owners.

Exhibit C is MoviePass, which offers users a ticket per day for as little as $7.95 a month. While critics see a flaw in the "buy up to 30 movie tickets a month for a low flat fee" business model, as long as the company stays afloat it will be paying mostly full price for the millions of tickets it buys. MoviePass already is buying about 5.7 percent of all tickets sold per week, up from 3.5 percent in December, says CEO Mitch Lowe, adding that he expects subscribers to swell from 2 million now to 5 million by year's end, and at that point his company could account for as much as 10 percent of sales. "The movie-theater business isn't dead; it's just about to restart again," Lowe says.

Jimmy Schaeffler of the Carmel Group argues that studios are so dependent on a healthy domestic box office that they should play ball with theaters even more than they do now by allowing them 6-12 month windows rather than as few as three. "If people only have access to the content they want at a theater, they'll go to a theater," Schaeffler says. "Are people turning to streaming to the degree theater owners should worry? Yes."

Exhibit D is Comcast-owned Fandango. Paul Yanover, president of the online ticketing firm, says improvements aren't just encouraging more movie­goers to use Fandango, but are actually adding to the number of people that are filling movie-theater seats. The company is vague about user metrics, but says its share of ticket sales has grown 150 percent in three years (it sold a third of all domestic tickets bought for Black Panther on opening weekend) as customers embrace new features, such as refundable tickets and making Fandango compatible with Amazon's Alexa and other voice-automated services.

Fandango purchased its chief rival, MovieTickets.com, last year, so its only meaningful competition could come from Atom Tickets, which was recently launched with $50 million in backing led by Fox, Disney and Lionsgate. Atom's forte is allowing for easier group purchases, and its app lets users buy snacks without waiting in line (its advisory board includes Steven Spielberg, J.J. Abrams and Tyler Perry). Atom services 19,000 screens compared with Fandango's 40,000, all part of a scheme to "increase movie attendance," Atom says.

Fandango also launched on Facebook Messenger and Apple iMessage to — like Atom — make it easier for large groups of people to purchase a block of tickets: they share trailers, negotiate the title they'll see, one person buys for the entire group, and they settle up via PayPal. "Fandango puts more tickets in hands. Does that increase overall sales? I think it does," says Yanover.

While it's understandable studios are increasingly focused on global box office, since it should grow at 4.4 percent annually to $46 billion by 2021 while domestic trudges along at 1.2 percent to $12 billion, according to PricewaterhouseCoopers, analysts worry that domestic theaters have an outsize downstream effect on studio profitability. "Some years the box office will be up, some years down, but theaters are very important as a first window," says Eric Handler of MKM Partners.

Some worry the entire 1.2 percent estimated growth stateside over the next three years could come from increases in ticket prices (roughly 25 percent per decade) rather than increased attendance, which dents word of mouth and hampers profit derived from home entertainment, TV licensing, etc.

"The box office still matters in the Netflix era," says Steven Birenberg, founder of Northlake Capital Management. "The wide-release films still cross over to cultural consciousness and create national conversation, or at least something we have in common as a nation. Witness: Black Panther."

"Streaming is not a threat to exhibition; inertia is the threat," adds Ben Weiss, chief investment officer of 8th & Jackson Capital Management. "Over time, more people will default to entertainment options that are easy, convenient and cheap. To combat inertia, entertainment experiences must be spectacular."

A version of this story first appeared in the Feb. 21 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.