How Adam Aron Is Transforming AMC and Shaking Up the Movie Theater Business
Adam Aron likes to hit the ground running. Within two months of taking the top job at AMC Entertainment in January 2016, he had negotiated a $1.1 billion deal to buy Carmike Cinemas, transforming the movie-theater company into the country’s biggest exhibitor. A few weeks later, AMC struck again, buying up Odeon & UCI Cinemas to become the top theater chain in both Europe and the world. Aron started 2017 with yet another splashy acquisition, snapping up Nordic Cinema Group and securing a foothold as the top source of box office in Scandinavia. It’s all part of a $3 billion acquisition splurge that’s transformed the theater chain from sleepy Leawood, Kan., into a global exhibition powerhouse with few equals.
Before he took the post, Aron, whose background is in the travel, leisure, and tourism industry, polled analysts and experts in the entertainment field. They told him that it was important to use his honeymoon period when his clout was at its highest to push a wide-ranging agenda.
“‘You should have all barrels blazing from day one,’” Aron remembers being told. “‘People are going to be looking at you as the new leader, curious as to what you stand for and what you’re going to accomplish.’”
The exhibition business can be slow to change. Theater owners make most of their profits selling soft drinks and popcorn at steep markups. They’re in the foot-traffic business, more interested in plying customers with snacks than they are in turning screens into crucibles of innovation.
Aron previously oversaw the Philadelphia 76ers and ran Norwegian Cruise Lines and Starwood Hotels & Resorts. Perhaps it’s his outsider status, but he’s approaching the job with the zeal of an iconoclast. Since taking over, the number of locations in AMC’s network has tripled, to 906, and the screen count has roughly doubled, to 10,558.
“In his first 15 months he has done nothing like any of his competitors’ management teams have done,” says Chad Beynon, an analyst at Macquarie Securities Group. “He’s looked under every rock.”
Aron’s relentless pace has impressed the major studios, as has his probing style.
“As a person who didn’t grow up in the business, Adam is very comfortable asking a lot of questions and spending a lot of time rolling up his sleeves,” says Dave Hollis, Disney’s distribution chief. “Instead of reacting to things, he’s pushing expansion.”
Lionsgate CEO Jon Feltheimer said Aron reached out as soon as he arrived at AMC. “We had a great lunch,” he said. “He wanted to hear our thoughts about the business and learn our perspective on how AMC and the other exhibitors operate.”
Nothing seems to be sacred for Aron. He has also been more willing than other exhibition chiefs to talk with studios about their goal of releasing movies early in the home at a higher price. Currently, major movies don’t hit home entertainment platforms until roughly 90 days after they debut in theaters.
Six of the seven major studios, a group that includes Paramount, Warner Bros., Fox, Sony, Lionsgate, and Universal, believe this is inefficient; movies make more than half of their theatrical revenues within the first three weeks of release, and studios argue that they are being hamstrung from making them available to consumers when demand is highest because of an antiquated set of rules. They want to make movies available on-demand — for between $30 and $50 a rental — roughly a month after they premiere in cinemas.
Exhibitors are trepidatious. Some theater owners maintain that shortening the theatrical-release window will cannibalize ticket sales. To entice exhibitors, studios are willing to cut them in on the revenue they receive from the early on-demand offering. Aron thinks the plan may make sense. “God is in the details,” he says. “If this is done in a way that’s intelligent, I believe this is an opportunity to grow the pie for everyone.”
Aron may be willing to make the leap, but he doesn’t sound convinced that any deal will take place soon. He notes that talks have been going on for 14 months without a pact, and he remains ready to walk away from the table if he doesn’t like the final proposal.
“If it’s not done intelligently, we won’t sign on, and things will get quite contentious with studios who are doing it around us rather than with us,” says Aron. “Hollywood runs the risk of killing the golden goose.”
In a memo to staff on his first day in at the helm, Aron said he was convinced that AMC needed to get bigger. There’s a reason he thinks economies of scale are going to be central to AMC’s future profitability. The domestic box office has hit record levels on a dollar basis for the past two years, but attendance has essentially been flat for more than a decade. The exhibition business has seen ticket sales grow by an average of 2% to 3% annually over the last 40 years, but that has been primarily attributable to higher ticket prices, averaging 3% to 4% growth per year, offset by slight declines in actual tickets sold.
Movies aren’t getting more popular, but that’s not how Aron is measuring success. He notes that AMC’s revenues grew 10% between 2015 and 2016, hitting record levels, and argues that attendance is up more than 50% in the theaters where the company has put in luxury seating.
“We don’t take bodies to the bank, we take dollars to the bank,” he says, adding, “Even though it’s a mature industry, individual companies can prosper in a mature industry if they have a good strategy.”
Just as movie studios are putting a greater emphasis on global ticket sales as a way to compensate for softening box office in North America, so too is AMC moving beyond its original borders. Before Aron took the helm, the company was almost exclusively focused on the domestic market. But if AMC continues to make big purchases, it may need to keep looking overseas for more acquisitions.
“There are more large circuits outside the United States than there are large circuits remaining in the United States,” Aron notes.
Getting bigger isn’t the only thing on Aron’s agenda. At a time when streaming services, quality cable programming, and sleeker televisions are making it more appealing to skip the multiplexes for the comforts of home, AMC and other exhibitors are trying to find ways to spruce up their multiplexes. Even before Aron took the reins, AMC had been gutting old theaters and outfitting them with recliner seats. The theater chain has added dine-in locations and put alcoholic beverages on concessions menus. It’s part of a larger effort to make going to the theater more of an event — an amenity-filled experience that can convince consumers to give the remote a break for an afternoon or evening.
Aron has taken it a step further. He’s trying to bolster AMC’s loyalty program, Stubbs, by allowing customers to sign up for free to what was previously a paid service. That’s grown the ranks from 2 million to 6 million households, while allowing AMC to get a clearer picture of its customer base by having more information on who’s buying tickets.
From his days working in the resort business, Aron is a big believer in branding.
He’s pushing to break locations into three different tiers of theaters: AMC Theaters, its flagship brand with the comfier chairs and reserved seating; AMC Dine-In, for locations with a full restaurant; and AMC Classic, for its smaller, less gussied up locations.
In the past, most moviegoers didn’t know the difference between an AMC or a Regal. They bought tickets to movies based on what time something was playing and how close it was to their work or home. However, some smaller chains, such as Alamo Drafthouse and Arclight, have found devotees by drilling down on customer service. AMC believes it can inspire the same kind of bond with ticket-buyers. It wants its name to stand for something.
“If you like to look back, then the way you picked your theater was you wanted to see a movie at 7,” says Aron. “If you look ahead, then people aren’t only going to choose their theater on the basis of convenience, but also on the basis of amenities.”
Unlike concerts or sports, movie-ticket pricing remains relatively fixed and uniform. It costs as much to see “Star Wars: The Last Jedi” on opening night as it does to watch “The Great Wall” in theaters during its sixth week of release, assuming you can still find somewhere that’s playing the fantasy flop.
Aron says he was surprised by how casual theaters were when it came to deciding how much tickets should sell for, and he’s formed the first pricing division in the company’s history. Yet he refuses to say whether or not he’s looking at dynamic pricing, citing legal reasons for his silence. Despite his reticence, those who know him say it’s a focus for the theater-chain head.
“In some of the other businesses he was in, pricing experimentation was very much a part of the landscape and he wants to experiment with that,” says Chris Aronson, Fox’s domestic distribution chief. “That’s never been applied to the exhibition space. But if it works in the sports business or the hotel business, I don’t see why we aren’t trying it here.”
Not every experiment is received warmly. The movie business is concerned that the millennial generation is disenchanted with sitting in a darkened theater. But a two-hour movie is simply too long to be played on the internet or an iPhone, or so the thinking goes. So last spring, Aron told media that he was interested in allowing texting in some theaters as a way to keep younger, phone-obsessed customers coming back to theaters. The blowback on social media was fierce, and within 24 hours, AMC announced it was sending the idea to the cutting-room floor.
“The best generals,” Aron says, “know when a strategic retreat is a very good idea.”
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