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What Will Save the Movie Industry: Popcorn or Credit Cards?

Brian Riley by Brian Riley
November 9, 2021
in Analysts Coverage, Economic Recovery
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What Will Save the Movie Industry: Popcorn or Credit Cards?

What Will Save the Movie Industry: Popcorn or Credit Cards?

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I’d go with credit cards on this one.

AMC talked about re-engineering its business in response to the post-COVID world. It is an exciting issue. While restaurants shifted their businesses to a model that includes takeout food, the movie business does not have that luxury. Instead, companies like Netflix skyrocketed with quarterly revenue that surged to beyond $7 billion, as people shuttered at home and watched movies without a mask and settled for microwave popcorn.

But don’t you miss the movies? Many cities have cool versions of historic movie theatres, but the trend is for luxury seating these days. But, still, who wants to sit in a movie theatre sporting a COVID mask?

With downward infections trends and booster shots, we will soon be able to skip the masks, at least long enough to watch the silver screen. Movie theatres are often measured by the number of screens, and the largest is AMC Entertainment, with 8,043 screens nationwide, followed by Regal Cinemas with 7,220 screens and Cinemark with 4,345. According to Statistica, consumers spent almost $3 billion on movie theater tickets in 2020. However, in 2020, as the result of COVID, AMC revenue plummeted from $5.5 billion to $1.2 billion, enough of a drop to ensure you would never have to wait in line for a seat.

Today’s read comes from Variety, which reports on AMC’s 3Q2021 financials.

Audiences are slowly but surely returning to cinemas.

That’s the takeaway from AMC Entertainment‘s most recent quarterly earnings report, which saw the world’s largest exhibitor post $755.6 million in revenue, a significant increase from the $119.5 million in revenue that it reported in the same period in 2020.

In the post-meeting announcement, AMC’s president points to three COVID countermeasures to improve revenue: a co-branded credit card, AMC cryptocurrency, and prepackaged popcorn for sale outside the theaters. Let’s stick with the first one – I am not too wild about cryptocurrency (at least until the Federal Reserve Bank is behind it), and who can argue about the benefits of popcorn?

Let’s talk about credit cards, which is why you are reading this in the first place. Despite COVID, 2 million people watched moves at U.S.-based cinemas between September 2 and September 5, reported CNBC.

AMC CEO Adam Aron pointed to the new Marvel Cinematic Universe film “Shang-Chi and the Legend of the Ten Rings” as the primary driver of foot traffic over the holiday weekend.

This holiday weekend also marked the first time since the beginning of the Covid-19 pandemic that attendance during a weekend in 2021 outpaced attendance from the same weekend in 2019.

So, work with that for a moment. Now, consider that, “According to the company’s financial reporting, cinemas operated by AMC Theatres were visited by over 46 million people in the United States in 2020, down by over two hundred million from the previous year, likely due to the effects of the coronavirus pandemic.”

It’s important to be conservative in this SWAG, but let’s cut the 200 million down by 75% to account for children and the unqualified moviegoers, whatever that means. So there is a 50 million base of solicitable customers. Suppose AMC builds a suitable rewards program, and then, still being ultra-conservative, we say they have a 2% penetration rate. So there are a potential 4 million new customers that can align with a co-brand Mastercard or Visa issuance by a firm like Amex, Bank of America, Barclaycard, Capital One, Chase, Citi, or TD Bank. AMC can generate revenue sharing on the co-brand, plus get a bounty for booking a new account, as is the standard industry practice.

I would bet the potential opportunity would beat the average $7.37 revenue generated per patron on food and beverages AMC earned in 2021.

You might love popcorn, but for a business like AMC’s, credit card co-brands can be a winner. Traffic, loyal customers, and stickiness. For more on current trends in credit card co-brands, read our recent Mercator Advisory Group report, Co-branded Credit Cards: Reinventing Themselves Post Covid Losses.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

Tags: co-brandCovid-19Credit Cardsrevenue
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