Cinemark's CEO Talks VR And Movie Theaters

Cinemark's CEO Talks VR And Movie Theaters
February 25, 2019
Entrance to The Void Virtual Reality experience in a Cinemark Dallas-area theater.


Oscar Week, with its throwback celebrations of traditional moviemaking and -going, seemed like the perfect time to talk with the head of one of the nation's biggest movie chains, Cinemark Theatres CEO Mark Zoradi, about where his company and theatrical exhibition are headed in a time of radical change.


To be sure, Zoradi said, Cinemark is still showing lots of movies, lighting up a film 27,000 times a day across 6,000 screens in most every country in the Western Hemisphere. But the chain is doing a lot of other things too, trying to find new ways to entice people to come, stick around, and spend more money.


The sexiest experiment might be with virtual reality. Earlier this month, Cinemark opened its second VR experience, this one built by SPACES and based on the Terminator franchise. That launched in a new facility in the lobby of a 20-screen complex in San Jose, Calif.


Late last year, the company opened its first VR experience, this one from Disney-backed The Void, at one of Cinemark's Dallas-area theaters. That one has featured several experiences built on Disney franchises such as Star Wars and Ralph Breaks the Internet. The Void also built its own haunted-house experience, Nicodemus, that it was able to switch over to every evening during the Halloween season in about 45 minutes.


Both SPACES and The Void experiences, Zoradi emphasized, are promising but remain experiments that will take months to fully evaluate.



"I’m very optimistic about it, but I still put it in the category of R&D," said Zoradi, with a much more cautious embrace of VR's potential than many early adopters, or even Dave & Buster's, whose Jurassic World Expedition proved a big hit last summer for that restaurant chain/arcade operator.


"We’re waiting to see what happens in months seven through 12," Zoradi said. "They’re so unique and innovative and people have never experienced anything like this. Will I still get them coming back for more after the first six months? We’re going to take it in a reasoned way."


Zoradi said he's purposely downplaying the experiment to keep analysts from  "building into their models some giant revenue amount from this."


"We’ve been on the forefront with (the VR experiences) of seeing if we have a (sustainable) business model," Zoradi said. "At this stage, it's too early to predict that. I am very optimistic about how these are doing, but we’re also going to be really careful about not setting up the marketplace that this is going to be the next great thing before we have the data to show it."


That said, the company believes one key for in-theater VR installations is to make sure they are "front and center in the lobby," instead of tucked away in Screen 18 in the back of the facility.


That prominent positioning allows for easy discovery in the theater's most-trafficked area, saving on marketing costs and helping ensure a steady flow of curious potential customers. It's also turning non-revenue areas into revenue generators, unlike what would happen with a converted screen elsewhere in the facility.


The company has been experimenting with other kinds of new technologies too, especially esports. It made a small investment in Super League Gaming, which runs two kinds of gatherings in Cinemark theaters.


In the afternoon, Super League runs tournaments built around Microsoft's huge Minecraft franchise, focused on the tween set of Under-12 gamers. Later in the day, the tournaments shift to teens and older gamers playing Riot Games' League of Legends and Supercell's Clash Royale.


That too, remains an experiment, if a more broadly conducted one across perhaps 25 Cinemark facilities, Zoradi said.


As well, the company has been working for years with Fathom Events, which specializes in digital distribution of specialized  and niche alternative programming, such as the Metropolitan Opera performances that my mother regularly attends in a Massachussetts theater.


There's some urgency to these experiments, though, given what's been happening in traditional film exhibition in the United States.


Even during good years such as 2018, recent growth in domestic box-office grosses has been driven largely by higher ticket prices. Yes, the industry had a very good 2018, bringing in a record $11.85 billion in 2018, according to the National Association of Theater Owners.


And yes, ticket sales were up 5.3 percent, after a crummy 2017, but they generally have been largely flat in recent years. A 1.5-percent hike in average ticket prices once again helped boost last year's box-office rebound.


Also unknown, what percentage of theater goers went to see Netflix projects such as triple-Oscar winner Roma by Best Director and Best Cinematography winner Alfonso Cuaron. The online-streaming giant made modest accommodations for Cuaron and other big-name directors this awards season with brief theatrical-only runs (and spent mammoth sums – Variety estimated as much as $25 million – to push Roma's candidacy).


Though Netflix reported no box-office returns, estimates for Roma ran as high as $3.5 million in the United States and Canada. That's still a tiny number compared to Black Panthersay, but not bad for a black-and-white, foreign-language film starring a first-time lead actress playing a maid in 1970s Mexico City.


And as almost always happens with Netflix, outsiders probably will never know for sure how many people stayed home to watch those big movies instead of going to theaters.


Another of the Netflix projects to get a theater-only run for a week or two was Susanne Bier's horror film Bird Box, starring Sandra Bullock. The company did release viewership data on that movie, saying a staggering 80 million subscriber homes watched the film in its first four weeks of release.


Traditional theaters must adapt, a lot, to the new world. They're experimenting with a wide range of improvements and new kinds of entertainment ventures to entice people to come to their facilities and spend money on more than just movies.


That said, all is not lost when it comes to movie-watching by teens and 20-somethings.


Indahash, an international content-marketing platform, surveyed 1,300 influencers about their movie-going preferences and found that though most said they go to theaters less often since the rise of Netflix and other online streaming sites, 65 percent still see a movie in a theater once a month. About one in seven say they still go to movies at least three times a month. That's an opportunity.

SPACES virtual-reality experience in Cinemark Oakridge theater complex in San Jose, Calif.(IMAGE COURTESY OF CINEMARK THEATRES)


But it's important to change the way people think about theaters, Zoradi said. The VR and esports experiments will help a lot in changing perceptions, particularly if they lead to sustainable business models for Cinemark and other theater chains. 


"What's a win?" Zoradi said. "We've always positioned Cinemark as an innovation leader. We like trying these new things, so it's good for our brand. And it's good  for theaters in general for theaters to have really modern ideas."


More rigorously, the company is looking for a return on its investment of 20 percent, Zoradi said.


"If it's doing that, then we'll likely find other theaters to put it in," Zoradi said.


The company has also been investing heavily in making a better experience for traditional movie goers. That means modernizing theaters, from installing luxury electric recliners (so far in 55 percent of its screens) to installing top-of-the-line projectors capable of fully lamped 3D (brighter lighting is crucial for a good 3D experience), high-frame-rate and 4k resolution.


The company also has its own IMAX competitor in the large-format screen battle, with its XD screens that provide more of an immersive experience for viewers.


"It's a premium format that consumers are typically willing to pay $3 extra to see big adventure movies in," Zoradi said.


Outside the theaters, the company is also investing in a broader range of food and drinks, including alcohol, in most venues. It's about to launch an in-theater restaurant, called Cut by Cinemark, in the Dallas suburb of Frisco.


"We've really tried to look at the sight, the sound, the comfort of people, the ability to offer amenities at the concession stand," Zoradi said. 


The company has also installed a retail merchandise operation inside each theater, selling products related to current movies. To help drive that initiative, it   hired away the CMO of Nieman Marcus, Wanda Gierhart. 


"These theaters have a lot more ability to do other things than just movies," Zoradi said. "We try to tie our merchandise, our food and beverage offerings to the movies being promoted. It’s almost like cross-promotion for the movies."

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