Greg Marcus
Subject: The Future of the Movie Theaters
Bio: President and CEO of the Marcus Corporation, owning hotels, restaurants and movie theaters
Transcript:
Larry Bernstein:
Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and culture.
Today’s topic is The Future of the Movie Theater.
Our speaker is Greg Marcus who is President of the Marcus Corporation which owns hotels, restaurants and movie theaters. Greg spoke previously on this podcast in June 2020 when he discussed how COVID was killing his business.
Today I want to learn from Greg about how movie theaters will change in the years ahead.
Our second speaker will be Darren Schwartz who is the What Happens Next Culture Critic. I want to hear from Darren about what he loves and hates about going to the movies.
Greg, can you please begin with six minutes of opening remarks.
Greg Marcus:
I'm Greg Marcus. I'm the CEO of the Marcus Corporation. We operate in the movie theater and hotel business. We have 16 hotels across eight states. We're the fourth largest exhibitor in the country in 17 states. We have just under a thousand screens, which is the metric for measuring size in the movie theater industry.
The last time I was on this show was at the height of the pandemic and you couldn't be in two worst businesses if you picked them for a pandemic. I used to describe myself as the poster boy for schadenfreude. They would be like, if you think your life is challenging right now, you should talk to this guy.
But I would tell people, I believe our businesses will be okay. We don't have a lot of debt, so we're going to be all right because humans are social and largely, I was right. The hotels business has a little more cashflow than we used to have.
Theaters are not back all the way, but they are making their way back. People our age are the slowest to come back. Pre-pandemic it was about $11.5 billion for the North America business; it's now about a 9.5 billion.
What's challenging for us is we're a high fixed cost business. The building is built. You have to pay the mortgage whether one person or a thousand show up. You have to turn the lights; you have to plow the parking lot in the winter. You have to pop the popcorn; you've got to take the tickets. There's a certain base level that you have to cover of cost. And once you get above that base level of cost, the margins are good, but until you get there, it's very hard. And so, when you lose 20% of your top line, that's a significant percentage of your bottom line.
The challenge then is to get that marginal customer back in the theaters. And interestingly, it's not the customers don't want to come, it that there is not enough content from Hollywood right now. The content is building back, but it has shrunk. The movie business is a numbers game. If you give me 10 films, two are going to be great, two are going to be not so great and six fall somewhere in the middle. But you need to have enough movies.
Pre-pandemic, we were getting 125 films a year of wide release. We had shrunk down to like 60, we're getting into the 90s right now.
Let me point to some data. We had big record weekends in 2023. 2024, we were dealing with the effects of the strike in 2023. The summer was pretty much as good as the summer of 2019. So, when the product is available, people show up and we can set records for attendance and box office.
That's not the only thing that's impacting the business. Number one is product. Number two is what's what we call the window. The concept of windowing is selling the same thing to the same person over and over again. It's the idea of releasing it sequentially, not all at once. You release in the theaters, then you release it into ancillary markets and next with premium video on demand. The idea is you release it in the order of the highest per capita eyeball revenue. So, the highest per capita eyeball revenue is generally a movie theater. There is an exception like Taylor Swift where her highest per capita is in an arena. And then she followed that with movie theaters.
I recently was watching one of my favorite movies The Terminator on cable and the ads are running, so I'm paying for it with my time and my eyeballs. And I'm thinking it's funny we can sell the same thing to the same person over and over again because they want to watch The Terminator for the 10th time. That's why that works. The last component that I think has been challenging to the business, and that's the more that they pump into the home cheaply, the harder the battle it is for us. I want to go back to the window. What's happened is the window has shrunk. It used to be 90 days and now it could be as short as 17 days. And so, the customer thinks, I don't have to go to the theater, I'll just catch it at home. If you look at the top 10, they're down 8% pre-pandemic. Once you start going below that a certain customer is saying, “I'll just wait.”
Larry Bernstein:
One of your first points was being together, humans like to be social and that's what drives people to want to be together in a movie theater. But what I've noticed is that that experience doesn't appear as social and as communal as it used to be. When I was a kid, there were more people in the theater, people weren't on their phones. How do you explain why the communal experience feels different in the theaters today than it did before?
Greg Marcus:
The original Megan, about a year and a half ago, I went to go see it because I'm not a big horror guy, but it got all these really interesting reviews. I went with my wife and another couple on a Friday night packed with high school kids and they were all on their phones.
They were like, “why are they all on their phones?” And I'm thinking to myself, you know what? We're old. They're all loving it. The theater's packed. They're looking at their phones, they're talking. They can't shut up. But for them, it's a really communal experience. They're having a great time.
I didn't notice it to be less of a communal experience than it used to be. When you're sitting at home alone on your sofa, that's a passive way of experiencing something. And when you're in a movie theater, it's more active. You've chosen to be on someone else's schedule.
Larry Bernstein:
Next topic is previews. They're so long. I even heard that some states have decided to regulate previews. It's a commercial in another form. You mentioned when you watched The Terminator that you were selling your eyeballs for a price. Here in the preview, we're giving away 24 minutes of my time to see these previews. And oftentimes you'll also throw in a commercial or two. Why do you feel like that's a good use of the consumer's time? I'm paying for a ticket price, but I leave myself exposed to whatever that theater owner wants to do. Tell me about previews.
Greg Marcus:
Our policy is generally 15 to 18 minutes of pre-show. From the minute that ours starts, we max at 20. Some of the bigger guys go longer. I think it's nuts.
I like to go watch the trailers. It's fun to see. It's great for our business. Movie theaters are a momentum business. And that's one of the challenges we've had where we've gone into these valleys of not much product and then lots of product. It's about the habit of going. And I bet when you used to go more, it's you'd see a trailer, you'd say, oh, that looks good. I'm going to go see that next. And I had a good experience here.
Our margins are tight. The studios, they're pushing as hard as they can on our margins. And when that happens, we're trying to figure out where we can make more money. Now, studios will pay to run trailers. I think that's a money grab that's shortsighted. And they're going to turn customers away from the industry if they keep pushing that too far.
Larry Bernstein:
So, are you saying it's really not you, it's the studios who are demanding this?
Greg Marcus:
Well, it's not that the studios are demanding it, it's the studios put us in this tough position where they're charging us so much money for the product that the exhibitor is trying to find way to make a living.
Larry Bernstein:
Barnes and Noble was struggling by attacks from Amazon and a lot of bookstores were closing, but I was over at Barnes and Noble the other day and they had a book club going on. They had other events. They've improved their food and coffee beverage opportunities. It was a happening, and I was thinking, oh, I thought the bookstore was dead. This is doing pretty good. Same logic application what can you do to make it seem like it's a happening? How can that movie theater evolves?
Greg Marcus:
Have a bar and you have really good food and beverage. And we can do things like create clubs and come and talk about the movie afterwards. Here's an idea we're trying right now in a couple of our theaters a thing called the Sneak Peek Theater. It's free. So, when you go in two of our theaters, we created an hour-long little show. And it may ultimately be shorter. We see people are not staying for an hour, they're staying for like 15 minutes.
We were running trailers and little fun bits that we've found either on the internet or that we've actually done ourselves. We'll put some of our TikTok’s up there. Or we'll put a classic scene from a movie up. And then you watch some trailers and just enjoy yourself and hang out. But literally, we started it about a week ago. So, we're going to try different things like that and give people reasons to come. We did a thing called The Wall in our theater in Gurney outside of Chicago.
We turned one of the auditoriums into a sports bar. It doesn't cost anything to come in. The main screen plays whatever major sporting event is on a Sunday, we have put TVs up the sides of the auditorium so you can watch anything you want to watch. It can be Sunday in the fall and you're watching baseball being played and golf tournament and the Bears Game and other NFL games.
We're just going to keep trying new things and something eventually that will catch on.
Larry Bernstein:
You mentioned discounts. Price does impact viewership. You have some customers who are very active in the theaters all the time. How do you think about how to price your product and how does it drive traffic?
Greg Marcus:
We do a $6 Tuesday, basically a very discounted day. It drives huge traffic and it's not very cannibalistic. It can be a little bit on the margins when a weekday is like a weekend day. During the summertime, Tuesday could be a Saturday for many people. But it is a different customer. It's a customer who can't afford or doesn't want to pay 10, 12, 15 bucks for a ticket. They pay $6 for a ticket. They spend less at the concession stand. But Tuesday used to be pretty quiet, and now it's one of our busiest days of the week.
Larry Bernstein:
It's like a discount airline. You've got these seats open; you might as well fill it.
Greg Marcus:
But what you don't want to do is get too many of the $12 customers to become $6 customers. We have an all-day matinee for kids and senior citizens seven days a week. It's a $8.50 ticket. So, we're offering discounts to different groups. We price differently based on the experience. Our premium large format screens are more expensive. There's time of day pricing, there's day of the week pricing, there's format pricing. We do some blockbuster pricing now for opening weeks. We're charging a little more. So, there's variable pricing going on, trying to respond to demand and supply.
You're going to see more variable pricing as you go along. What we don't do is say this movie is a $12 movie and this movie is a $10 movie. Maybe one day that will happen, but right now studios don't like that. But frankly, there's movies I know that are $10 movies.
Larry Bernstein:
What are you optimistic about as it relates to the movie theaters and the industry?
Greg Marcus:
I am optimistic that there is a place in our society for the movie theater business. The studios believe in the importance of it. They understand how it really impacts their movie. And I'm optimistic that it's good for society, it's good for people to get out. There's a book called Bowling Alone, which you might be familiar with.
Technology can be very enabling until it's disabling and people aren't leaving their house and it's bad for society. And we're seeing people not being out amongst each other. Movie theaters aren't going to solve all the problems of the world, but it is helpful to be with other people and to get out of your house.
Larry Bernstein:
Thanks Greg, I would like to welcome back our very own movie and culture critic Darren Schwartz.
Larry Bernstein:
Darren, where are you on movie theaters? We've been to the Highland Park Theater and at Northbrook AMC Multiplex.
Which theater do you prefer?
Darren Schwartz:
I prefer the Highland Park Independent Wayfair Theater by far.
Larry Bernstein:
I agree. And why?
Darren Schwartz:
Because it has less of a sense of desperation, and you are not walking into a ghost town mall and there's not sad people working at the counter.
In Highland Park, there's a nice restaurant next door; it's a thoroughfare. There are people walking around. The malls are dead.
Larry Bernstein:
At the theater, do you like the assigned seats?
Darren Schwartz:
I don't think so. In some ways it makes it more depressing. Is every seat available? The fact that you can eat in the theater doesn't do anything for me because the food they're serving I'm not interested in. They have headwinds. I do love movies, but there is some challenges there.
Larry Bernstein:
We've watched a number of movies in my family room on the big screen with surround sound. How do you compare that experience with being in a multiplex?
Darren Schwartz:
The multiplex by far is a more enhanced experience visually and audibly. But the convenience of coming over to your house, lying on your couch, even though there's probably 45 minutes to figure out the technology.
Larry Bernstein:
I don't know how to use technology.
Darren Schwartz:
I take my shoes off. We can walk around, we can pause, we get food.
Darren Schwartz:
Greg Marcus said young people feel like it's a communal experience. They go there on the phone, they're chatting, they're talking, their annoying. But by the way that Gen Z has the highest amount of adoption, they see between five and 11 movies per year by far more than us.
Larry Bernstein:
The movie theater is a kid's product. The movies are created for them.
Darren Schwartz:
That's troubling because the rom-coms, independent movies, things that are cutting edge, not Marvel type stuff is falling by the wayside.
Larry Bernstein:
Is it just being made for television?
Darren Schwartz:
They're being made for streaming.
Larry Bernstein:
When I was a kid, there were a lot of comedies: What's up Doc, Stir Crazy. Fletch
Darren Schwartz:
Stripes, Caddyshack and Modern Problems.
Larry Bernstein:
Why do you think that there are no comedies available on the big screen.
Darren Schwartz:
Greg talked about it. The releases are significantly down, so they go for big budget, big return movies that people are going to come out in droves. They're looking to hit a home run and putting something out that's small, independent Jean de Florette. Have you seen it?
Larry Bernstein:
I have Gerard Depardieu was fantastic in it. He was recently charged with sexual harassment. He was completely confused by the allegations and didn't see what the problem was.
Darren Schwartz:
Did you see the sequel Manon of the Spring?
Larry Bernstein:
I did.
Darren Schwartz:
These movies we would be watching them on Hulu.
Larry Bernstein:
Let's go to communal activity. When I was growing up on Saturday night, my brother, sister and I would watch Love Boat and then Fantasy Island. We did it together.
Come home from school, Quincy reruns, we watched as a family. I would go through an entire package of cookies in one seating, Nilla wafers, fudge sticks, gone. It was a communal experience. And then we'd talk about it.
What'd you think of Tattoo in this episode? Did he grow as a character? Stuff like that.
Darren Schwartz:
Tattoo was four feet, three inches tall. He's locked in. He's not growing.
Larry Bernstein:
We experienced it together. With my children that didn't happen they didn't watch TV together. They watched it independently. I made a significant investment in a big screen TV and surround sound and nobody uses it except for us. It's disappointing.
Darren Schwartz:
And I'm not even family.
Larry Bernstein:
I'm trying to understand why they want to watch TV in their bed on a small screen. And here's the funny part, they love it.
Greg Marcus was talking about how you don't want to Bowl Alone. You want to get out of the house. There's inertia. Do you think people will feel better leaving the comfort of their bed and going to a theater where they don't really engage with other people?
Darren Schwartz:
No one wants to be in an empty restaurant. But when you go, you're not talking to anybody. You just like knowing that other people are there. You like hearing the noise, not too much. You want to be able to talk to your friends. You just want to know people are there. That's a real thing.
You want to get that social juice that you're around other people. Same thing in a restaurant and don't necessarily want to talk to them.
I don't think that people go to the movies to be communal. People go to the movies to be entertained, just like people go to the restaurants to eat food, but it's different stakes in the theater. It doesn't really matter if other people are there. It used to be nice in the old days, lots of people laugh. Lots of people scream if it's scary, there's some interaction there, but no one's going to walk out if a theater is empty.
Larry Bernstein:
My daughter likes to attend the Saturday midnight show for the Rocky Horror Picture Show. We spoke about the sing-along problem for Wicked, where the theaters initially encouraged theatergoers to not sing along with the movie. And then recognizing that this was a phenomenon decided to offer sing along episodes of Wicked. I imagine that this is a communal experience, people dressed up and singing would naturally be inclined to find people like themselves and start a discussion. Is that an opportunity for theaters to try to offer more communal activity?
Darren Schwartz:
Single along? I just don't think there's a lot of opportunity to do that. I mean, you're not going to watch Mission Impossible and have a communal experience. You and I didn't. There's no singing. I think what Greg's point was they want to tap into the human desire to be around other people There's different layers of that. If you go to the theater, you want to gasp where everyone gasps or laughs. That certainly can be accomplished.
Larry Bernstein:
Greg Marcus was talking about was that there's a period of time where a movie is in the theater first for as low as 17 and as much as 90 days where it's not available on streaming. And people really wanted to see it. The question is why do people want to see it during that period? Is it a water cooler phenomenon? They want to be able to talk about F1. Or is it the marketing material so persuasive, they have to go see it right now. What is driving the decision to go see it at the theater when it just came out?
Darren Schwartz :
I don't know. They've lost me. I'll give you an example. Bob Dylan is probably my favorite artist.
Larry Bernstein:
I thought it was The Rolling Stones.
Darren Schwartz:
One and two.
I have every album, know most of the songs, and was so excited when the movie came out. But I missed the window. And I love Timothee Chalamet. I've seen most of his movies. Great actor. I haven't watched it at home on streaming because part of me is sad that I didn't get to go see it in the theater. So that's one where I wanted to be there, but I missed the window. And all the marketing of the world didn't make me get motivated to go see it by that fourth or fifth weekend because after that it's gone. And the time window to see movies is so short.
I love Brad Pitt. F1 seems interesting. I have no motivation to go see it even though I think I'd like the film.
Larry Bernstein:
I'm a Dylan fan as well.
Darren Schwartz:
Hold on. Is that true?
Larry Bernstein:
Dylan was playing. We got second row seats at Ravinia. Dylan comes out to perform and he's unintelligible. He's mumbling; crowd is excited. But then the mumbling goes on for a while and people are like, what is happening? Is he drunk?
Darren Schwartz:
No, he's been mumbling for decades now. And he also changes the lyrics.
Larry Bernstein:
Now, other performers who age, you can understand what they have to say like Springsteen or Bob Seger. But Dylan, he lost me.
One of the things that Greg said was that audiences don't care very much about the quality of the visual at the theater. Billy, our assistant pro at Lakeshore drove to Indianapolis from Chicago to see Christopher Nolan’s Oppenheimer on IMAX.
Why do you think people don't appreciate these distinctions in quality of the visual experience and does that explain why people are watching on their phones versus the big screen in the house?
Darren Schwartz:
It's about access and convenience. People are lazy.
Larry Bernstein:
I sometimes see my wife watching a movie on her computer in front of a big screen TV that isn't turned on. It's the same room. It's pressing the button.
Darren Schwartz:
It is so much easier to pause to fast forward. Rewind.
Larry Bernstein:
The packaging for the candy that's available it's insanely large and I have no self-control as it relates to sugar products.
Darren Schwartz:
I've seen that.
Larry Bernstein:
It's got 4,500 calories. If I had Twizzlers, I can't stop. Dots, I could lose all my teeth. What do you make of gigantic sizes for candy and beverages?
Darren Schwartz:
The last move we went to together I brought French candies. I gave you one. You're like, I don't want any. But by the end we had 20 each.
Larry Bernstein:
Self-control is not a strength.
Darren Schwartz:
It's part of the business model. Greg said, the margins are very low and they got to make it up somehow. They sell you soda, but the popcorn's not great. Now at the Wayfair Theater, Highland Park, it's real butter and I appreciated that. You go to a normal cineplex and it's all crackly and gross. The old days, I remember the popcorn used to be so much better fresh and buttery and salty.
Larry Bernstein:
Our tastes and preferences have changed as we age. I remember the first time I had bubble yum, I was in fifth grade and I said, a genius came up with this. I haven't seen this product available in years. But if I were to chew into bubble yum, I would say this is grotesque.
Darren Schwartz:
The first gum I remember changing my life was Gatorade gum that tastes like yellow Gatorade. It was tangy. And I just started crying because it was beautiful. I was drooling.
Larry Bernstein:
I think we've changed, now we appreciate chocolate mousse with whipped cream versus dots.
Darren Schwartz:
I would like Creme Brûlée.
Larry Bernstein:
How do you like your Creme Brûlée?
Darren Schwartz:
I like the Creme Brûlée where it's your first bite. If you break through that thin layer, like you’re walking on a lake and you think it is frozen and your foot goes right through. I like it when they do the blowtorch right in front of you that's the next level. I don't know if they can do that there.
You like sorbet?
Larry Bernstein:
Coconut.
Darren Schwartz:
They're not going to give us sorbet in the theater.
Larry Bernstein:
Greg Marcus was telling us that they got great pizza, they got great burgers.
Darren Schwartz:
I would never eat a burger in a theater.
Larry Bernstein:
I don't think we are his audience.
It's the kids and people who are starving. They want cheap protein and they want it now.
What do you think the theater business is going to look like in 20 years?
Darren Schwartz:
I can't imagine that there are going to be 12 screens in an offering. I got to believe they would be smaller. It just doesn't seem sustainable for people to keep going to theaters. They're empty, they're not making money. It's not as good of experience for the movie goer.
Larry Bernstein:
In 1998, I lived in Tokyo and I went to see Austin Powers. The theater was packed and I laughed continuously. No one else in the audience cracked a smile. How is it possible that Hollywood is making a fortune selling its product to the Chinese and Japanese?
Darren Schwartz:
People always love American stuff.
Larry Bernstein:
Do you think that the action is universal but comedy is not?
Darren Schwartz:
I don't think comedy is universal.
A lot of Americans love Monty Python. A lot of people don't get it. British humor is very different. It's more subtle. American humor is more in your face, more slapstick.
Larry Bernstein:
Where are you on Benny Hill?
Darren Schwartz:
I love him. I mean, you can't do that show now.
Larry Bernstein:
Why can't you?
Darren Schwartz:
They would put him in jail.
Larry Bernstein:
Do you remember that smile when he would push that woman's behind on the bus?
Darren Schwartz:
Yeah, I don't think I've ever seen a funny Japanese movie.
Larry Bernstein:
You saw that Korean comedy Parasite.
Darren Schwartz:
It was not a comedy. I think there were some funny moments,
It was terrifying. It got really sideways.
Larry Bernstein:
Won Best picture.
Of our contemporaries, what are you hearing about their enjoyment of going to the movies?
Darren Schwartz:
On Reddit I was looking at some of the threads of a Reddit user, Fat Dragon Nemesis. I love seeing movies in the theater, but I'm sick of the other people. Why did you bring a baby to an R-rated movie? Why are you on your phone? Why did you not bathe before you sitting next to me during a two-and-a-half-hour flick? So, I think it's a generational thing.
Larry Bernstein:
What do you enjoy about watching movies at home?
Darren Schwartz :
I love the convenience, but I also love the ability to do research. I'll pause a movie. I'll look up an actor. I'll go onto Wikipedia. Sometimes if it's a complex plot like Tenet by Christopher Nolan, I'll read the plot up to where I am. You just have so much more information at your disposal, but you also can go make a pizza. You can go make a call; you can take a break.
Larry Bernstein:
Both of us want the movie theaters to succeed. What advice would you give Greg Marcus on how to bring us back to the theater.
Darren Schwartz:
I'd like to see more independent films. I'd like to see more romcoms. I never thought about having a meal at the theater. I don't like the options there.
But what about doing B-Y-O-F bring your own food and maybe some kind of partnership with the local restaurants where it's like a Bento box where a local restaurant has a dinner for the movie and it's tied in, maybe it's thematic. One of the things I learned at GROUPON is people love combo experiences.
Larry Bernstein:
Special meals based on the content of the film?
Darren Schwartz:
Now that may be more of a kid thing like a Happy meal that general idea of bring your own food and it's a meal it's from a local place that I really like.
Larry Bernstein:
I'm sensitive to smells. I've become accustomed to the smell of popcorn in a movie theater. But if we're going to bring in a bunch of different foods, I don't know what this is going to do.
Darren Schwartz:
Do focus groups, you test it out. You're not serving fried squid that are going to offend people. There are lots of businesses that have done combo experiences and this is something a smart creative guy like Greg could consider.
Larry Bernstein:
Thanks to Greg and Darren for joining us.
If you missed the last podcast, the topic was Remembering the 80th Anniversary of Japan’s Surrender.
Our speaker was Richard Overy who is the leading WW2 air force historian. Richard is the author of a new book entitled Rain of Ruin: Tokyo, Hiroshima, and the Surrender of Japan. Richard discussed the moral and military issues related to dropping a nuclear bomb and firebombing Japanese cities.
I also included excerpts from two previous podcasts on winning the War in the Pacific. The first excerpt was with Kenneth Pyle who released a new book entitled Hiroshima and the Historians: Debating America’s Most Controversial Decision.
This discussion focused on FDR’s decision to demand unconditional surrender for each of the Axis Powers and why that may have resulted in more unnecessary death and suffering.
Our second excerpt was with Paul Kennedy who is the author of The Rise and Fall of the Great Powers. Paul examined the American military strategy to beat the Japanese.
You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.
Check out our previous episode, Remembering the 80th Anniversary of Japan’s Surrender, here.
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