Online Vendors Bet Moviegoers Are Willing to Bypass Box Office

There’s a fight brewing in the movie ticket line.

Responding to a growing impatience among consumers who too often find movies sold out on Friday night, several “dot-coms” are trying to elbow their way to the front to dominate online movie ticket sales.

Well-established AOL Moviefone and upstarts Fandango.com and MovieTickets.com are all vying for their share of the 1.5 billion movie tickets a year sold in the U.S.

It’s about time, says musician and Web page designer Stacey Goldstein of Santa Monica, who tried to go out to a movie with a few of her friends one recent Friday evening. Strolling to the 3rd Street Promenade, they found all the shows sold out until nearly midnight at the AMC and Mann theaters.

“We ended up not doing anything,” Goldstein sighed. “We kind of walked around for a while, and ended up in a bookstore.”

Telephone-based reservations systems that started a decade ago are turning into a full-fledged e-commerce segment of U.S. box-office revenues. Industry figures indicate it’s less than one-half of 1% of total sales, but growing fast.

Moviegoers can buy tickets online for most theaters--picking them up at will-call or from automated teller machines--and at a few theaters, they can use tickets that they print out on their personal computers. Soon, the three e-ticketers say, filmgoers will be able to buy sodas and popcorn along with reserved seats, and even grab seats on the spur of the moment on wireless Web.

But the strategy promising dream dates for movie fans is drawing thumbs down from skeptical analysts, dismayed by, among other things, the way exhibitors are being herded into exclusive camps.

“It might work well in a dense urban environment, but if you live out in the sticks, there’s no need for it,” said Daniel O’Neill, equity research analyst at Credit Suisse First Boston. “This is a service that really applies only with real blockbuster films or, the rest of the year, in urban markets.”

“It’s a great product for a narrow niche, but I’m not sure there’s room for three or more players,” said Deutsche Banc Alex. Brown analyst Drew Marcus.

MovieTickets.com Chief Executive Mitchell Rubenstein is among the executives shrugging off those warnings. The privately held Boca Raton, Fla.-based firm launched May 26 with exclusive rights to sell tickets for the AMC circuit--which has 10.25% of the U.S. market--and the smaller National Amusements chain, whose screens are concentrated in the Northeast U.S.

Boosted by $25 million in advertising put up by 5% shareholder Viacom, MovieTickets.com sold 100,000 seats within its first six weeks. Rubenstein predicted that within 18 months, it will transact 5% of the two chains’ ticket sales. MovieTickets--which is 30% owned by Hollywood.com, of which 10% is held by Tribune Co., owner of this newspaper--also displays show times of other exhibitors.

Also in its nascent stages, Fandango.com is a privately held $30-million consortium of seven big exhibitors controlling about half of the U.S. market: Edwards Theatres, Century Theatres, General Cinema Theatres, Regal Cinemas, Loews Cineplex, General Atlantic Partners and Cinemark Theatres.

Fandango CEO Arthur Levitt III, former president of Disney Regional Entertainment and president/CEO of Hard Rock Cafe International, said the consortium launched a test Web site June 16 and plans to roll out full nationwide service--including ticket sales for the seven chains--later this summer. Fandango Chairman J. Michael Cline said the consortium will be handling 20% of its affiliate chains’ box-office sales within three years, a potential annual volume of 120 million tickets.

Fandango’s Web site already allows movie fan Goldstein, for instance, to buy seats in her Santa Monica neighborhood at the Broadway Cinemas 4, the Mann Criterian, Laemmle’s Monica 4--and for dozens of General Cinema screens a short drive away. But she can’t use Fandango to buy AMC tickets, because of that exhibitor’s exclusive MovieTickets deal.

Cline, who also owns Accretive Technology Partners, the private investment company bankrolling Fandango, said the upstart consortium hopes to use technical agility to capitalize on what his research indicates will soon be heavy wireless traffic in movie-ticket sales.

Wireless traffic will outpace online traffic within two years, some analysts say, and research into moviegoers’ habits shows a significant rate of last-minute buying decisions. Cline says wireless users dining out, for instance, can peruse nearby movie show times and buy tickets with just a few clicks.

The new competition comes just as Moviefone dropped the $1-per-ticket sales fee on Internet sales--although it still collects $1 per ticket in Los Angeles for sales on its 777-FILM telephone service. Moviefone CEO Andrew Jarecki said the firm, which sold nearly 10 million tickets last year, now supports its e-ticketing service with splashy Web page advertising from movie studios.

Moviefone, which rolled out in 1989, maintains vigorous brand loyalty, with 3 million telephone and Internet users a week.

The company reported annual revenue of $35 million before being acquired by AOL in May 1999. Moviefone is testing print-at-home tickets at a few United Artists theaters in New York and recently rolled out telephone voice-recognition software in Southern California. Instead of tapping out “The Patriot” on the phone keypad, customers can now pronounce the title to access show times, and read their credit card number into the receiver to pay for the tickets.

The latest e-ticketing technology is on display at the Walt Disney Co. owned-and-operated El Capitan Theatre in Hollywood, the only Southland cinema where customers can use tickets printed by their personal computers.

Buena Vista special events Senior Vice President Lylle Breier said the self-printed-ticket, launched in mid-June, has boosted online sales by about one-third, despite a $1-per-ticket service fee.

With the new technology in full swing, market fragmentation might soon be evident as well. Fandango’s Levitt claims that his firm will soon chip away at AOL Moviefone’s market share by triggering exclusive sales deals with its exhibitor members.

Jarecki dismisses that contention, insisting that Moviefone is banking on multiyear sales contracts with Fandango partners including Loews Cineplex and plans to unveil expanded service later this week.

In any event, Credit Suisse First Boston’s O’Neill is pessimistic about prospects for the e-ticketing newcomers in light of Moviefone’s customer-friendly phone service and access to nearly all of the 35,000 U.S. movie screens.

“The film exhibition industry . . . is known for a lack of cooperation,” O’Neill said. “It’s disappointing that here is a new business opportunity, an opportunity for these guys to capture some new revenue at a time when their business model is seriously hurting and still they can’t agree to work together.”