Q&A: Why AMC Theatres CEO Adam Aron isn’t worried about Disney-Fox colossus or Saudi Arabia
Watch the trailer for “Avengers: Endgame.”
AMC Theatres Chief Executive Adam Aron has plenty to be cheerful about at CinemaCon, the exhibition industry’s annual trade show in Las Vegas. The business is basking in 2018’s record $11.9 billion in domestic box office ticket sales after the doldrums of 2017, and there are signs that this year could be just as strong after a slow start.
Advance tickets for Marvel’s “Avengers: Endgame,” which opens this month, on Tuesday became the company’s highest-selling pre-seller ever, beating “Star Wars: The Force Awakens” by 50%. That’s despite the website crashing for two hours because of the surge in traffic.
But looming over the festivities at Caesars Palace are worries about the effect of the recently closed $71.3-billion acquisition of 21st Century Fox by Walt Disney Co. and the changing behavior of consumers who increasingly look to streaming options such as Netflix for their entertainment. Aron spoke to The Times about why he’s not worried about Disney’s growing global clout, and why the company is proceeding with plans to build as many as 50 cinemas in Saudi Arabia during the next five years, despite deep political strife over human rights.
We’ve seen recent growth in the box office despite the rise of streaming services. How are you feeling about the future of the theatrical market?
We’re coming off a 2018 that was the biggest box office in the 100-year-plus history of cinema. The growth domestically was up $800 million above 2017. There’s never been a year when the box office has gone up by $800 million in a single year. As we’re seeing at CinemaCon, the slate for 2019 is almost beyond imagination. I think it’s going to be a year of hit after hit. It’s new movies, it’s franchises. If we had predicted this during the summer of 2017 when some people were writing us off, people would have thought we were coming from Mars. We could not be more bullish about our place in the sun. The pre-sales for “Avengers: Endgame” are just another example of how robust moviegoing is in the United States.
With the close of Disney’s purchase of Fox and the coming launch of new streaming services, are you concerned about what that means for the industry?
We have a strong opinion about Disney-Fox. AMC is a full-throated supporter of Disney. We did great business with Fox for decades and have many great friends at what was Fox. In any consolidation, there are human dislocations that we note with great reverence because we have a lot of respect for those people. But Disney makes great movies. We think Disney will do extraordinary things for moviegoers and moviemakers with the Fox brand and the Fox Searchlight brand.
What makes you think you won’t end up having to pay a higher percentage of ticketing revenue once Disney controls 40% of the domestic box office?
AMC is the biggest exhibitor in the U.S., and we’re the largest exhibitor in Europe. We have every desire to be Disney’s biggest and best partner all the way from the U.S. to the Middle East. Seemingly every time they release a film, our shareholders at AMC benefit, and no one is going to work harder to support Disney than AMC. The only thing I’m focused on is driving more revenue into theaters.
We’re very good marketers for movies. As “Avengers: Endgame” demonstrated Tuesday, AMC and Disney together is a powerful combination. In the old days, studios made and marketed the movies and theaters just showed the movies. What’s really changed over the past five years is that some theater chains have also become great marketeers. A great example is our Stubs loyalty program. We know the moviegoing habits of 50 million Americans, and we are communicating with them twice a week about new movies. This is very efficient targeted marketing that benefits the studios.
Last year, you started AMC Stubs A-List, which lets people see three movies a week for a monthly subscription. How is that going?
It launched in June 2018, and we’ve already crossed 700,000 by March 1. We didn’t expect to be at 500,000 until the end of June. It’s driving a lot of incremental moviegoing, so much so that if you look at AMC’s attendance per screen in 2018, it was up 7%. People have been writing about a two-decade-long trend of declining attendance in movie theaters. We’ve completely reversed a decades-long trend, and we think that attendance is going to be growing. That’s a combination of the quality of the movies and marketing through programs like Stubs and A-List.
These programs are not cannibalizing profits?
It’s adding to profits. There was some investment spending. We invested about $12 million in the launch of A-List. Also, the heaviest adopters adopt first and even medium adopters go to a lot of movies right out of the chute because it’s a shiny new toy. But the frequency of moviegoing settles down after months go by, and right now we’re in very good shape.
After the murder of journalist Jamal Khashoggi, some companies backed out of deals with Saudi Arabia. Why is AMC expanding into the kingdom?
We launched our first theater in Saudi Arabia in April 2018. It was the first theater in 37 years in the country, and it’s been very popular ever since. We thought long and hard about what’s been in the news in recent months. We decided that what we were doing in Saudi Arabia was very beneficial to the people there. There are 33 million people in that country, 70% of whom are under the age of 30. They like going to the movies and had been deprived of that for decades. We had the opportunity to let them see what the rest of the world sees. We decided that the best thing we could do for the people of Saudi Arabia was to continue.
So we are going forward. We have a lot of projects in development as we speak. And we would expect to open 40 to 50 AMC cinemas in Saudi Arabia over the next three to five years. When we do that, millions of theater visits will take place and a lot of people in Saudi Arabia are going to see what you see in Los Angeles.
They’ll see what we see, but with some changes (due to censorship).
Very modest. When we opened with “Black Panther,” do you know how much was edited out of that film? Forty seconds. That was it. We think we’re doing good things. And we’re aware of [the politics], but it was the right decision to make.
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