Though the movie-theater industry has a reputation as being old and outdated, there's actually quite a bit of innovation going on. AMC Entertainment Holdings (AMC 6.50%), the largest theater operator in the world, has often been at the forefront of these industry changes.
For instance, the company was the first to begin installing luxury recliners in its theaters, which has boosted AMC's revenue and forced others to follow suit. AMC was also a first mover in industry consolidation, acquiring three other theater chains in the 2016-2017 time frame. And though the doomed MoviePass was the first company to roll out a theater subscription service in the U.S., AMC was the first theater chain to unveil a subscription model with a financial model that actually, you know, worked. Last year, AMC even received an investment from private equity firm Silver Lake Partners, which normally invests in upstart technology companies. That's not exactly the type of partner one would envision for the "old" movie-theater industry.
On AMC's recent earnings release and conference call, CEO Adam Aron showed no signs of slowing down on new ideas. In fact, AMC just unveiled another first for the theater industry -- one that seems obvious, in retrospect.
The big game on the big screen
On AMC's second-quarter earnings call with analysts, Aron outlined a slew of new ideas for the theater chain, one of which was AMC's intention to show live sporting events:
Starting this fall, we hope and expect to be able to broadcast live sporting events, a meaningful number of games on weekend afternoons at a select number of theaters across the country at AMC, across all three of our brands, from one of the four major professional sports leagues.
Again, if consumers respond favorably to seeing live sports broadcast on, say, a 30-foot or 40-foot screen, as we think they certainly will, this could be the start of considerably more live sports programming at AMC.
Fall sports on weekend afternoons? It's quite possible that Aron is talking about Sunday NFL football games. After all, once-a-week "event" football games are likely a perfect fit for theaters. Since many games take place in the afternoon, a time of lower traffic and discounted matinees, it makes sense that there may be room for an extra screen per theater to show the big game.
Additionally, rabid sports fans likely aren't going to the movie theater at that time anyway, so it's very practical to assume this could lure in an incremental consumer, not displace a current one. And since these people will already be out at the theater, there's a chance they may stick around for a movie, whereas they might have stayed home and streamed a TV show otherwise.
It would also make sense for the NFL. Again, I'm speculating as to which sports league it is, but professional football is in a predicament somewhat similar to movie theaters: While last year showed a 5% increase in NFL viewership, the bump came after two years of worrying declines. A partnership with AMC could be a tool for the league to revive interest.
Why hasn't this been done before?
While many in the investing community are fretting about the effect of over-the-top home streaming on theaters, people do still spend money on the premium theater experience. In fact, 2018 was a record box-office year in the U.S., with a rare uptick in attendance.
Since people mostly watch sports at home, it's not a stretch to think that some might also want to pay up for a premium big-screen experience, especially in a big room with like-minded superfans. After all, enough fans head out to their favorite bar to watch the big game that the term "sports bar" is commonplace. So why haven't movie theaters ever broadcast the big game on an even bigger screen?
AMC could use a boost
For all of AMC's efforts on its Stubs A-List subscription program, dynamic pricing, reserve seating, and updated food and drinks, the investing community has generally shrugged at AMC's stock. Shares have dramatically underperformed amid a tepid first-quarter box office and the company's high debt load.
However, the company did get a boost after the recent earnings release. It beat analysts' revenue expectations and showed above-industry attendance, meaning AMC is doing something right, at least relative to competitors.
Since the sports-league deal isn't finalized yet, we don't know what kind of impact it might have. But given AMC's lagging stock price, even after Thursday's bump, value investors may wish to give the innovative theater chain a look.