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3 Ways Free Popcorn Will Help AMC Stock This Summer

By Rick Munarriz - Jun 9, 2021 at 11:45AM

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The multiplex operator reaching out to its new shareholders for a direct connection is another brilliant move.

The kernels will be popping at AMC Entertainment Holdings(AMC -6.58%) theaters this summer, and not just because movie studios are finally trusting the local multiplex with their biggest releases. AMC launched Investor Connect last week, a program that will keep its retail investors abreast of company news. The carrot here -- or corn, if you will -- is that folks signing up to receive the exhibitor's digital missives and special offers will also score a free large bucket of popcorn.

AMC has done a lot of smart things during the pandemic. It rolled out mobile ordering of concessions and reserved seating across the entire chain. It introduced private rentals for groups of 20 or fewer for excess screens that weren't really necessary. It also stayed open in the fall when its largest competitor closed its box office, making sure that it didn't lose any momentum on the industry upswing. However, offering a complimentary bucket of popcorn to folks who claim to be retail investors takes AMC's genius to another level. Let's go over a couple of the reasons why this matters.

Masked patrons enjoying a movie at a theater.

Image source: Getty Images.

1. It's a cheap way to build out a marketing list      

It costs a movie theater about $1 for a bucket of popcorn that it sells for $8 to $10. Giving away free popcorn may eat into a huge profit driver for a multiplex chain, but it's also a ridiculously cheap price to acquire an opt-in participant for its AMC Stubs and Investor Connect programs. 

Keep in mind that it's a very liberal checkpoint to sign up for the program. No one's sending over PDFs of brokerage statements to confirm ownership. No one's getting booted the moment the stock is sold. Signing up is just a matter of checking a single box. You can be sure that a lot of non-shareholders are signing up for the free snack. Odds are strong that I just inspired you to sign up if you're not an active shareholder. 

AMC is fine with that. It wants millions of people it can hit up this summer with email blasts on new films, special screening prices, and new concession items. Heck, it may even sway some folks to kick the tires of its fledgling AMC On Demand streaming service. Even if many investors and -- cough cough -- non-investors opt out of the program after collecting the freebie it will still come out ahead with a wider marketing distribution net. That's a big win.

2. One ticket please

The debuts of A Quiet Place II and Cruella over the extended Memorial Day holiday weekend resulted in U.S. theaters having their best showing in 14 months, but the $98 million in total tickets sold for the industry was less than half of what was sold during the same weekend in 2018 and 2019. 

Based on current ticket pricing we're talking about roughly 10 million people going to the movies during the seasonally potent Memorial Day weekend. It's a big number, but we're talking about just 3% of the country. Put another way, reach out to 33 of your friends and on average just one of them caught a flick that weekend. AMC is also naturally a just subset of the total industry.

An important part of the AMC Investor Connect promo is that who that sign up have to go to a movie to redeem that tub of buttery goodness. It's also a pretty big size, so you may as well bring a friend or more to share it with. 

AMC doesn't make as much money on a ticket sale as it does with a bucket of popcorn. Movie studios take a generous cut of the box office receipts. AMC is trading a high-margin item for a low-margin cover charge. However, getting folks back is the key here. That salty popcorn is also going to make you thirsty. Guess who also sells frosty beverages at a hefty markup? 

3. Retention matters 

Meme stocks don't know how long retail investors will stick around. It's a new phenomenon with traders bidding up shares beyond realistic enterprise valuations as if it's a rite of passage. There's a reason why AMC has taken advantage of its buoyant share price to print new shares and for insiders to cash out. AMC Entertainment is undeniably one of this year's hottest entertainment stocks. How long will that last?

However, we're also seeing something that we haven't quite seen before. AMC is making a direct connection with its shareholders that should encourage them to "hodl" their shares even after trendier investments burst on the scene. It's making them brand ambassadors, taking cult stocks to a new level.

Companies have tried to reward long-term ownership with direct connections in the past. Getting free packs of gum or discounts on cruises and cars has been in the shareholder perks playbook for decades. Now we're looking at a digital connection that will not only keep retail traders loyal but also spread the word to get more people to join them at the movies. It starts with a tub of popcorn. There's still time for a Hollywood ending.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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