AMC Entertainment (AMC) has been a battleground stock in recent years. The company, which operates the world's largest movie theater chain, was crippled by the pandemic, which shuttered cinemas and movie production alike.
However, the multiplex operator came roaring back in the fourth quarter, reporting revenue of $1.17 billion, up 621% year over year, and marking the company's strongest quarterly results in two years. Profits were still elusive with a net loss of $134.4 million, but that figure was much improved from a net loss of $946.1 million in the prior-year quarter.
Investors welcomed the improving financials while acknowledging the movie theater kingpin still has much work to do. Lost in the shuffle, perhaps, were a couple of words uttered by AMC CEO Adam Aron that could help turn the tide for the beleaguered multiplex and eventually generate billions of dollars for the company -- and investors.
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One of these things is not like the other
Several years ago, AMC tried a novel experiment when the company increased weekend movie prices above what it charged during the week. The test worked so well, it became permanent. Furthermore, AMC promotes Discount Tuesdays to its loyalty members, including AMC Stubs A-List, Premiere, and Insider subscribers. AMC markets the ticket prices as offering "blockbuster savings" with entry discounted as much as 50% below full-priced tickets.
The company also charges higher ticket prices for premium formats, including IMAX and Dolby Cinema.
The two words worth billions
In a variation on that theme, AMC announced during its earnings call that it was testing "variable pricing" -- which coincided with the opening of the blockbuster film The Batman.
"Currently, our prices for The Batman, which opens this week, are slightly higher than the prices we're charging for other movies playing in the same theaters at the same time," Aron said. Reports suggest ticket prices to see the Caped Crusader can run anywhere from $1 to $1.50 higher than tickets for other feature films. The surcharge is expected to run for eight days, according to a report from The Hollywood Reporter.
Aron went on to point out that variable pricing is standard practice at the company's theaters in Europe, where audiences pay "a premium for the best seats in the house," similar to what spectators experience at sporting events, concerts, and live theater. AMC believes this opportunity offers considerable upside.
Even in the range of $1 to $1.50 per ticket, it's easy to imagine a scenario where AMC can parlay its variable pricing into a noticeable uptick in revenue. Spider-Man: No Way Home, for example, has generated more than $1.87 billion in ticket sales. Movie theaters typically share the revenue 50-50 with studios. With a 25% estimated market share and hundreds of millions of theater-goers each year, variable pricing could easily generate hundreds of millions -- or even billions -- of dollars in additional revenue for AMC, and the resulting boost to its fortunes could be a boon to shareholders.
Taking a step back
It's important to remember that movie theater attendance has been in secular decline since ticket sales peaked in 2002, meaning AMC is still fighting an uphill battle. While the post-pandemic progress the company has achieved is laudable, it could be several more quarters -- or even years -- before we have a better "picture" of AMC's long-term potential.
