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Market Movers The Impact of Social Distancing in the Entertainment Industry

In this vertical-specific interview, Al Lalani, Co-Founder of Annex Cloud chats with Brittany Catherman, Solutions Engineer, Entertainment & Hospitality at Savantis about the impact that social distancing has had in the theatre industry. Brittany shares strategies and examples of how theatres can prepare for the reopening of things. Plus, tips theatres can take for a digital transformation.

Transcript

Al Lalani:

Hello and welcome to another session of Annex Cloud Market Movers. This is a place where we bring together influencers and market luminaries and experts to help us through these times. Today I'm very excited because we're doing a vertical focus discussion. With me is Brittany from Savantis, and we're going to talk a little bit more about the vertical for movie theaters and cinemas and entertainment as a whole. I'm very excited to speak with you, Brittany. Welcome back to the Market Movers.

Brittany Catherman:

Thank you for having me. I appreciate it. Nice to see you.

Al Lalani:

Nice to see you as well. Hey, Brittany, so I'll start with the big news that we've all heard. Granted, by the time this video launches, it's May 13. So just for the records, the big news is we heard a little bit of the market pop for AMC Entertainment or AMC Theaters, as we all know it, where there were talks of Amazon trying to buy AMC in some capacity. That's interesting, right? Because you've got a large sort of company that's media and entertainment. They've got a vertical there with Amazon Studios and Amazon Prime Video, so to speak, but this is a very different channel for them. What are your thoughts overall? How does that even make sense, or does it make sense?

Brittany Catherman:

Yeah. So I'd like to start out with just thinking about the industry overall right now. There are a couple of different current events or just things to think about during this particular rumor, so to say. But big-name cinemas are banning Universal and Disney films right now, and why are they doing that? It's because Universal and Disney have made a stance that they are going to go on a case-by-case basis if they want to release some of their films on video on demand. So AMC making that claim, we don't know if this is going to be counterintuitive or not. So we get the player Amazon, and we want to think about what opportunities do they have to lay stake in this claim, right?

So Amazon is a cash cow right now. They have the money to put into someone like an AMC or any other cinemas that may be struggling as well. They own Prime Video, which their biggest competition between the likes of Hulu and Netflix. So being in constant competition, they need another knee up, I suppose you'd call it, and then they also own Amazon Studio. So this is a producer and distributor who owns a cinema. I mean, it makes sense that they control the release and the supply chain end to end, and it is a form of vertical integration, right?

Now, I know what you're all thinking. If you're keen on your history, we're thinking about the Paramount decree, where, in essence, cinemas and distributors had to be separated so as to provide a level playing ground for everyone in the game. So if we think about it now, times have changed dramatically. So I mentioned Hulu before. Who owns Hulu? Disney, right? So I think that because of that fact alone, things may change, right? While it's not a cinema video-on-demand platform, it's not a cinema, but Disney does control the supply chain. It could be considered an oligopoly. So I think we better pay attention to what's going on there because it could set a precedence for the rest of the distributors for video-on-demand platforms.

Al Lalani:

Yeah, that's very interesting. Amazon is a very interesting beast. I mean, we all got surprised when they got into the grocery industry by buying Whole Foods.

Brittany Catherman:

Right.

Al Lalani:

From what my research says, they tried to buy Landmark Theaters probably a couple of years ago. I didn’t succeed. Probably bought by private equity. AMC is an again, movie theaters, and cinemas are in a challenging environment right now, where they're struggling for cash. Along with hospitality and airlines and travel, that industry is significantly affected. So to make a play for really getting a lot more distribution quickly as they did on the grocery side with Whole Foods, potentially an interesting play. If there was one reason to buy the biggest player in movie theaters in North America, I would say the largest probably, that would be potentially the reason.

It's interesting. The parlay into the next sort of discussion I want to have is the industry is in trouble. That's, I would say, very easy to say now. People can't go to movie theaters anymore, and we actually saw it. I'm a huge movie-goer, personally. I would go with my family to a movie at least once a week, and I could probably say that now. But it's a challenging place to be in because you can't ... There's so much digital distribution now that people are getting used to.

Even when this does open up, and it probably will at some point in time, social distancing measures will make it difficult for having full capacity. There is not enough content available, because the creators aren't creating that. Whether it's Disney or Universal like you mentioned, or others, they're not creating enough. So even if they do open up, the crowd pullers won't be there to bring those people back in. It looks a little bit of doom and gloom within the industry.

So if you are a movie theater company, if you were an executive manager there and you were starting to think about how to start thinking about opening back up ... and I sort of try to compare this against a startup. You're literally trying to start back up again from ground roots. So some of those things you have to do probably are going to be very ground roots. What are the things you would recommend they should start thinking about as the restrictions lessen? Even if it's 25% of people are being let back in or 50%, how should they grow back their audiences from when they get started?

Brittany Catherman:

Yeah, and that's a great question. So right now, we're looking at a lot of really great guinea pigs, if you will, setting the tone for the rest of cinemas or even restaurants moving forward. So we have EVO Entertainment based out of Texas, who, as you know, have been given the ability to slowly reopen in phases. So right now, they're in what they call Phase One, where they have explicit guidelines to even enter the building.

So I think that's really important, from taking temperatures where if it's over 100.4 degrees, you simply won't be admitted into the cinema, or requirements to wear a face mask, and if you don't have one, then they're going to give you a disposable one. You will not be in the auditorium without one. They're not accepting cash in the first and second phases. 25% capacity limits for the auditoriums. Online ticketing is highly encouraged. They have beta stages of ordering ahead applications for concessions, and not until the third phase is we actually going to see a 75% capacity and cash will be accepted again.

So with these strict guidelines for the world to see, you can see it on their website, as well as social media platforms are pushing it. So that comes to my second point. You need to be able to communicate with your audience, right? So we have a really good case for Malco Theaters. They've done an extraordinary job of being active in talking to its guests via social media platforms, one being Twitter. I see them posting all the time, every day. So engagement has grown exponentially during this time, according to Karen, who is their VP of marketing, I mean, it's just her doing it because they are a smaller company. But the more engaged they are, the more likely that loyal guest is going to come back, and they know the social guidelines.

The third one is, to piggyback off of that comment, make sure you're telling your guests how you're going to adhere to social distancing guidelines and mitigate sanitation concerns. You need to provide reassurance to your guests and let them know to expect. If you expect them to wear a face mask, make sure that they know that. So whether you're emailing them or SMS texting them if they've provided consent, you need to be able to talk to them and let them know what your expectations are.

Then the fourth one I think is huge is to be able to evolve. So we have these order ahead applications starting from the ground up, where we have Atom Ticketing, who already provides order ahead options for concessions and tickets. I think we're going to see a 100% change from a physical paper ticket to paperless ticketing and scanning.

Al Lalani:

So you mentioned a little bit about a promotion on social media, getting back to your core, your existing customers. I'm a strong believer. I mean, I told you I'm a moviegoer, I'm a person that used to kind of do this every week. But I think people are going to be scared, and even with these measures that you talk about, which are essential and extremely important for them to kind of ensure the safety of their guests, people are going to be scared. It will take a movement, and my equation to a startup was when you were starting a company back up, in the initial motion, you need to get a few people that are your evangelists, that go out and say, "I had a great experience with this thing."

So if you can get me back in the movie theater and say, "You know what? Those old times, when I was having so much fun watching a movie, I'm still having that fun. I still want to go back." All of these measures are in place. It's not just the company saying that I've got the right measures in place. It's the people saying, "I feel safe. I feel safe doing this. I feel safe when I'm inside. I'm happy again, seeing the movie. It's back into not the pain, but the pleasure of being there." So you need to mobilize those audiences while you take those measures to make sure your guests are safe. You need to mobilize the audiences to ensure they can make the speak happen.

That takes me to sort of my next question, which is thinking a little bit about how we can think about how you mobilize your existing, amazing audience that you had, the loyal moviegoers, the people that used to frequent your movie theaters before, how can you mobilize those people to start them starting to say, "It's good, back again," and just start the moving back up again?

Brittany Catherman:

Right. So my answer to that is that I think cinemas, or, rather, I know cinemas are really going to have to rely heavily on their loyal fan base for survival, and this goes without saying. Your employees count, too, in case anyone forgot. But especially in the US, we see a lot of hesitation from people wanting to return to the cinema because of uncertainty. So cinemas will need to reach out to their loyal customers to come back. Just like any industry, if I'm a loyal customer and I'm still giving you my business during these uncertain times, I expect constant communication, as well as some appreciation for my loyalty.

Like I mentioned a little bit before, the example that I had is Malco Theaters. The engagement that they've had with their guests on social media platforms has just grown exponentially. I think that's how they're really going to get these warriors or these loyalists to really start talking about why they love the cinema so much. There is actually ... It's called moviestogether.org, and we can provide the link, but if you go to it and provide your first and last name and your zip code, it'll give you an update when your local cinema is open. So incentives like that and to get people like you and me, frequent moviegoers, to start talking about that, if you can get your loyalists on board, I think you'll be in a better place.

Al Lalani:

Yeah, that's awesome. I think just paralleling that into other spaces or other verticals that are similarly challenged, whether you look at travel, I will have the same challenge going on a flight as I do a movie theater, probably worse, because it's a longer period. I will have the same challenge going into even a Marriott, and they're communicating the same way to get their loyalists back. The difference that I see, however, while all of them are doing the social distancing, the measures, the safety measures that are being put into place, all of these verticals are doing that. The difference, however, I feel is that a lot of these verticals, when you take specifically hospitality or you take travel versus movie theaters, those two verticals have done a significantly better job over the last 20 years in building their loyalty programs.

So all of us have received emails from our favorite airlines saying, "Your statuses that you had now been extended for at least another year. Your points are no longer expiring." So they're actually leading with their loyalty program to kind of communicate with their best loyal audiences. But they already had an amazing program in place that has been around for a very long time. Contrast that to maybe the movie theaters, where they had some of it, but a lot of it was very different. It wasn't like the airline programs or the hospitality programs. It was more like a paid program. So I might sign up for a movie pass and I get a free ticket a month, and I get some benefits.

That was the traditional model in the movie theaters that did have a loyalty program of some sort. That program may not work anymore. That may not be the reason I ... Getting another free ticket may not be the reason that brings me back to a movie theater anymore. So people that have had some loyalty programs will have to rethink it, in my opinion. They will have to learn from what the other industries have done a fabulous job at and sort of apply some of those techniques there. People that didn't have a program will probably need to create one at this point in time because that's the way they will be able to mobilize their audiences, get the best audiences they have to come in and spread the word and then grow it back up again. What are your thoughts around sort of loyalty and the implementation, tactically, of those retention programs and the application of those programs now versus what was there in the past?

Brittany Catherman:

Right. So right now, I think cinemas, which we know, if we're a part of the loyalty programs, either they are focused on points or membership status. If I'm a gold status, then maybe at a certain threshold, I get a percentage off of my bill. But then we had what we call movie pass, which you mentioned, I don't know intentionally. They have come and then they have gone very quickly, but they incentivize the subscription sale model, and they really forced cinemas to move into the future with subscription services, whether cinemas wanted to or not. So we can see it still evolving rapidly, but we really need loyalty programs that go above the expected point system. Like you mentioned, paid memberships are great, but we also want to consider loyalty programs without a proper subscription.

So let's think like members and nonmembers. We want to be able to capture that and provide perks for their loyalty, even if they haven't signed up for a program. We want to encourage certain behavior based on historic buying behavior and tracking. How do we do that? We can do that by maybe collecting data. Tracking may seem intrusive to some, but it is the future, and how we use that to our advantage can curate a guest experience for the better, because, as we already know, not all customers are created equal. So how can we make that experience unique to them or that promotion? Then it can result in a real-time response.

So we have curated marketing, and that can deliver upsells, considering their segment. A great example would be if a mother is purchasing a child's ticket, it can immediately offer a child's combo. So it's really that simple, to be able to be flexible in that space. So we realize it's evolving rapidly. So how are they going to keep up? Cinemas need to be responsive, and now.

Al Lalani:

Absolutely, and if I may add a few more sorts of thoughts on how they can apply, I mean, one of the things they can definitely do is amplify the message that they are trying to promote now, which is, "We are safe. It's safe to come back in. It's safe to participate. You're still going to have a great experience that you had before. It's even better because we now have all these things in place to help you have a better experience." So what if you incentivize them that had a great experience to go refer a friend to come back for the first time again? If they did great, that's awesome, because we want me to go out and tell my friends it was awesome, not just the cinema themselves. What if I hashtag my picture now when I went back to the movies and was able to kind of communicate that that's safe again to do that?

So the experiential piece now involves not just the movie experience, because that's where they were focused on, the movie experience, and the actual drive for that. It's now the movie goer's experience, but the movie goer's experience not just in terms of feeling good, but it's about feeling safe. It's about feeling excited back again and me communicating that experience, and that sort of experiential loyalty is the new norm. A subscription may still pay some part to it, but I don't think people do something different by it for getting another free movie ticket if I didn't want the first one in the first place.

So I think these are great points, Brittany. I think a great discussion so far. I really appreciate you for sharing your thoughts from an industry perspective. One of the bigger plays beyond loyalty is this whole concept of digital transformation. Cinemas and movie theaters have done some investments in the past, but I wouldn't say they're the forefront of digital transformation. There is still a lot to be done. Even if they get the movie experience correct, even if they get people to start talking about them and start going back in, they still need to adapt to the new way of how consumers are going to buy, because I might just buy online now. I probably don't want to go there and figure out what I want. I'm probably going to go do more research online. I'm going to buy a different way. So the experience of communicating with that brand is going to change.

What are your thoughts in terms of broadly digitally transforming the technology within the cinema space, and what are the investments that people should think about or execs should think about in that space to do in 2020, 2021, and beyond?

Brittany Catherman:

Right. So the first and biggest thing that comes to my mind is cloud. If they're not already there, they need to be. There's no way a business is going to be sustainable in our future without having the ability to scale up and down during trying times like this. They need flexibility. So cloud is great. There's a pay as you go structure, and they can enjoy a subscription-based model that's kind to your cashflow. This goes beyond the simple cost of maintaining their systems as a fixed overhead. It includes the ability to manage staff, change functionality quickly. So we think social distancing, seating maps which have changed overnight, and the likes of food and beverage order ahead applications. The costs may seem daunting initially. So CTOs may not want to jump in it right away, but that's what we call the innovator's dilemma, right? I'm sure we're all familiar with that. So it might be difficult to scrap the old, but in the end, it will pay off.

Al Lalani:

Absolutely. Personally, I think some of these investments, think of it ... I call it startup mode, again. So think of it how you would think ground up. You have to remake some of the investments, rethink some of the things that you didn't do before, and they may not immediately pay off. So there's a balance between what you have to do immediately versus what you have to invest over time. But if those transformations don't happen, there is a bigger, bigger challenge ahead of these cinemas, and it's not just that the people won't return, because they may and they will most likely return over time. I think we were afraid after 9/11 to fly. We all flew a lot in the last five years-

Brittany Catherman:

We sure did. We sure did.

Al Lalani:

... way more than we all wanted to. So three years from now, we will all be back in the movie theaters. That's for sure. That experience isn't going away. But will the movie theaters be able to sustain, and will the movie theaters be able to compete when that happens? What do they need to do in the next two to three years now that creates that big boost for them to stay in business, for them to continue and rise from this tide as the times change? That's highly important.

Brittany, you guys are very, very experienced in the space. You can really help a lot of people that are thinking this way. If people want to reach out to Savantis, how did they reach you? How did they reach Savantis for some help?

Brittany Catherman:

Right. Well, you can go straight to our website, savantis.com. You can find Intelligent Cinema there. You can also find me on LinkedIn, Brittany Catherman. I have a Twitter account as well at bsavantis, and you can start from there.

Al Lalani:

Wonderful. Brittany, this was a wonderful conversation, and I hope people got some benefit out of it. That ends it. If people want to watch other Market Mover videos, please go to annexcloud.com/marketmovers, where we bring in brilliant experts like Brittany. Thank you again, Brittany. Bye for now.

Brittany Catherman:

Of course. Bye. Thank you for having us.

Featured Speakers

Al Lalani

Al Lalani

Co-Founder, Annex Cloud

brit

Brittany Catherman

Solutions Engineer, Entertainment & Hospitality, Savantis

Annexcloud Logo

Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.

The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.

Savantis logo

As an SAP and AWS partner, Savantis Solutions has built and deployed a set of next-gen enterprise solutions aimed at the entertainment and retail industries. Since 1998, Savantis has been at the forefront of delivering and supporting innovative solutions centered on SAP, and more recently AWS. “Our mission is to enable mid-sized and cost-conscious companies to efficiently compete with larger corporations”, says Allan Vanderheyden, SVP Sales & Marketing. Some of our popular innovations include (a) RetailOn – a rapid, cost-effective SAP solution for retailers (b) Intelligent Cinema – an advanced cloud-based SAP solution for cinemas (c) SAMMY - a security and compliance solution for the hospitality, retail, and entertainment industries. Headquartered in Exton, Pennsylvania (US) and with offices in India, Sri Lanka and South Africa, we’re a global team of 500+ Savants servicing 280 customers worldwide.

For more information on Savantis, visit savantis.com