Starting last Friday, NCM began running a single 30- or 60-second “platinum spot” immediately before the “attached” one or two trailers right before the feature starts. (Studios typically “attach” trailers for their own upcoming titles, with placement in the final minutes before the feature thought to enhance the impact.) Regal and Cinemark signed on as launch partners in the NCM initiative, which promises exhibitors a 25% cut of the revenue from each platinum spot.
Aron told analysts the scheme is a non-starter.
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“That trailer package is extremely valuable real estate,” he said. “I would so much rather be advertising movies. The value of what we earn both from the paid trailers, where we’re receiving income from studios, and from all the extra tickets that we sell for future coming attractions, that’s so much more than what NCM offered us to show an ad for Tide detergent.”
AMC is also concerned about how its customers would react, Aron added. “We also think — and know — that our customers like seeing movie trailers,” he said. “And we think they’re going to find it quite jarring to see an ad for an unrelated product just before the showtime. It’s commonly done in Europe, but consumers are used to it in Europe. It’s not commonly done in the United States and we think consumers in the U.S. are going to react pretty negatively to it. As the leader in the industry, we passed.”
Aron also touched on some other newsy topics during the call. Asked if he would reaffirm predictions earlier this year for a record-setting domestic box office haul in 2019, he said it will likely come down to the wire.
“We’re really not going to know where 2019 ends up literally until Christmas-New Year’s week,” Aron said. “The film volumes are so big in December. We know the quarter’s going to be a big one.”
He said the final tally will end up between $11.5 billion and $12 billion. The 2018 box office set an all-time high, with a little more than $11.8 billion. The opening of Star Wars: The Rise of Skywalker, which arrives just before Christmas Day, will likely be a determining factor in where the total finishes.
Asked about Saudi Arabia, where AMC opened one multiplex earlier this year and plans another in December, Aron said the region “has enormous promise for us.” The one site in Riyadh, he said, is pulling in 11 times the revenue of an average AMC location. Seat utilization (a closely tracked metric in exhibition) is more than double that of the AMC Empire 25 in New York, which is the highest-grossing theater in the U.S.
Saudi Arabia has a population of 33 million and the 20th-largest economy in the world.
“It’s a signigicant opportunity for us and we’ve done it in a capital-light way,” Aron said. “Most of the capital is being provided by our sovereign-wealth partner.”
AMC, like other Western companies operating in Saudi Arabia, faced intense scrutiny in late 2018 after the murder of Washington Post columnist Jamal Khashoggi. Netflix has faced scrutiny over its assent to Saudi government demands to edit an episode of Patriot Act in which Hasan Minhaj criticized Mohammad bin Salman. The political dimension of operating in the region did not factor into Aron’s commentary or the question he was asked.
Asked for “early learnings” from AMC’s just-launched streaming service, Aron didn’t offer any numbers, citing the fact it has been live for only a couple of weeks. But he characterized the initial results as encouraging.
The company has “very little cash invested in this thing,” Aron said, spending “a few million dollars to program it” and a modest amount on marketing.
Accordingly, the CEO continued, “I don’t quite think we’re going to scare iTunes or any of the people in the space already.” But with tens of millions of monthly visitors to AMC’s website and mobile apps, the company’s strategy is to “fish where the fish are. … We think just by accident we’re going to see a substantial number of transactions, on each of which we make a positive contribution to overhead.”
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