Recommendations for AMC Entertainment's Strategy in a Changing Entertainment Industry

Overview of AMC Entertainment

Within a rapidly changing entertainment industry, we recommend that AMC consolidate their brick-and mortar operations and further enhance its traditional movie theater operations to serve the most profitable segments through high performing sub-brands while also increasing expansion into streaming and subscription services. We also recommend that AMC closely monitor international market trends and develop dynamic capabilities across the firm to respond meaningfully in an evolving entertainment industry worldwide.

AMC Entertainment has enjoyed considerable growth since its humble beginnings, becoming one of the largest theatrical distribution companies in the United States. Revenues from ticket sales, concessions, and other activities have sustained movie theaters through periods of increased industry consolidation, evolving consumer behavior, and new film formatting and technologies, but AMC’s existing strategy may not be sufficient as ticket sales and theater attendance continue to decline. Despite international growth, FY2017 proved to be a difficult year for AMC in terms of net earnings and increased debt.

During Aron’s tenure, AMC has strategically invested in enhancing the movie-going experience with millions in theater upgrades, a revamped loyalty program, a new website and app, and improved concessions, however, AMC must become an even more forward-thinking innovator in the entertainment space to keep pace with rapidly evolving consumer preferences and technologies. Enhancements need to add value above competitor offerings to sustain market share and as such, each of AMC’s markets should be carefully analyzed to determine what model and theaters yield the highest ROI. Doing so will allow AMC to shift from a strategy of rapid growth to one focused on greater efficiency while serving evolving consumer entertainment needs.

We believe AMC’s strategy must take into account alternative viewing options such as in-home digital streaming and premium on-demand video (PVOD) to reach new segments of the market and generate new streams of revenue. Declining ticket sales and increased consumer preference for convenient and flexible entertainment options mandates that AMC consider how best to allocate resources between in-theater and on-demand operations.

AMC should refocus its efforts with its original mission in mind: to provide consumers with a superior entertainment experience. AMC should consider avenues that allow them to utilize existing operations to expand their entertainment options. Also, keeping their core mission in mind, those activities that do not add value to their product offerings or meet current consumer demands should be scaled back or eliminated. Dynamic capabilities will need to be developed to adapt to shifting consumer behavior and cultural changes, both in the U.S. and abroad.

Individual markets, and can only attempt to target based on consumer tastes and production marketing. As ticket sales for a variety of entertainment genres continues to decline, AMC and its competitors have struggled to increase attendance despite tens of millions of dollars in capital investments put into their theaters. This growth and expenditure is unsustainable without new streams of revenue.

AMC holds a large market share in the theatrical exhibition space but has inadequately expanded their strategy to consider other areas of the entertainment industry. AMC’s strategy under Aron has focused on enhancing the movie-going experience in terms of comfort and convenience, strengthening consumer marketing, targeted programming, and expanding its geographic footprint, and there is a certain degree of path dependence that locks AMC into its physical spaces. Tactics for engaging customers have included building a robust loyalty program that provides concession and ticket sales perks, as well as subscription and video on demand viewing capabilities.

Additionally, AMC has diversified their offerings to specific markets and segments by creating three distinct sub-brands: AMC Premium Theaters, AMC Classic Theaters, and AMC Dine-In Theaters, each designed to attract different types of movie-goers and provide a unique method of consuming films in a theater setting. Additionally, Aron has focused on expanding AMC domestically and internationally to continue growing market share. To enable this growth, AMC has aggressively acquired smaller theaters and focused on becoming an early entrant in larger, developing international markets. These efforts have led AMC to become the world’s largest theatrical exhibition company as of 2017.