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Why Movie Theaters Are Getting Into the Streaming Game

Regional chain Southern Theatres has become the latest company to attach a premium streaming service to its loyalty program

Amid the hard work of reopening after the pandemic, some movie theater chains are venturing into the streaming business — but not to compete with Netflix and the other titans of the home entertainment industry.

Instead, chains like AMC, Alamo Drafthouse and most recently Southern Theatres are using in-house premium on-demand platforms to develop their already-existing customer base and to gather data to fine-tune their marketing strategies. Daniel Loria, editor of Boxoffice, believes that it’s a trend that should have happened a long time ago.

“This push towards e-commerce and customer data is something we’re finally starting to see in U.S. theaters but is something that really should have started five to 10 years ago,” he said. “It is something we will probably see more of in the post-pandemic period.”

Southern Theatres, which operates 18 multiplexes across eight southeastern states, is launching its streaming service this month and attaching it to its “Reel Rewards” loyalty program. Subscribers to the program will be able to rent films from all five major studios after their theatrical run and before they are released on streaming.

This will help somewhat with ongoing plans by studios to shorten the exclusive theatrical window from its pre-pandemic 90-day length. As Cinemark announced last Friday that it has come to confidential terms with each major studio on release windows, it is becoming increasingly likely that the new window length will change depending on who is releasing the film in question. Regardless of that length, a PVOD service could help a chain extend the amount of time it can capitalize on a film’s popularity.

But Southern President/COO Ron Krueger said that the main goal of the service is to provide an extra perk for the chain’s most loyal customers.

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“We see this as a great way to give better value to our Reel Rewards members and to engage with the most frequent moviegoers outside of the theater,” he said. “Studies by NATO have shown that consumers who frequently go to the movies are also subscribed to multiple streaming services, so we can introduce the frequent moviegoers in our customer base directly to a service where they can watch the newest films right after they leave theaters.”

Loria said that streaming was adopted by chains outside the U.S. years ago. He points to chains like Cineplex in Canada and Cinepolis in Mexico that have used their respective streaming services as a vital revenue stream during the pandemic, with Cineplex continuing to do so as Canadian theaters have been slow to reopen due to persisting COVID-19 outbreaks.

While American chains didn’t develop these services in time to serve as a backup for nationwide theater closures, he sees them as a way for theaters to fine-tune their marketing by getting more data on which films their customers are most interested in, as well as how many movies they rent digitally on top of buying tickets for. At a time when chains of all sizes are strapped for cash thanks to COVID, having that data can help make every advertising dollar count.

“I think it’s Fandango that should really be credited with seeing where things are going,” Loria said. “They were the first to recognize that creating an on-demand service to accompany their e-ticketing would be the way of the future, and now I think that more chains may join in as vendors have popped up that can provide a PVOD service and connect it to existing digital platforms.”

One such vendor is Row8, which developed the PVOD service that will be used by Southern Theatres. CEO John Calkins believes that as theaters get past the pandemic recovery period and begin to settle into a new normal where theatrical exclusivity on films doesn’t last for more than two months, the industry will have to find ways to maximize profit and will have to strongly consider reaching out to moviegoers beyond the walls of multiplexes.

“The challenge for the whole theatrical market is commitment. You need to be on the devices that people are on to start a PVOD service like Roku and Vizio, not to mention the marketing costs” he said.“What we want to provide is scale to exhibitors that allows them to get a foothold by providing digital infrastructure and build partnerships with other vendors that can make it easier for exhibitors to offer films to their customers both in their theaters and later in the home.”