AMC Entertainment was helped in the fourth quarter and fiscal 2018 (ended Dec. 31) by the strong performance of the new AMC Stubs A-List subscription tier to its rewards program, Chad Beynon, an analyst at Macquarie Capital (USA), pointed out in a research note.
Domestically, in the U.S., A-List and AMC’s ongoing reseat initiative in which it’s been shifting to more comfortable, reclining chairs at its theaters, “led to incremental annualized revenue” of $300 million for the year and led to only a “one-time negative” $12 million impact for the company, Beynon said.
The analyst also predicted AMC Entertainment will benefit this year from a strong slate of movie releases in the U.S. and other markets around the globe.
But Beynon said the company’s free cash flow, “following years of transformation,” represented the “core reason why we are bullish on AMC.”
AMC Entertainment launch Stubs A-List about eight months ago and the “guest reaction to both Stubs and A-List has been nothing short of terrific,” Adam Aron, the company’s CEO and president, said on an earnings call with analysts Feb. 28. As of the start of the call, A-List had 704,560 members, he said, pointing out again that the company achieved its 12-month goal of 500,000 members in “just 4.5 months post launch.”
The overall Stubs program’s membership, meanwhile, grew to 18.6 million member households, representing about 40 million American moviegoers, he said, adding: “About 45 percent of our entire U.S. clientele is now participating in Stubs, tracking their purchases with us and playing for our points.” As a result, the company also now has a “rich, large and valuable consumer database at AMC,” he said, predicting that, in 2019, “we will send out more than 1.5 billion e-mails and texts” to Stubs members, informing them about the “impressive 2019 movie slate.”
The company launched A-List “at more than double the price charged by our competitors and, given robust demand wildly ahead of our original expectations, we took the opportunity to raise price by a weighted average of about 13 percent” Jan. 16, he said. The price increase went into effect for new members and “will roll out across the entire A-List membership as each member hits the one-year anniversary of his or her enrollment,” he noted.
The frequency of movie watching for A-List members, meanwhile, “starts out high in the first week or two of membership, settles down almost immediately to an average of about 3.3 visits per month in the first full calendar month of enrollment and quickly falls below three visits by the third month of enrollment,” he also disclosed, adding: “This is how we always expected it would be, as people settle in to ongoing membership. In January and February of 2019, average frequency for the entire membership was already down to 2.8 visits per month. Of crucial importance in all this frequency data, our reviews suggest that the incrementality of this moviegoing is huge.
Prior to joining A-List, A-List members on average were seeing only about a half a dozen or so movies per year. They are now coming to our theatres with much greater frequency. And they’re bringing friends with them at full price and buying high-margin food and drink.”
What that data means is that “we finally appear to have cracked the code in generating increases in U.S. theater attendance, reversing a two-decade long trend,” he said.
The growing popularity of Stubs A-List comes as rival MoviePass continues to struggle. Late last year, MoviePass announced it was updating its monthly subscription pricing again, this time with a three-tier structure in which pricing would vary depending on where the subscriber was located and the types of movies that customer wanted to see. The announcement followed several months of complaints from MoviePass subscribers, after the company started significantly limiting the movie options that members could see at their local theaters on any given day.
The announcement also followed an increased number of competing subscription plans, including most prominently AMC Stubs A-List.