Movie theaters affected by COVID-19
The global box office took its first hit at the outset of Coronavirus in China in January 2020. The Chinese government ordered shutting down all movie theatres till things got back to normal. Eventually this was a story not just about China. One by one almost every country in this world got affected. As governments and health organizations realized that social distancing was the only way forward to control the spread of virus, restaurants, movie theatres and all public gatherings were banned.
Cinema theatres were one of the several majorly hit segments with no other way of earning revenue once viewers were forced to stay at home. AMC, the largest movie theater chain in the U.S., and Regal, with 1,200+ theaters between them, said they were closing their venues starting March 17 for at least six to 12 weeks.[i] That weekend, the box office hit a 20-year low, down 60% from a year ago.[ii] The loss in foot traffic and revenue was worse than what they were the weekend after September 11 attacks.
Even when the threat of virus is diminished and businesses reopen, people will be skeptical in visiting crowded places such as cinema halls. Moreover, with increase in consumption of online media and improved services from Netflix, Amazon Prime, Disney Plus etc. over this period of Covid-19, viewers are likely to maintain social distancing longer than mandatory and avoid going to movie theaters for months to come.
EVO Entertainment Group is a San Marcos (Texas) based cinema and entertainment operator in the US. They have 6 locations around Texas with 57 movie screens. As with other theaters chains, Evo was also forced to shut down its theaters for the risk of Coronavirus spread.
EVO quickly innovated its operating model to mitigate the impact of COVID
EVO thought of what can be done quickly to continue providing people with the experience of watching movies on big screen, while maintaining social distancing. The decision was to change their operating model from closed movie theater into a “drive-in” in the theater parking lot.
“Our current climate has challenged us to adapt and develop innovative ways to continue to provide entertainment to our communities,” [iii]
-EVO Entertainment Group CEO Mitch Roberts
To support social distancing during Coronavirus outbreak and to continue providing cinema viewing services to movie lovers at a time when all EVO theatres were closed, they started nightly shows in EVO parking lots so that guests can remain seated comfortably and safely inside their own vehicles while watching movies on big screen.
EVO Entertainment Group converted the parking lot of its Schertz location into a drive-in theater that offered nightly film screenings. They sold all the tickets for Friday’s opening night show on March 27th — Marvel’s Spider-Man: Far From Home — that began at sunset around 7:30 pm.
The concept of drive-in cinema was developed a very long time back. A partial drive-in theater – Theatre de Guadalupe – was opened in Las Cruces, New Mexico, on April 23, 1915.[iv] However, the popularity of this kind of cinema viewing died in the 70s and it just remained as a novel concept in the last couple of decades. By 2013, drive-ins comprised only 1.5% of total movie screens in the United States and their numbers kept declining from 389 in 2013 to only 305 in 2019.[v]
EVO quickly built capabilities needed to switch to drive-in
Screens: What works as screen inside physical theaters do not know work for outside viewing. Therefore, EVO painted the exterior walls of the theater with high-grain white paint for increased visibility when films are projected on it.
Audio: To ensure good audio quality, EVO created radio channels and used AM/FM radios to broadcast the sound inside each vehicle. This allowed for clear sound from cars’ individual audio systems.
New mobile app: With limit on the number of parking spots, EVO also quickly developed an app for customers to make bookings online and pre-order food. Guests could order menu items from the theater kitchen via this custom mobile interface built specifically for this initiative. All payments were made through the app with no cash transactions to avoid contact.
On premise food sale (Source of revenue): While EVO started the drive-in initiative for free in order to gain momentum, the source of revenue was food. The EVO Drive-In also featured a contact-free way to order food using the app. To ensure safety, delivery staff wearing nitrile gloves dropped off carefully prepared meals at vehicle’s driver-side door. EVO had protocols such that viewers were supposed to keep their doors closed until the runner was ~10 feet away.
EVO market: In addition to the drive-in concept, EVO Entertainment recently introduced grocery and alcohol delivery. The company launched EVO Market, which provides essentials for customers in the area which can either be picked up or delivered to their door.
Those sales, combined with the drive-in dining offerings, resulted in over $23,000 in food and beverage revenue in a weekend. [vi] The idea to transform their theaters to drive-in model was very well received by the customers with all shows fully booked.
Long-run advantage: While the current mandate in Texas has stopped drive-in theaters too for EVO for the time being, the infrastructure and technology put in place by EVO Entertainment will serve it well as soon as the state relaxes the rules. While mandates will still most likely be against gathering inside movie halls and public would be wary of such crowded public places, EVO will be able to continue generating revenue through this revised operating model of drive-in theaters.
Act Now: While every organization thinks about adopting technology and digitization, transformations are usually slow. Evo stands as a great example for other organizations how companies can adopt innovation in a few days and gain competitive advantage against its peers.
Innovation for sustainable differentiation: Like EVO, companies need to think about driving innovation and operating model transformation to create a foundation for change and to deepen or sustain their differentiation against competition.
Understand regulatory options and be agile: As we see here, COVID19 has introduced new regulations and mandates. Companies need to work around these regulations such that their businesses remain relevant. Remaining agile with technology (e.g. app developed by EVO or changing screen and acoustic technology) can help organizations weather through changing regulatory environments.
[iv] Thomas, David. Screen with a Voice: a History of Moving Pictures in Las Cruces, New Mexico. Las Cruces, NM: Doc45 Publications, 2016.