Great article Tim! I agree with your premise that the long term trend of offsetting volume with price is unsustainable for AMC. However, I disagree with the notion that the best means of combatting the threat of declining attendance is to barrel full steam ahead into PVOD. AMC’s value proposition is to provide an out-of-home entertainment experience for moviegoers and to fulfill that value proposition they need to get people to come to the theaters. Today, they are doing that by investing in better exhibition technology, as you note. Consumers today don’t necessarily go to the theater just to see a movie; they go to get the full experience of watching a film on a huge screen with great sound, hopefully while also eating and drinking comfortably in a new reclining seat. The experience is often a social one that can’t be replicated at home. But the future for AMC is more than just movie exhibition. That’s why the company just announced a $20M investment in Dreamscape, a Steven Spielberg-led full-body motion capture VR startup that provides up to six users with the opportunity to participate in a shared VR experience. . Along with the investment AMC also signed a new partnership to bring Dreamscape into movie theaters and standalone boxes in both the US and UK. Clearly, the goal is to create a more social and immersive environment for consumers, pulling people to theaters and driving attendance in arenas that extend beyond movie exhibition. Dreamscape represents the tip of the iceberg – I am excited to see what comes next.
Really interesting article, Pranay! I agree with your concerns about the long-term viability of ATMs as cash is increasingly displaced by alternative methods of payments but I am perhaps less bearish than you are on NCR’s prospects. In addition to the options you laid out, which, as of other posters have noted have seemed to stave off potential revenue declines in the core ATM business, NCR should also pursue growth opportunities in the international arena. While cash usage has declined considerably in the US, it remains the predominant form of payment in many parts of the developing and even the developed world. As those countries’ economies continue to grow and more people ascend into the middle class, consumption on discretionary cash purchases should increase as well. NCR should seize on the opportunity to expand its ATM network in international and developing markets to counter the declines in cash transactions currently happening here in the US.
To your second question, I think selling aircraft in the US is a lost cause. Ben hit the nail on the head when he suggests that the efficiency issues render COMAC aircraft irrelevant from a competitive perspective. Moreover, there are reputational concerns as well that airlines must consider. Whether justified or not, the public is not going to be as comfortable stepping onto a Chinese-manufactured commercial aircraft as they are stepping on to a Boeing or Airbus today. I don’t foresee any US airline willing to take the risk to launch such a product in the market. For the same reasons (inefficiencies and reputational), US carriers never operated Soviet-manufactured Ilyushin planes, in spite of their prominence back home in Russia and other Soviet-friendly nations.
For now, COMAC would be better served developing its engineering prowess and improving on its product offering in future iterations of the C919. Given the strategic importance to China of developing a home-grown aircraft OEM, it is likely that COMAC will continue to receive considerable financial support and backing from the Chinese government. In the meantime, the business can likely sustain itself with the arms-length transactions that the government has facilitated between COMAC and the state-owned Chinese airlines. But if it has any hope of penetrating into western aviation markets, COMAC will need to significant improve the capabilities of its future planes and invest considerably in international marketing to improve its brand perception and that of Chinese-manufactured airplanes.
Really interesting article Eerik. I think that Boeing needs to decide whether it wants to be a manufacturing company or a marketing company. In the old days of the 707 and 747, my understanding is that Boeing was effectively vertically integrated, with functions ranging from design to manufacturing to assembly all performed in house. As Eerik notes, this has evolved significantly over time, with the most recent 787 program representing the most egregious example of outsourcing a majority of design and production to Tier 1 OEMs. Not only does this supply chain strategy pose significant risks from geopolitical perspective but it has significant cost and commercial implications as well. The 787 program is also known for its many years of delays and its significant budget overruns – almost $27 billion over original forecasts by the time the first plane was delivered.  The results speak for themselves. Even if vertical integration drives higher operating expenses in the short run, it smooths out longer term commercial risks and massively reduces the tail risks of geopolitical upheaval. As it turns to the NMA, Boeing should consider moving back to the production model that made its early planes and even the 777 so successful by bringing more jobs back in house.
Boeing got played by Airbus at its own game, plain and simple! As Ben’s well-researched article articulates, Boeing’s attempt to to leverage the current protectionist political climate to stomp out Bombardier backfired. The end result is that it has lost out on the opportunity to acquire a 100-seater aircraft and must instead compete against an emboldened Airbus in what remains a duopolistic market.
While the C-Series program so far has been a financial albatross on Bombardier’s poorly capitalized balance sheet, it’s strategic significance on the commercial market should not be discounted. Both Airbus and Boeing have historically excelled in producing larger gauge narrowbody aircraft, preferring to cede the segment of smaller-gauge commercial craft to regional OEMs like Bombardier and Embraer. However, as rising fuel and labor costs have largely rendered 50-seat regional jet flying unprofitable, commercial airlines have more recently pursued a strategy of upgauging their fleet from smaller to larger regional aircraft. For the first time in the industry’s history, a 100 seat aircraft like the C-Series fits within these airlines’ fleet strategies. Within the context of the current environment, Boeing’s loss is particularly painful.
Even prior to the Airbus acquisition, Boeing has been trying to undercut Bombardier and the C-Series program. For example, in 2016 it aggressively offered its 737 classic aircraft at rates that are significantly below what Bombardier can afford to offer.  It seems to me that Boeing has been trying everything but develop a better product to win in the market. Boeing should have been spending the last few years developing a commercial response to the C-Series. Instead, it wasted its time lobbying the government. Today, it faces the reality of a 100-seater Airbus competing against the 737. Going forward, it will likely have to develop a commercial response, a significantly more costly prospect than what it might have faced if it had allowed Bombardier to continue to compete in the market.
Thanks Yohannes – nicely researched and argued. You raise an interesting question about the ethics of the MCO model, in spite of the more straightforward economic benefits to the team. While I agree that it makes economic sense for EPL clubs to acquire players through the purchase of other countries’ domestic clubs and later transferring the best ones into the EPL, the players are the big losers under league design. By tying up talent at a really young age, no player would have the chance to pursue their market potential and earn their fair value in wages, particularly as rising stars began to differentiate themselves in the domestic leagues. Ultimately, that’s not a fair outcome for the players who rightfully deserve the opportunity to accumulate incremental wealth as their talent and demand grow. And as Fritz pointed out, it also raises conflicts of interest in terms of how the rosters are managed between the EPL club and the other teams in the MCO, with the fans of those other teams also ultimately losing out as the best players are constantly migrated upwards to the premier league.