What follows is a post from Dr. Atul Teckchandani, one of the great professors teaching Entrepreneurship at CSUF.
Most movie theaters operate in one of two ways. Either they are the types of theaters that get the newest movies and then attract film-goers who are willing to pay $8-12 to see these movies as soon as they are released. Or they are the types of theaters that show movies a few months after they have originally been released, but at a steeply discounted price.
The big movie theater chains (AMC, Regal, UA, Cinemark, etc.) typically dominate the first category. And the second category does not seem to be a very attractive segment of the industry as most of the discounted theaters tend to be independently owned and their interiors suggest that the owners are not exactly minting money.
But does that mean that the movie theater industry isn’t a good place to start a business? Not at all! The folks at the Alamo Draft House have found a way to create a very successful movie theater chain by breaking all the rules.
Here’s what they do. First, their theaters all are setup so that there are long narrow tables in front of each row of seats so that wait staff can deliver food and drinks. Their menu is not just limited to popcorn, drinks, and snacks – customers can also order pizzas, nachos, and even beer and wine. In other words, customers can come to Alamo Drafthouse to spend their entire evening. Rather than going to a restaurant to have dinner and then going to a theater to watch a movie, they can come to Alamo Drafthouse and do both.
While the idea of offering more than just the typical movie theatre fare is a great way to increase revenue, what makes Alamo Drafthouse truly unique is that they bring new life to old movies by connecting “moviegoers and movies on a visceral– even primal–level, conjuring the magic and excitement of audience members’ most formative cinematic experiences.” (Source).
To better illustrate, here are some of the current events on their movie calendar for the Austin, Texas location:
- The Princess Bride Quote-along
- Bridget Jones’ Diary (girls-night)
- Amadeus (w/ a live choral performance)
- Secret Garden (including afternoon tea: three servings of tea and tea treats)
- True Lies (with live pyrotechnics)
- The Godfather (with pairings of Italian wines and cheeses)
Rather than simply replay these old movies the way discount theaters do, they create a more interactive experience that revolves around a movie. Usually it’s an older movie that has nostalgic potential or one that has a large cult following. And the results are outstanding: revenue per movie screen at the Alamo Draft House is almost double that of the large movie chains.
I spent two years in Austin, and know first-hand how much more enjoyable the movie-watching experience is at Alamo Drafthouse as compared to a more traditional theater. The folks at Alamo Draft House have managed to be successful in an industry that appears to be quite an unattractive place for new ventures, and found a way to thrive by changing the rules of the game.
And herein lies the lesson for entrepreneurs: do not let the “rules” of an industry limit your options. It is always hard for an upstart to compete with the incumbents. Instead, change the rules so that your success is not determined by directly competing with these incumbents. Go after a different target market. Offer a different value proposition. Leverage partners. In other words, build a different business model.