WEBVTT - Event Cinema in the Post-Pandemic Era

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. As you know, uh,

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<v Speaker 1>we talk a lot about, certainly what's going on in

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<v Speaker 1>the markets, how individuals are getting back out into the

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<v Speaker 1>world experiencing things. We've seen that play out when you

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<v Speaker 1>speak of the markets and some of those airline stocks,

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<v Speaker 1>some of those leisure stocks. Well, last time we caught

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<v Speaker 1>up with our our next guest, we were really in

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<v Speaker 1>the thick of the pandemic. UH, and that was back

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<v Speaker 1>in May of UH. And so just to get an

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<v Speaker 1>idea of how people are returning back to theaters in

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<v Speaker 1>particular and experiencing thing right now, it is back with

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<v Speaker 1>us CEO at Fathom Events are home to a MC

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<v Speaker 1>cinemark Regal. He is joining us via zoom from Las Vegas. Ray.

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<v Speaker 1>How are you good, Carol? How are you doing? I'm

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<v Speaker 1>doing well, trying to keep track of kind of a

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<v Speaker 1>NonStop environment. Um, tell us about your world and how

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<v Speaker 1>have things changed since May have when we talked with

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<v Speaker 1>you and may Have one. Well, a lot of things

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<v Speaker 1>have changed since two thousand nineteen when we had our

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<v Speaker 1>our best year in event cinema. But uh, you know,

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<v Speaker 1>as theaters started closing down and everything, Uh, it impacted

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<v Speaker 1>us pretty significantly. Obviously most of our content is distributed

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<v Speaker 1>to movie theaters. Uh. Not only AMC regular Cinema R

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<v Speaker 1>that on us, as we were saying, but also ninety

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<v Speaker 1>seven other theater circuits around the world, and everybody the

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<v Speaker 1>circuit side of the business responded differently in terms of closings, openings,

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<v Speaker 1>when they closed, when they opened. So it presented a

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<v Speaker 1>lot of challenges for us. But we were able to

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<v Speaker 1>survive the period by getting two pp P loans and

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<v Speaker 1>e r C credit and UH worked on projects and

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<v Speaker 1>we launched a program called Hope UH internally, and what

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<v Speaker 1>it was was, we're concerned about the health of our employees.

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<v Speaker 1>We needed to stay optimistic. Uh, we need to stay

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<v Speaker 1>persistent and then excel when we came out of the

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<v Speaker 1>pandemic someday, and we didn't know when that would be

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<v Speaker 1>back then, but we're in that stage now and people

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<v Speaker 1>are coming back to to theaters like you wouldn't believe

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<v Speaker 1>and like I'd like to be alright, So I know,

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<v Speaker 1>fingers crossed, right, So you know, we're bloomberg and we

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<v Speaker 1>like to get concrete evidence and numbers. So give me

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<v Speaker 1>an idea. Are you back to where you were pre

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<v Speaker 1>pandemic levels? Now we were we were just to give

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<v Speaker 1>you some some of those numbers. We were down about

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<v Speaker 1>eighty percent off at two thousand nineteen in two thousand twenty,

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<v Speaker 1>which was very consistent with where with where the commercial

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<v Speaker 1>business was with all of and exhibitors as well. Um,

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<v Speaker 1>we're looking to be about seventy five percent of two

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<v Speaker 1>thousand nineteen and everybody's using two thousand nineteen is a gauge. Uh,

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<v Speaker 1>is that being the last full year prior to the pandemic.

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<v Speaker 1>So the you know, the the analysts, I think are

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<v Speaker 1>looking somewhere between seventy percent and maybe seventy five percent

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<v Speaker 1>commercial product and will be at least as at seventy

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<v Speaker 1>five percent at the top range of that when by

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<v Speaker 1>when uh, by by this year, by this year, by

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<v Speaker 1>the end of the year. So where are you right

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<v Speaker 1>now then? So, uh, where we are right now is

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<v Speaker 1>probably around of two thousand nineteen, but we're back in

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<v Speaker 1>loaded with content because a lot of the productions were,

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<v Speaker 1>uh we're delayed because of COVID. So now all that's

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<v Speaker 1>catching up. So you're gonna see a very very strong

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<v Speaker 1>uh ladder Q two Q ry. How are things like,

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<v Speaker 1>you know, how is the supply chain impacting you? And

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<v Speaker 1>the supply chain includes also you know, labor workers. You know,

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<v Speaker 1>you can't open up you know, you can't open up

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<v Speaker 1>a venue right if you don't have the people there

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<v Speaker 1>to support it. You know it really it really has

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<v Speaker 1>an impact impacted us. The biggest thing that I think

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<v Speaker 1>our exhibitor partners went through was the fact that their

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<v Speaker 1>theaters were closed. You have a lot of minimum wage

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<v Speaker 1>workers that had to go get a job elsewhere, and

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<v Speaker 1>so they're hiring a lot of new employees right now

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<v Speaker 1>and have been. And it's the training aspect of it.

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<v Speaker 1>So it hasn't necessarily been the supply chain in terms

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<v Speaker 1>of any materials or anything like that. It's been more

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<v Speaker 1>along the lines of personnel. That's that that's actually really interesting.

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<v Speaker 1>What about things that you are doing specifically though to

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<v Speaker 1>kind of rev up the audience and get people back,

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<v Speaker 1>because well, we're talking a lot about We've got about

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<v Speaker 1>thirty seconds and then we'll come back and talk some

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<v Speaker 1>more about this whole idea of people are ready to

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<v Speaker 1>go out and experience things but you know, a lot

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<v Speaker 1>of people are getting on planes and you two are

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<v Speaker 1>competing with people who maybe want to do other things

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<v Speaker 1>when it comes to experiences. Yeah, I mean, you know,

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<v Speaker 1>it's very interesting because our content is so diverse, Carol.

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<v Speaker 1>It's as as we talked about before. It's everything from

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<v Speaker 1>the arts of the Metropolitan Opera to anime, to faith

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<v Speaker 1>based content to classic movies. And it's been very very

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<v Speaker 1>interesting to see how how each of those audiences come

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<v Speaker 1>back within each of those genres. And I'll be happy

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<v Speaker 1>to talk a little bit more about that in a

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<v Speaker 1>bit if you'd like, Yeah, I'd love to. Let's get

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<v Speaker 1>into the breakdown. We're gonna do a little bit of

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<v Speaker 1>news and then we'll continue the conversation. Right we're talking

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<v Speaker 1>with Ray Not. He's chief executive officer of Fathom Events,

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<v Speaker 1>joining us via zoom from Vegas, and I am curious

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<v Speaker 1>to see in terms of what people are coming back

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<v Speaker 1>to see what they want to do, uh in a theater.

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<v Speaker 1>So we'll get into that in just a moment. I

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<v Speaker 1>want to get back to our conversation. We're talking with

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<v Speaker 1>Ray Not. He see you at Fathom Events, still with

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<v Speaker 1>us via zoom from Las Vegas. Hey, Ry, I want

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<v Speaker 1>to go back before I get into some of the

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<v Speaker 1>content that you guys will be putting out there. You

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<v Speaker 1>mentioned you're looking to be about right nineteen by the

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<v Speaker 1>end of the year. What confidence do you have that

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<v Speaker 1>you get back there? And the reason I ask is

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<v Speaker 1>Charlie Pett and I just talked about a story about

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<v Speaker 1>how consumers have stopped adding new streaming services. I mean,

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<v Speaker 1>I do feel like people are kind of overwhelmed by choices.

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<v Speaker 1>So what confidence do you have that we kind of

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<v Speaker 1>get back to where it was? I I think we're

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<v Speaker 1>actually seeing we're actually seeing that and we're right on

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<v Speaker 1>track giving our given our forecast. Okay, Uh, that's where

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<v Speaker 1>that basis comes from. But um, you know, the people

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<v Speaker 1>that are that are really returning to theaters are in

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<v Speaker 1>the categories of faith anime, especially faith. I mean, we

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<v Speaker 1>we have had We ended last year with a film

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<v Speaker 1>called The Chosen and uh it did our biggest title ever.

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<v Speaker 1>It was fourteen million dollars that we did. We sold

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<v Speaker 1>over a million tickets and so you know, again, content

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<v Speaker 1>is king. I know that's an old cliche, but it is.

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<v Speaker 1>And if you have the right content in theaters, which

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<v Speaker 1>we have found later in the year. We believe that

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<v Speaker 1>the audiences are going to come out and want that

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<v Speaker 1>communal experience. You took me right to where I want. Now.

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<v Speaker 1>I agree content is king, and as the streaming services right,

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<v Speaker 1>they see it directly in terms of subscribers or engagement.

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<v Speaker 1>So you mentioned um faith, Tell me about you know,

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<v Speaker 1>because you've got different choices. You've got sports, you've got opera,

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<v Speaker 1>you've got the anime. Um you mentioned faith. What's what

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<v Speaker 1>do you see is the biggest area of growth for

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<v Speaker 1>you and maybe really driving the top line? Well, I

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<v Speaker 1>I think a couple of different areas. They think. What

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<v Speaker 1>our programming team has done a very excellent job of

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<v Speaker 1>doing is sourcing content that you would never ever, never

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<v Speaker 1>ever thought of could be on the big screen. You know.

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<v Speaker 1>A good example of that is I think last time

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<v Speaker 1>we may have talked, we were talking about the partnership

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<v Speaker 1>that we had with Warner Brothers where we brought uh

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<v Speaker 1>episodes of Friends Anniversary, and we're doing that with Golden

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<v Speaker 1>Girls for example, coming up as well. So that that

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<v Speaker 1>is a very uh, you know, girls night out and

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<v Speaker 1>niche group that wants to come out communally, and that's

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<v Speaker 1>really what we're seeing um, you know on the faith

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<v Speaker 1>based area. I mentioned this the chosen that that was

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<v Speaker 1>a is an app that's free to everybody with millions

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<v Speaker 1>of subscribers, and that that audience had never come to

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<v Speaker 1>theaters communally. And they made this film specifically for Christmas

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<v Speaker 1>called The Messengers and it was about the birth of

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<v Speaker 1>of Jesus through the eyes of Mary and Joseph. And

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<v Speaker 1>we did a surprise announcement with Angel Studios on that

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<v Speaker 1>and it was the very first time that audience had

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<v Speaker 1>ever gathered communally and they came out in droves. So

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<v Speaker 1>it's it just tells me that people are looking to

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<v Speaker 1>have some form of entertainment in that communal together environment.

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<v Speaker 1>Well there's something to be said, but for niche programming, right.

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<v Speaker 1>So because of the success of that is it is

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<v Speaker 1>it causing you to explore other areas? It is? Uh,

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<v Speaker 1>you know, there there are other areas out there. The

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<v Speaker 1>great thing about the great thing about Fathom is we

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<v Speaker 1>have this foundation of all these categories and sports, comedy,

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<v Speaker 1>what have you, and and all of those are our

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<v Speaker 1>foundation of our business that will continue to build on.

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<v Speaker 1>But you're going to see more live events in theaters.

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<v Speaker 1>We have the largest live network of any any anybody

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<v Speaker 1>in theaters out there, and uh, so you're gonna start

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<v Speaker 1>seeing some things like WWE. You're gonna see some more

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<v Speaker 1>boxing as as those types of productions ramp up in

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<v Speaker 1>the live live area, we'll be bringing those to theaters again.

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<v Speaker 1>So the cost of content is it going up? There's

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<v Speaker 1>so many people competing for content. It does sound like

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<v Speaker 1>you're getting into certain areas that maybe aren't as competitive,

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<v Speaker 1>but I mean sports is certainly competitive. How expensive is

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<v Speaker 1>that when you look at your balance sheet? Well, in

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<v Speaker 1>the history of Fathom, we've never paid for a dime

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<v Speaker 1>to acquire content. And the reason for that is our

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<v Speaker 1>model is a little bit different. We don't produce content,

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<v Speaker 1>we don't pay for content. We essentially barter promotional content,

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<v Speaker 1>and we barter about a hundred million dollars in promotional

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<v Speaker 1>value a year. So, um, it's licensed for a window

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<v Speaker 1>of time with Fathom theatrically and uh it's a basically

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<v Speaker 1>a rev share that we do with the content provider

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<v Speaker 1>at the box office, and that that's our our model.

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<v Speaker 1>It's very very different. I am also curious about your demographics.

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<v Speaker 1>I'm always curious about a service like this, especially when

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<v Speaker 1>you talk about you know, your faith, uh vertical if

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<v Speaker 1>you will doing really well? Is it an does it

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<v Speaker 1>sc older? Give me an idea of the cross section. Well,

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<v Speaker 1>it's uh, it's interesting because our our largest content provider

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<v Speaker 1>is still the Metropolitan Opera and average age is around

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<v Speaker 1>seventy three years old. So you'll you'll have that will

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<v Speaker 1>do children's programming where you have you know, parents and

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<v Speaker 1>kids come up that are that obviously sway much much younger.

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<v Speaker 1>You have anime content, and anime content can be anything

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<v Speaker 1>from a very young age to uh, you know, there's

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<v Speaker 1>even content out there that it's hard are in uh

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<v Speaker 1>in the anime space. So uh So having this diverse

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<v Speaker 1>amount of content and vert goals that we have. The

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<v Speaker 1>age differentiation is all over the place. But that's what

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<v Speaker 1>makes it special for us because if the older audiences

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<v Speaker 1>with the mat and some of the classic movies are

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<v Speaker 1>a little bit slower to come back, then we're gonna

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<v Speaker 1>push more for the faith and the anime and the

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<v Speaker 1>children's program. Just got about forty seconds here, I mean,

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<v Speaker 1>what what worries you most about the outlook? Just quickly?

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<v Speaker 1>You know, I'm I'm very bullish on it. I you know,

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<v Speaker 1>I don't think that there's gonna be another outbreak that

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<v Speaker 1>will close theaters again. That was obviously our biggest concern

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<v Speaker 1>out there. UM, I see more and more content providers

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<v Speaker 1>wanting to distribute content like this. It's not a traditional

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<v Speaker 1>theatrical run, it's not straight to streaming, and we don't

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<v Speaker 1>consider ourselves competitive with any of those guys. So I

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<v Speaker 1>guess to answer your question or not answer your question.

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<v Speaker 1>He's on the horizon right now, Caro, A little sounds

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<v Speaker 1>like you're sleeping. Well, I need to get there as well.

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<v Speaker 1>Ray now, thank you so much, great update and great

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<v Speaker 1>deep dive into what you guys are up to. Ray

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<v Speaker 1>not CEO at Fathom Events, joining us via zoom from

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<v Speaker 1>Las Vegas