As on-demand video services such as Netflix and Hulu thrive in a post-cable world, how can movie theaters, with their high cost of admission, stay competitive? In this episode of Mastering Innovation on Sirius XM Channel 132, Business Radio Powered by The Wharton School, Hamid Hashemi, founder and CEO of iPic Entertainment, discusses his company’s approach to getting people out of their homes and into the theaters.
Today, there are more choices for in-home entertainment than ever before, with technologies that let customers mimic the experience of the theater in their own home. In 2011, Hamid Hashemi started iPic entertainment in an attempt to remodel the way we watch movies, leading to eventual partnerships with on-demand streaming services. He distinguishes between in-home and and out-of-home entertainment and identifies his company’s competition as only the latter. Together, Hashemi and host Harbir Singh examine theater demographics, what it takes to cater to the millennial generation, and the cost-benefit ratio for innovation.
An excerpt of the interview is transcribed below. Listen to more episodes here.
Transcript
Harbir Singh: What kind of demographics do you have? We teach a lot of millennials at school and they’re telling me they just watch movies on their smart devices. And I say, how can you even see anything on a 3×5″ screen, right? You’re saying you get millennials as well?
Hamid Hashemi: Yes, we do. Ninety percent of our guests are between ages of 21 and 54. The median age is 33 with an average household income of $120,000. We do cater to millennials. Millennials are looking for experience. Because of the ability to watch content online on their devices, they are more selective. If they’re going to go out, they’re going to look for an experience. They know that they would watch a movie no matter where they go.
“Millennials are looking for experience. Because of the ability to watch content online on their devices, they are more selective.” – Hamid Hashemi
Harbir: I see what you’re saying. The regular theater is more disrupted than your theater by Netflix. I’m told that people like to just watch Netflix and relax at home, so this is a different segment. Is that the concept?
Hashemi: Yes. We actually show Netflix content in our theaters. We believe, and we’ve demonstrated, that people allocate their entertainment dollars to in-home and out-of-home experiences. We compete with out-of-home entertainment experiences, and we believe in that so much that we don’t compete with in-home. We don’t compete with Netflix and Hulu. We went to Netflix two years ago and have an agreement with them to show their films in our theaters. People, while they can watch a movie at home, still come out to the theater because we’re all social creatures. We’re social people; we want go to places and share experiences with other people, and there’s no better place than movie theaters.
Singh: You’re creating the next social experience, given very often the $10 or $9.50 ticket is disrupted by streaming video. Which markets are you targeting right now? Do I expect this to go to the secondary cities as well?
Hashemi: Right now we’re in all the major cities. We’re in nine states. We’re in L.A., New York, Chicago, Dallas, Austin, South Florida. We have locations under construction in Atlanta. Our goal was to build in all the major cities and then build around those locations. We planted our first location in these markets. Now we’re building our fourth location in these markets. There is absolutely a market in smaller towns (or so-called Middle America), but right now opportunity is greatest for us in all the major markets. If there’s more population density, it works in our favor. The cost of building these facilities is the same no matter where we build. It’s a matter of admissions. The bigger population you have, the more attendance you’ll get.
Singh: The footprint of this must be smaller than the big multiplex, so can you acquire real estate more easily or re-purpose real estate more easily?
Hashemi: Yes, that’s true. A typical megaplex is about 75,000 to 80,000 square feet. Our footprint is anywhere from 35,000 to 42,000 square feet. There’s a lot more flexibility because for the most part we are located and positioned in lifestyle centers. Our auditoriums can be underground or they can be on the second floor where the main floor is our restaurant and entrance to the theaters. The rest of the space can be used for retail. The real estate market is changing and today, everything is about experience, entertainment. Traditional retail has all kinds of challenges. If anybody is building a lifestyle center, which is the trend today, they look for traffic drivers. We’re certainly one of the best traffic drivers with the right demographics, I’d say.
“We’re social people; we want go to places and share experiences with other people, and there’s no better place than movie theaters.” – Hamid Hashemi
Singh: I know some malls are having difficulty with traffic, but they have parking, they have all the other attributes you might need. Is that one of the reasons why you’re entering some of the larger markets?
Hashemi: Yes, we are. We are going into some existing locations, for example, an old Sears building that’s being completely torn down. A new wing of this shopping center or mall is being turned into a lifestyle center. We’re going to those types of locations. We’re very careful when it comes to real estate and site selection. If we’re free standing, we’re typically in pedestrian streets. If we’re in a mixed-use project, we’re typically in lifestyle centers that have a lot of other restaurants and other forms of entertainment that would become a nighttime destination.
Singh: What are some of the things that concern you? What is the innovation that somebody might do that might disrupt what you’re doing? Or, for that matter, just people trying to catch up? Chains like AMC might upgrade their experience to give a similar seating plan. Maybe they won’t have a mixologist of the same caliber and they won’t have a culinary department run by a James Beard Award-winner. Are those things that might cause concern?
Hashemi: Sure. We look at our competition, and by competition, I mean all forms of competition. To us, any out-of-home form of entertainment is competition, including restaurants and other movie theaters that are re-seating their theaters and putting in reclining seats. For us, it’s really about upping the experience. Our model has always been about giving you a lot more value for your dollars than anybody else can. We’re the first company that put reclining seats in the theaters. The next step for us was, how could we take that and make it even better than what we were doing before. Today, we’ve designed and patented pod seating.
If you go to our theaters, you find two reclining seats that are encapsulated in a pod. It gives you complete privacy. When you recline your seats, you can’t see anyone and nobody can see you, so you’ll be able to have a shared experience in a very intimate environment with pillows and blankets at your tables. The next step for us is to make this experience more personalized. What we call great service and what we used to call a great service 15 or 20 years ago is so different. 15 years ago, a good example of personal touch, when it came to service, was the Ritz Carlton or the Four Seasons. They anticipated your needs; there was always somebody there to interact with you and provide you the service you needed.
Today we call Amazon a great service, or we call any of the ridesharing programs a great service. When I summon a car and I get in the car, I don’t have to interact with anyone. For us, the mobile devices have enabled us to do so many things ourselves that a great service is now the ability to do it yourself.
About Our Guest
Hamid Hashemi is the founder, President and CEO of iPic Entertainment. Hashemi has over 30 years of experience owning and operating entertainment venues and is recognized as one of the motion picture industry’s most dynamic business developers, having successfully developed and launched three companies involved in motion picture exhibition. Hashemi’s career in movie exhibition began in 1984 when he founded Muvico Theater (“Muvico I”), which he grew to over 100 screens in South Florida before selling to Regal Cinema. From 1995 to 2005, under the same Muvico Theater name (“Muvico II”), he began building a new generation of megaplexes with 18 to 24 screens, including some of the country’s highest-attended theaters, such as Muvico Paradise 24 in Davie, Florida; Egyptian Theater in Baltimore, Maryland; and Boca Palace 20 in Boca Raton, Florida. In addition to being the first movie exhibition company to offer amenities such as childcare centers, assigned seating and valet service, Muvico Palace was the first theater in the country to offer a premier movie experience and dining option under one roof and was recognized throughout the industry as the most innovative theater of its kind.
Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.