DIS Walt Disney Co

   (FROM THE WALL STREET JOURNAL 2/1/16) 
   By Ben Fritz 

Three studios are leading a $50 million investment in a new company looking to solve one of Hollywood's oldest problems: How to get more people into movie theaters.

Walt Disney Co., 21st Century Fox's Twentieth Century Fox, and Lions Gate Entertainment Corp. are backing Atom Tickets, a mobile startup that can organize groups to go to movies and enable discounts for less-popular screenings, a controversial practice in the industry.

Atom, which previously raised $10 million, has been incubated by Lions Gate.

The company has been operating in three test markets since April and plans to launch nationwide this summer, potentially posing the first serious challenge to Comcast Corp.'s Fandango, which has long dominated the online ticket market, since it and the smaller MovieTickets.com launched in 2000.

Many in the movie business are eager to increase the percentage of tickets sold online, currently around 15%, and the total tickets sold each year, which has been trending slowly downward for more than a decade, recently reaching about 1.3 billion in the U.S. and Canada.

The Atom app can poll several friends' movie preferences and availability and suggest screenings that meet everyone's criteria. People can then buy a block of tickets together but divide payments. No more rounds of emails and texts, in other words, to figure out who wants to see what movie when and who owes how much money.

With theaters' consent, Atom can offer escalating discounts as people buy more tickets together. Theaters can limit that option to certain screenings of movies with poor box-office results, or can choose not to participate at all.

Atom earns revenue through ticket surcharges, a cut of popcorn and soda preorders, and advertising on its app.

"Variable pricing" has long been controversial, with some arguing different prices for different films erodes the value of moviegoing. Executives at the two cinema chains that participated in Atom's tests, Regal Entertainment Group and Carmike Cinemas Inc., said they were open to testing the idea, as did executives at Disney and Fox.

Lions Gate Vice Chairman Michael Burns called it "astounding" that variable pricing isn't a common practice, given the potential to make more money for movies that bomb on their opening weekends.

Theaters set ticket prices, though studios typically set the minimum revenue they will accept per ticket sold, which can make discounts difficult.

"We think it's a place theaters will evolve to and we're going to keep testing it," said Atom co-founder Matthew Bakal, adding that variable pricing won't be among the company's offerings when it launches nationwide.

Atom's backers think an aggressive new player would help. "Shaking up this space would be beneficial to everybody," said Kevin Mayer, Disney's chief strategy officer.

But the market leader is making aggressive moves of its own.

On Friday, Fandango said it had acquired M-Go, a video-on-demand service, in order to offer movie downloads along with tickets. In addition, Fandango has held talks with Time Warner Inc.'s Warner Bros. to acquire that studio's movie website Flixster in exchange for equity, a person with knowledge of the discussions said. That would give Fandango, which is overseen by the head of Comcast's Universal Pictures, two major studios in its corner. Fandango currently sells tickets online and through a mobile app, but doesn't focus on organizing groups or discounts.

Atom was co-founded by Mr. Bakal, a film-financing executive, and Ameesh Paleja, a veteran engineer at Amazon.com Inc. "There are not a lot of tech people looking to help theaters," Mr. Paleja noted.

"People have so many options at home, we need to make the social experience of moviegoing easier," said Fox Chief Executive Jim Gianopulos. (21st Century Fox and The Wall Street Journal-owner News Corp were part of the same company until mid-2013.)

Eighty-five percent of Atom users in the test markets, which included Knoxville, Tenn., and two smaller towns, were between 13 and 40 years old, the company said. The average number of movies seen each year by people in that age group has been declining, according to Motion Picture Association of America data.

To launch nationwide, Atom may need more partners than Regal and Carmike, the No. 1 and No. 4 chains in the U.S. by theater count, respectively, as well as Landmark Cinemas Inc., a distant No. 2 in Canada. A spokesman for AMC Entertainment Holding Inc., the No. 2 chain in the U.S., declined to comment on whether his company would work with Atom.

Carmike CEO S. David Passman said theaters that used Atom generated higher ticket and concession sales than comparable ones in other cities. David Ownby, Regal's chief financial officer, said it was too early to gauge the impact Atom has had for his company.

(END) Dow Jones Newswires

February 01, 2016 02:48 ET (07:48 GMT)

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