The Evolution of the Movie Theater Industry with Nathan Hunstable, CTO at Cinergy Cinemas & Entertainment

(Intro Narrator at 00:00:00) Today, we're talking to Nathan Hunstable, CTO at Cinergy Cinemas and Entertainment, about the evolution of the movie theater industry. You're listening to Joel Beasley, Modern CTO.

(Joel Beasley at 00:00:16) Alright, so my daughter is six, and I asked her about ten minutes before this interview, I said, "Hey, I'm talking to the guy that makes movie theaters. What do you want me to ask him?"

(Joel Beasley at 00:00:27) And she said, "Can you ask him if I can have my own movie theater?" And I said, that's actually one of our first questions. So we went to see Migration about two weeks ago with the kids, awesome animated movie. And we went to see it, and I thought to myself, why has no one started a movie theater and got the movie theater license and then just made it available to stream? What's preventing that from happening?

(Nathan Hunstable at 00:00:52) Okay, so is this, are we, is this part of it? Yeah, yeah, yeah.

(Nathan Hunstable at 00:00:56) This is a great answer. So several years ago, and you can look this up, I think it was Sean Parker. Is that the Napster guy? I think he was trying to get a video on demand box kicked off.

(Nathan Hunstable at 00:01:08) And I don't remember if this was before or after COVID, but that was terrifying to us, right? You pay $50 and it downloads to this box, and it kind of just died.

(Nathan Hunstable at 00:01:19) And so, again, I don't remember if it was before or after COVID. I'm thinking maybe it was right before, because at the time we were still kind of figuring out as an industry what is the next five years going to look like with all this streaming, how all this is going to unfold. And yeah, that was a big, big fear, and I think it was a combination. I mean, the outlook from our perspective, from the exhibitor side, on the cinema side, is the studios, we're partners, right? You make the content, we show it. You can't do this without us, and we can't do this without you. So I have a feeling they realized that it would upset the system a lot if they did that, right?

(Nathan Hunstable at 00:01:57) I mean, that would take a lot of money out of our pocket and change things for us. So I think it was probably just a little bit of politics more than anything, right, of pushing and shoving that if y'all do that, we're going to have a big problem here. But yeah, I don't actually remember what ended up happening with it, but it kind of died off. But that was a very big fear there for a while, that it was a box that you could put, connect to your TV, and it would download what's called first run movies straight to your home.

(Joel Beasley at 00:02:24) Yeah, but that's what consumers want.

(Nathan Hunstable at 00:02:28) Yeah, yeah. And again, COVID. We thought eventually we were going to fight this battle. I can remember vividly in 2019, we were in LA, and we were at the National Association of Theater Owners. That's our trade association, and we were talking about Netflix and Disney Plus. Disney had just announced this thing, Disney Plus, or maybe it was just coming out, and Paramount was announcing. We were like, "Man, over the next five years, what is going to happen?"

(Nathan Hunstable at 00:02:55) And then COVID happened, and it was like, all of that was just immediately in home, right? Straight to the home. I think Trolls World Tour was the first one that was right as COVID came out, and it was like, "Wow, now we're in big trouble because now things are going straight to home." And as an industry, that's what we're fighting, right? We're fighting those streaming services. Now on the entertainment side of the industry, we're fighting VR, right? Some of the VR hardware that we use as an industry is available at home, right? It's consumer level type products. And so that's a very scary thought in that some of the best things that we have going for us, I've got to get you out of your house to come do a very similar thing here.

(Nathan Hunstable at 00:03:40) Now the big argument is movies are better in the movie theater, right? You're doing it with people and the sound and the video and the, just the everything that goes on in the production value that we can give is completely different. But there are people, and we fight this every single day, that don't want to do that. And if they can get it straight from their streaming services straight to their home, that first run movie, they'll do it for whatever reason. And there's lots of reasons, but that's the battle that we have to fight constantly. We're constantly trying to figure out how we have the upper hand against that, and it's not easy. I can tell you that much.

(Joel Beasley at 00:04:20) No, no. Alright, so first of all, I want to set the tone here. I love movies.

(Joel Beasley at 00:04:26) I'm a big...

(Nathan Hunstable at 00:04:26) That's funny because Josh said the opposite. Josh said he works for big games.

(Joel Beasley at 00:04:30) Movies. I can't believe he works here after me finding that out.

(Intro Narrator at 00:04:34) I watch a lot of movies, actually, Joel. I don't know what you're talking about.

(Nathan Hunstable at 00:04:36) Yeah, I got to read. Nice save, nice save.

(Joel Beasley at 00:04:41) Yeah, no, it was, that was actually one of the fun facts in one of our team building things that we found out that Josh has watched, like, five movies. I watch movies almost, I try to watch movies every day, every week. I'm huge. I specifically like the sci-fi genre and then, of course, kids' stuff with my kids. But so I'm a big fan, and I love taking my kids to the movie theaters. And it's great because it's just a bunch of other parents in there, especially for kids' movies. It's great because there's a bunch of other kids in there. And what I have found, because I talk about this with my wife a lot because we watch movies together, is I like going to the movies. I like the idea of going to the movies as an experience I have in my life. But our content consumption is ramped up so drastically that the percentage of content I watched at the movie theaters is just, it's going down, right? If you look back to when I was 15, the percentage of total content consumed, it was between TV and then movie theaters. You know, I'd go to movies Fridays with friends, and so I'd be doing a lot of school stuff.

(Joel Beasley at 00:05:41) But it's going down. But that doesn't, but when I see it, I know it sounds hard because I'm talking to you and I want to have a good call, and I know you're at this company, but I'm going to be on the other side of the argument here. I'm going to be on the tech bro, "let's automate everything" side just so I can better understand. I think it's going to be like the horses and the cars. We still take the kids to horse lessons. We still go horseback riding. We still do that. We do it, you know, they do it weekly.

(Joel Beasley at 00:06:10) I go with them once a month or something of that nature. But we also have the four wheelers, right? So we do that. And it's just, we do different things. We like to experience the different things, and one of the things we like to do is movies. It's funny because when we're talking, you're using we're scared or we're fear or whatever. I'm surprised that you're not, like, "Hey, guys," at your board meeting, "let's be the ones to make the box. Let's use all of our revenue to make the box."

(Nathan Hunstable at 00:06:38) Yeah, I mean, you, it is. And it is certainly on our radar, and we certainly realized that, you mentioned, you know, intake of all this content, especially, you know, going back two decades, right? I sat down and watched sitcoms, right? And they were very low production value, and so the movie was the big thing. I mean, I've seen some YouTube videos and some content creators that can create some pretty phenomenal stuff, as well as all these other things. Now you have such an, and not only that, what you were watching back then was, "Okay, it's 7:00. I need to go watch this show because that's the only time I can watch it." Whereas now, whether it's a movie or a TV show or whatever, I can do it literally on demand, obviously, but at any time, at any size screen. And so, yeah, it is certainly on our radar, and it's certainly a scary thing to see how it's going to change, right? And I think it really changes with the consumer.

(Nathan Hunstable at 00:07:42) The kids that are, you know, our kids' age, my kids are six and 11, as they grow up, what, I mean, they're not going to grow up as much as we did saying, "Oh, when we went to the theater, that was a fun event." I can remember the very first movie I ever saw was Honey, I Shrunk the Kids, and I remember it to this day. I remember my reaction to seeing Jurassic Park and all that. They're not going to have that, right?

(Nathan Hunstable at 00:08:04) I mean, they've had YouTube and iPads and just so much content throughout their lives. They're not going to remember that, and we don't go nearly as often, and it's such a different experience. But what's interesting about that too is the amount of content that's coming out, the amount of seats in cities, right, that's a big piece of it. The number of theaters in a specific area isn't as much. We've taken out all of our seats, all of our stadium seating, and now there are all these big recliners and all that.

(Joel Beasley at 00:08:36) By the way, that was the best thing to happen.

(Nathan Hunstable at 00:08:38) Yeah. And we have the best because they have little heaters, you know, a little button to keep your backside warm. But as you do that, you lose like 40, 50, 60% of your seats. So now a town, now a geographic area that had, you know, however many seats, 10,000 seats in the market, now may only have 5,500. Well, now the studio is trying to figure out how to make up that revenue, right?

(Nathan Hunstable at 00:09:00) You as the exhibitor might be doing okay because you're going to sell more. The price is going to be higher for that ticket, but you don't have as many butts in the seat. And so the studio is now not getting as much money, and now they're looking at it like, "Wow, how do we handle this?" And so I do think, I say all that to say this, that over time, and I have seen this, this has happened as an industry, you know, because of everything with COVID, things were going straight to in home. But over the last three years, I think these streaming services have kind of realized that it's not a great revenue model to send it straight to Disney Plus or whatever for lots of different reasons.

(Nathan Hunstable at 00:09:38) A, you're not getting as many tickets, people aren't seeing it multiple times, you're paying the same price. And so I think that what they've realized is we can put it into the theater, and then after 30 days, 60 days, whatever it is, 45 days, put it into on demand, video on demand and streaming services in the home. I think it's kind of falling into a nice kind of place where everybody can kind of play along, right, and get their piece of it. But then for a while it was really scary, and I do think that over time, it'll have to see how it works itself out. But you also used to see companies build 24 plexes and these massive theaters with tons of auditoriums. We don't have the content for that anymore, right?

(Nathan Hunstable at 00:10:22) You don't have, especially this year coming up, you don't have a new movie coming out every weekend. You've got a couple, but over the next three months, frankly, this first quarter of 2024, it's kind of thin. So we're kind of freaking out a little bit as an industry. So nobody's building those megaplexes anymore. We've got locations that have 16 auditoriums. We're building new locations that have six, seven auditoriums as opposed to our big one that has 14, right? You just, there's no reason to have that many anymore. And so for less content, for less people in the building, I can still fill up my building, and that's what adding these other things into your building becomes such a critical piece to success and making as much money as you can off one consumer that walks in the door, right?

(Nathan Hunstable at 00:11:06) I mean, that's the key now at this point. So it is a revolving, ever changing industry. But everything we went through with COVID, I think right now we're all just kind of like, "Let's just get back and coast for a little while and we'll see what happens in the future."

(Joel Beasley at 00:11:23) It sounds scary. What's the vibe there in the industry? Are, like, is everybody blinded by nostalgia and this is just what we like to do and we just want it to make it work? Or are there people that are stepping back outside of it and saying, "Look, this is what's coming, obviously. We, there's a model for it," which is either the horse and the cars, I think, is the best model because we still, it's still an industry. There's still money there. People still go do it and they spend money. It's just scaled down. So are there people out there saying, "Look, we obviously are on this down curve and it's going to be scaled down, and so let's prepare for that future"?

(Joel Beasley at 00:12:07) Obviously, you're kind of doing it a little bit by building smaller theaters, right? But also, why not be the one to build the thing you know is going to crush you?

(Nathan Hunstable at 00:12:17) Yeah.

(Joel Beasley at 00:12:19) Is it because you can't be that guy at the trade association? You get tomatoes thrown at you?

(Nathan Hunstable at 00:12:22) Oh, you would get annihilated. Yeah, you'd be ostracized pretty quickly. I think, you know, most people in this industry, what's interesting is it is a very, I don't want to say archaic because that has a negative connotation, but it is a very kind of old school industry, right? And you have these, I mean, first off, the majority of the theaters in the country, I'll say the majority, probably the majority, are owned by the big three, right? The big three companies that I won't mention. But, and so they would put a stop to it pretty quickly. And their hands are, and their relationships with the studios are pretty close.

(Nathan Hunstable at 00:12:54) So it's the kind of situation where they could do it. I guarantee you they could do it. But if somebody, a small company like us, were to go try to do it, it would be shut down pretty quick, and you would get some tomatoes thrown at you, and you'd probably be kicked out of that association. But, you know, I don't know if that's ever coming or not. And certainly it has to think, but, again, though, I think the bigger companies that have hundreds of locations, right, they probably are a little scared because it's not as easy to pivot, especially if they're public, right? It's not as easy to pivot for them. When we were going through COVID, we were trying to figure out what we could, if we were to knock out half of our auditoriums, what could we do with these spaces, right?

(Nathan Hunstable at 00:13:35) And now pickleball and all this other stuff and go karts, all these new things are these new fads that for us as a small company, we have nine locations, we could easily do that, right? And we could pivot that much for lots of different reasons. They can't. And so for them, it probably is. And not to mention, look at all the ones that have gone bankrupt and they've had to shut down. Literally hundreds across the country have been shut down and that affects, that's bad for the industry. It's good for us in some markets and we've benefited from that, but as an industry, that's not a great thing, right? That's less butts in the seat and then that makes that conversation with the studios a little trickier, right? Because now, maybe the terms aren't as good or maybe they're having to charge you more because most people don't realize we give away sometimes as much as 65 or 70% of every single ticket to the studios. That's their money.

(Nathan Hunstable at 00:14:22) So we keep a small portion. Have you ever wondered why concessions are so expensive?

(Joel Beasley at 00:14:28) That's what I see.

(Nathan Hunstable at 00:14:29) That's where we make our money. Traditionally, I mean, now obviously we've expanded into these other areas, but yeah, I have a feeling that those bigger companies—I know they are—that they are reeling to try to figure out what's next. Right? And people like us who are innovating some of these other entertainment options, nobody's gonna build another movie theater. Well, don't quote me on this.

(Nathan Hunstable at 00:14:52) That's just a theater. Right? Popcorn, soda, you see your movie. How do you do that when you can do food and beverage and all these other things?

(Joel Beasley at 00:15:00) Are they digital, the cinemas? Like, is it coming to some box? Are they mailing tape? Like, what are they doing?

(Nathan Hunstable at 00:15:08) All of the above. So, yes. Well, not necessarily film anymore. So back when I started in 1999, we strung up the projectors with film, right? And then there was—the studios really wanted us to go digital, but again, you're talking these small exhibitors didn't have millions of dollars to convert their auditorium. So they did kind of a partner program where they bought it, and then you put it in, and then you paid them back over a long period of time, and it was a whole program.

(Nathan Hunstable at 00:15:36) So at this point, the entire industry, unless you're some super specific nostalgia theater, is all digital. Everything is digital. The content comes in from satellite. The majority of the time, it's satellite, although they can still mail us hard drives if that doesn't work. But there's a whole content delivery network that comes in via satellite over the course of a few days in advance, and then there's a license that we get delivered 24 to 48 hours before, and then we kind of marry the two together and the content becomes available to be sent to each individual projector, and then there's a server there. I mean, it's actually an unbelievably complicated process, but it's all digital now. And then now we're going through this transition of the old xenon big xenon bulbs, and now we're going strictly laser projectors. Right? And that's kind of in this transition period of, again, a major cost in rehab to switch from xenon to laser projection.

(Joel Beasley at 00:16:34) So if I wanted to—well, first question is, do these boxes exist for wealthy people?

(Nathan Hunstable at 00:16:43) I have no idea.

(Joel Beasley at 00:16:43) The answer is yes, because I can spy. I'm surprised. I can just—well, yeah, that was my next question. So how much money do I need to spend to license as a movie theater so I get the rights to be able to do this if I have a one-location movie theater?

(Nathan Hunstable at 00:16:59) So you would have to jump through a lot of hoops and a lot of paperwork like we talked about for the studio to send it to you. Is it possible? Absolutely. Yeah.

(Nathan Hunstable at 00:17:09) But it would be a lot, probably. Now, does your first question is, does it exist for the mega wealthy? Probably. Yeah. There's probably some people out there—I have a feeling—that are way up the chain that could do it. But it would take a lot. Yeah. It would take a lot.

(Joel Beasley at 00:17:28) Yeah. Because there's somebody out there that's like, hey, if Shaq wants it in his theater at home, he's gonna get it in his theater at home. Yeah. Okay.

(Nathan Hunstable at 00:17:36) I would think so.

(Joel Beasley at 00:17:38) Yeah. So then how do I become Shaq? I'm like, get—

(Nathan Hunstable at 00:17:42) Get a lot of championship rings and be on TV. No. I don't know. I mean, it is a process because you actually have to kind of go through—there's a whole process to kind of get connected to each studio because we still deal with the studios directly. We work with a buyer who calls the studios and negotiates terms. I mean, there's—and then the delivery piece, I mean, and then the technology to get it from the servers that it's downloaded to or the ingestion point and then to each projector—it's a lot of technology.

(Joel Beasley at 00:18:12) Do you negotiate specific deals for movies?

(Nathan Hunstable at 00:18:16) We do.

(Joel Beasley at 00:18:16) Yeah. Why are they even playing that game? Why aren't they just saying, hey, we'll negotiate with the three big guys and everyone else just gets this one rate or you die? Why are they playing the game?

(Nathan Hunstable at 00:18:28) Because they can. Yeah. I mean, you're exactly right. We've been asking these questions for years at our trade association, but the reality is the big three and the top ten probably have that kind of pull. Whereas with us, for the most part—not to take anything away from our bookers—but for the most part, they say, here's the rate you're gonna get. There's nothing we can do about it. But if you're one of the big ones, they can say, here's the rate you're gonna get, and then they can say, well, we're not gonna show it because we don't like that rate. Well, that takes a big chunk out of the revenue of the studio, so they're gonna work it out. But for us, they don't care. I mean, okay, don't show it in your nine locations. We'll do something else. So it's kind of a set rate. And then there's a ramp-down period. Right? I mean, you pay a different rate the third, fourth, fifth, sixth week. But it's always gonna, for the most part, be in the favor of the studios. They hold the content. I mean, they take all the risk, frankly. Right? They're the ones creating the movie, and so we don't really have a whole lot of negotiation power as an individual. Our trade association can't really negotiate individual rights on our behalf. So, you know, you're kind of stuck. What are you gonna do?

(Joel Beasley at 00:19:42) Wow. Well, you could do the Elon Musk move and just buy the top three.

(Nathan Hunstable at 00:19:47) I don't know if you'd be able to get that deal from the government.

(Nathan Hunstable at 00:19:50) Yeah. The DOJ might have a problem with that.

(Joel Beasley at 00:19:52) They might have a problem with that. Buy one of them and then just be the one that does the box. Do you know what happened with Sean Parker? You said Sean Parker. I actually interviewed Napster. Do you know Napster still exists? I interviewed them. They got bought by a cryptocurrency.

(Nathan Hunstable at 00:20:06) I've looked it up several times over the last few years. Yeah. There was still some sort of entity, but I really don't know what happened. I think—I swear, I think it was before COVID—and it must have just tanked. And it was—he was trying to be innovative. Right? I mean, we were scared. I mean, it was gonna be a big deal. And for all I know, it's still out there. I have no idea, frankly. But it's been a couple years since I've heard anything out of it.

(Joel Beasley at 00:20:31) Josh, is it still out there? Josh is gonna look it up while we're talking. Because look, again, that doesn't mean I'm not gonna go to the movies. But you have kids. Yeah. Oh, wait. There it is. There it is.

(Nathan Hunstable at 00:20:43) What's funny is that I have a feeling it was probably pressed pretty hard because in 2017, the studios having their own video-on-demand services really wasn't a thing. Right? Or at least it hadn't been made public. And so I have a feeling about that time, Disney Plus was ramping up, Paramount Plus was coming out, or Peacock and Paramount and all that. So I have a feeling, especially now, they'd have a hard time getting something like that going because the behemoth in the room is Disney. Right? They control a lot of this. And so I have a feeling they'd have a lot to say about somebody trying to create an in-home box.

(Joel Beasley at 00:21:19) But look at the people who are on the side of it: Spielberg, JJ Abrams, Peter Jackson. They love the forward thinking. We need to get Sean on the show, John.

(Nathan Hunstable at 00:21:28) And they also work for those production companies too. So—

(Joel Beasley at 00:21:32) I know. Of course, they're gonna fight it. Every industry, it's the death throes or whatever.

(Nathan Hunstable at 00:21:40) Oh, yeah. That would be the ultimate disruption. There's no doubt about that. I mean, and we've been through this multiple times and certainly through COVID with all these streaming services. So there would have to be some sort of—from an industry side—there'd have to be some sort of, you know, what we call a window. Right? So, traditionally, if you think about it back when you were growing up, before it would show up in Blockbuster, it would be six, nine-plus months, right, until you could rent the movie. Well, now, post-COVID, it could be day and date, so they come out at the same time. Could be a matter of weeks. Could be 30 or 45 days. So there'd have to be some sort of window.

(Joel Beasley at 00:22:23) Yeah. Why are they doing that? Why did they dual release? Sometimes—what was a movie? We actually chose to watch the movie that was streaming at home instead of going to the theaters because there were two movies released. We wanted to see both movies. The kids were sick, and one of the movies was released streaming. You pay like 30 or 40 dollars for it, but why are they making these decisions?

(Nathan Hunstable at 00:22:49) It really comes out of the studio. I mean, I would imagine it's just a major financial decision. Right? I mean, again, and why, I don't know. But I can tell you this: I know that if Netflix wants to put something out the same time it goes in the theater, they're paying big money for it—or Amazon or whoever it is. So it's strictly a financial decision. If they look at the outlook and say—I mean, every week we know when a movie comes out and it's usually pretty darn close how many tens of millions of dollars it's gonna make. Right? I think I read earlier that Mean Girls is coming out this week, and it's looking at 33 million dollars. Well, it's gonna be somewhere in that. And so if they look at it and say, well, gosh, it makes sense to put it on Netflix or put it on this streaming service in seven, fourteen, twenty-one days or whatever it is, and they'll pay us this—it's totally a financial decision at that point. Recoup some of that cost of production and marketing.

(Joel Beasley at 00:23:43) It's interesting. The history has been find the gatekeepers, destroy the gatekeepers, and technology is the weapon in which we're doing that.

(Nathan Hunstable at 00:23:52) Yep.

(Joel Beasley at 00:23:53) Yeah. But every day, I get to look in all these different industries. For example, the docks that we have, the ports. Remember when those backups were happening? Yeah. Well, I did all this investigative—myself—research on it. So it turns out that there are fully autonomous ports, like 99% autonomous ports. There's some humans there. We don't let those into the US because the unions don't let them into the US.

(Nathan Hunstable at 00:24:17) Oh, I imagine.

(Joel Beasley at 00:24:18) They prevent us from having highly functional, competitive ports because of a union group that's like, it's gonna take the humans' jobs. So these little case studies are interesting because right now they're happening before it's super political. Right? Because the idea of humans and robots is gonna become, obviously, a huge political point in the future. But there's not too much energy around it. Exactly. There's not a crazy amount of bipartisan stuff with the AI right now. Everybody just is kind of like, hey, what's going on with that? But it will get crazy, I'm sure. But we can look back to these times when we do have these situations where we're successfully preventing technology from existing to keep jobs. Like, those case studies exist.

(Nathan Hunstable at 00:25:05) Oh, yeah. And that is—I mean, again, the entire industry, we view it as—we being the industry, the trade association, especially. Right? I mean, we've had conversations where the CEOs of a studio is up on stage at a conference, and he says the same thing, right? We are all in this together. Right? It's a partnership. And if you start to cut one of the legs out, I mean, the whole thing starts to crumble. And so you gotta think about it. The studios, yes, you could absolutely send it straight to the home and cut out—but you're gonna lose half your theaters. I mean, most of the small exhibitors and, frankly, a lot of the bigger ones probably are more susceptible than even the small guys for lots of different reasons. They're gonna have a hard time making money, and then that changes everything, and it's just the domino effect. And then the studio is not making enough money. So—and we saw that during COVID. With everything going straight to the home, they don't make as much money. I mean, if you've read the articles, Disney Plus lost billions of dollars in its first year for the same reason. So let's put it straight to the theater, give it however many days or weeks, and then put it to streaming. And you kind of—there's a way it can all work. But whoever that disruptor is, I mean, that would be a big deal. But the way the industry is set up, you'd have a hard time getting that kind of going because the studios want that. Now, the studios that don't necessarily care about it is the Netflixes and the Amazons of the world that don't have that footprint. They don't have the footprint in the exhibitor anyways, in that traditional exhibitor space. So they don't care. So it'll be something like that—and they've done it. I mean, they do it all the time. They make an amazing contract. And it would—some of the movies, it's actually really frustrating because some of the movies would do unbelievably well. What was the—during COVID, there was one with Tom Hanks or something. The Irishman, I think it was, went straight to streaming, and it was one of the big ones that would have done amazing, right, in the theaters. But at the time, COVID was still a big issue, and it probably wouldn't have made as much money. But if that came out now, I doubt they would have done that. Right? They would absolutely send it to the theater, make your 70, 80, 100 million dollars, go overseas, and then bring it into streaming. It's all a financial decision from their side.

(Joel Beasley at 00:27:26) That's interesting. Well, we have such amazing content from—do they ever take it where—Amazon, I think Amazon had a movie with Mark Wahlberg that was real funny where he was like a spy, but his family didn't know or something. I saw it a couple weeks ago, but it was on, I think, Prime. Do they ever take Prime stuff and then let it play in the movie theaters so they can make more money?

(Nathan Hunstable at 00:27:49) Yeah. There have been limited runs. I mean, there is an Amazon Studios that—I mean, we've had—there was a movie several years ago because we did a sneak of it or something where Amazon Studios put it out first run. But I don't know if they've just—it's not as often. It's not as prevalent, but they certainly do it. Yeah. I mean, and again, that was probably before Prime Video was a huge thing. Certainly, on the apps and everything, maybe there was a video piece, but you don't see it as much anymore. For them, they have such—and Netflix too. I mean, it's all about subscribers at that point, so I don't know the economics behind it, but they certainly could do it. And they do it, but not as much as you would think.

(Joel Beasley at 00:28:36) The previews have changed a lot at movies over the years. You see all sorts of stuff based off different theaters that I go to. What are you guys doing—that subscription thing at your theater?

(Nathan Hunstable at 00:28:48) What do you mean?

(Joel Beasley at 00:28:49) Like, do you let people buy a subscription, like a monthly subscription to your movie theater?

(Nathan Hunstebel at 00:28:55) Yeah, so I'm glad you brought that up. So we just launched a membership program January 1st, and there's, depending — we have three different kind of tiers of theaters, right? You have traditional theaters. We have kind of our food and beverage ones where you sit down and we used to be — a waiter would come to you — but strictly movies and food that you sit down in the auditorium. And then we have what we call the FEC, or a cinema entertainment center, where it's bowling and video games and axe throwing and escape rooms. So there's three different tiers, and then each — oh, that one.

(Joel Beasley at 00:29:24) Sounds fun.

(Nathan Hunstebel at 00:29:25) Yeah. And so in each kind of tier, you've got two or three different tiers of gold or platinum. But basically, yeah, you pay on average, you know, $16, $17 bucks, and you'll get two movie tickets and then a couple tickets at a flat rate and a 10% discount on concessions. And if it's one of our FEC locations, you get our game cards or a token for some sort of VR or something like that. But our big locations, they have all those kind of amenities, and so it makes a ton of sense to pay. If you're gonna go to the theater once a quarter, absolutely, the membership makes all the sense in the world. And because we have all these other offerings, you know, some of the other ones that it's just movies, if you go once a quarter or something, the numbers may not make sense. But if you get all that additional stuff for us, it makes all the difference in the world to come to us and to be a subscriber. And so we launched it literally ten days ago — app, web, and fully integrated to everything in the auditorium, in the centers that have it. Yep.

(Joel Beasley at 00:30:21) You mentioned earlier something about people seeing movies multiple times. People watch movies multiple times? Do they go to the theater and, like, watch the same movie twice while it's playing?

(Nathan Hunstebel at 00:30:31) You see that sometimes. What I was kind of referring to was the ability to have it streaming, right? I mean, that was the video on demand side of saying — you know, but we do have that. I mean, we have — you have these followings of people that are just movie buffs, and they come in. You know, back in the day, we used to do, like, marathons, right? Like when Star Wars would come out, we would show all the Star Wars movies and people would come to all that. I mean, you'd be surprised at how much our loyalty program as a whole is massive. People — and then keep in mind, also, we're in smaller markets for the most part. We're in these tertiary markets, or — you know, we're in a couple big ones. Outside Chicago, Charlotte, Tulsa are a little bit different, but the other markets are — we own the entertainment space in those cities. So our loyalty following is pretty high. So it's not uncommon for people to come in multiple times a month to see something. Now, how much content we have can certainly drive that, but Hollywood does a great job of marketing their own movies, so we kind of focus from a marketing standpoint of there are other things in the building. We let Hollywood market it. They do a great job and spend all that money.

(Joel Beasley at 00:31:40) And how did you get involved in this? Are you a partner at the company, or like, what's your position there?

(Nathan Hunstebel at 00:31:46) No, so I'm the CTO at Cinergy. I have been in the industry since 1999. Actually, the owners of this company were my first bosses. I had barely turned 16. October '99, they opened their very first theater in small town Granbury, Texas, and that's where I grew up, and so I was like, I'm gonna go work in the theater. That was the biggest thing that happened to the town in, gosh, probably decades, right? We were getting a six-screen movie theater, and I was sweeping up popcorn. I'm just a lowly employee. And over the course of several years, I worked there, made it to the projection booth. There's a food and beverage type company that he started in 2001 called the Movie Tavern, which is still around today, owned by Marcus. And he — we — the owner started that company in 2001. I became the IT director there in 2002 after I graduated high school. He sold it in 2007 or '08, and then I started my own IT company in 2009. And Cinergy, where I am now, was one of my first clients. And so I've been involved in this company since 2009. I sold my IT company in 2015 to my partner and came over here full time. So for almost nine years, I've been here as the CTO at Cinergy. When I came on board, we had two locations, and now we have nine.

(Joel Beasley at 00:33:05) Nice.

(Nathan Hunstebel at 00:33:06) So I've been in the industry for a long time. Yeah. Yeah. It is growing. It's interesting to see the progression of the industry as a whole in a lot of different ways. COVID obviously played a big part of where we are now, but even from a technology standpoint, right? I mean, the industry was so stagnant for a hundred years, right? People were still printing off tickets and tearing tickets even when I started. We didn't take credit cards or anything back then, and so now, because we're kind of being forced into it, we've become, as an industry, incredibly technology focused around the digital projection, and the sound systems have become amazing, obviously, and then everything else in the building. And the ability to try to keep the guest in the building as long as we can and make that process as easy as possible. That's what kinda makes us different in that we've spent all this time and all this money and all this effort to create all these technologies to make that customer journey as easy and smooth as possible. And you mentioned the membership program, right? I mean, that's kind of a big deal across the industry. We're the first ones to do it that incorporates movies and the FEC side, right, the entertainment space, all in one kinda very smooth, clean customer experience and customer journey. We're kind of the first ones to do that, and that's just in an effort to do it, to keep people in and get people in and get them off their couch from all this other stuff that we've been talking about, right? I mean, that's what we're up against, and that's what's constantly driving innovation in this industry, which, again, for the first hundred years was almost nothing.

(Joel Beasley at 00:34:40) How early do you get the movies before they actually release?

(Nathan Hunstebel at 00:34:43) So what's funny is when I started, we used to get them like a week in advance. And as a projectionist, I'd have to build it, put it on the projector. I mean, it was an incredible system the old way, and we would get it about a week in advance. So we would absolutely — we had to watch it, right? You had to build it reel to reel and everything, so you had to make sure it was good. Now we get it days or more in advance, but the license key doesn't actually unlock it until the day of. So maybe around midnight or overnight, we can — you could get a sneak peek if you were to be able to do it and to be able to watch it. But for the most part, it's pretty well locked down, and it's monitored pretty closely. So they've got a pretty good handle on keeping it secure.

(Joel Beasley at 00:35:25) Yeah. I was looking at the technology, the anti-piracy technology where they will embed different types of codes and things into all the different individual streams so they can see where it was pirated from.

(Nathan Hunstebel at 00:35:35) That's — yep. That's the — I haven't — I've been told that. I've never seen it, but supposedly there is ways that they can track it down to what auditorium it came or a theater it came out of should they come across it for sure.

(Joel Beasley at 00:35:48) Yeah. I don't know where I — I think I watched a video about that on YouTube, but that was essentially, they would sprinkle in these, like, what was it? I can't remember exactly what it was, but they had a way of doing it, and they would make it unique for each of the streams that they sent out. And that way, they could tell exactly where it came from.

(Nathan Hunstebel at 00:36:06) Yep. I believe it. Absolutely. They've got a — they run a pretty tight ship on that side of it. They keep it pretty well locked down. And the problem is, is if you get it at the last minute and there's an issue for whatever reason, right, a license key doesn't work or something, it doesn't work. And so that causes mass chaos in your office.

(Joel Beasley at 00:36:21) Does that happen?

(Nathan Hunstebel at 00:36:23) It can, yeah. I mean, it's happened. Yeah. I mean, again, the back end systems are unbelievably complex, partially unnecessarily so in a lot of ways. And so, you know, just like anything else, things get corrupted, right? You're sending a lot of data from a satellite down. It downloads it. It's got some checks, make sure it's not corrupt. And then it's going from that server to another server, and then from that server to a projector server, and then it's gotta send it to obviously onto the screen. I mean, things happen. Absolutely, it happens. Yeah, we had an issue at one of our theaters, maybe in Charlotte, just within the last couple weeks where a file got corrupt and you've just gotta redownload it or resend it to the projector, and that takes, you know, I mean, these things are tens of to a hundred gigs or whatever the size is. It takes time. And you've got people sitting in an auditorium, so it certainly happens. It's not a fun experience. If you're the manager on duty, I can assure you of that.

(Joel Beasley at 00:37:25) That does not sound like a fun — we had a — last time we were at or two or three times ago, we were at a movie theater and the AC or the heat broke.

(Nathan Hunstebel at 00:37:34) And I —

(Joel Beasley at 00:37:34) Oh, no.

(Nathan Hunstebel at 00:37:35) That happens too.

(Joel Beasley at 00:37:36) That happens too.

(Nathan Hunstebel at 00:37:36) Especially in Texas.

(Joel Beasley at 00:37:38) Yes. Yes. Well, this was fantastic, my friend. I'll let you know when I'm out there, and then we'll have the episode released next week.

(Nathan Hunstebel at 00:37:45) Okay.

(Joel Beasley at 00:37:46) Thank you so much for listening. And if you found this episode useful, please share it with a friend or colleague who you think would get value from it. And if you have topics that you'd like to hear discussed on the podcast, either add me on LinkedIn or send me an email [email protected]. Every time I get an email or LinkedIn message, it absolutely makes my day and inspires me to keep going.