Evo theaters: Social distancing and watching movies
With worldwide drop in movie theater business due to COVID-19, EVO Entertainment quickly shifted its business model from closed physical theaters to open air drive-in theaters in its parking lots. Alongside, it also delved into grocery delivery services to expand its revenue streams at this time.
Movie theaters affected by COVID-19
The global box office took its first hit at the outset of Coronavirus in China in January 2020. The Chinese government ordered shutting down all movie theatres till things got back to normal. Eventually this was a story not just about China. One by one almost every country in this world got affected. As governments and health organizations realized that social distancing was the only way forward to control the spread of virus, restaurants, movie theatres and all public gatherings were banned.
Cinema theatres were one of the several majorly hit segments with no other way of earning revenue once viewers were forced to stay at home. AMC, the largest movie theater chain in the U.S., and Regal, with 1,200+ theaters between them, said they were closing their venues starting March 17 for at least six to 12 weeks.[i] That weekend, the box office hit a 20-year low, down 60% from a year ago.[ii] The loss in foot traffic and revenue was worse than what they were the weekend after September 11 attacks.
Even when the threat of virus is diminished and businesses reopen, people will be skeptical in visiting crowded places such as cinema halls. Moreover, with increase in consumption of online media and improved services from Netflix, Amazon Prime, Disney Plus etc. over this period of Covid-19, viewers are likely to maintain social distancing longer than mandatory and avoid going to movie theaters for months to come.
EVO Entertainment Group is a San Marcos (Texas) based cinema and entertainment operator in the US. They have 6 locations around Texas with 57 movie screens. As with other theaters chains, Evo was also forced to shut down its theaters for the risk of Coronavirus spread.
EVO quickly innovated its operating model to mitigate the impact of COVID
EVO thought of what can be done quickly to continue providing people with the experience of watching movies on big screen, while maintaining social distancing. The decision was to change their operating model from closed movie theater into a “drive-in” in the theater parking lot.
“Our current climate has challenged us to adapt and develop innovative ways to continue to provide entertainment to our communities,” [iii]
-EVO Entertainment Group CEO Mitch Roberts
To support social distancing during Coronavirus outbreak and to continue providing cinema viewing services to movie lovers at a time when all EVO theatres were closed, they started nightly shows in EVO parking lots so that guests can remain seated comfortably and safely inside their own vehicles while watching movies on big screen.
EVO Entertainment Group converted the parking lot of its Schertz location into a drive-in theater that offered nightly film screenings. They sold all the tickets for Friday’s opening night show on March 27th — Marvel’s Spider-Man: Far From Home — that began at sunset around 7:30 pm.
The concept of drive-in cinema was developed a very long time back. A partial drive-in theater – Theatre de Guadalupe – was opened in Las Cruces, New Mexico, on April 23, 1915.[iv] However, the popularity of this kind of cinema viewing died in the 70s and it just remained as a novel concept in the last couple of decades. By 2013, drive-ins comprised only 1.5% of total movie screens in the United States and their numbers kept declining from 389 in 2013 to only 305 in 2019.[v]
EVO quickly built capabilities needed to switch to drive-in
Screens: What works as screen inside physical theaters do not know work for outside viewing. Therefore, EVO painted the exterior walls of the theater with high-grain white paint for increased visibility when films are projected on it.
Audio: To ensure good audio quality, EVO created radio channels and used AM/FM radios to broadcast the sound inside each vehicle. This allowed for clear sound from cars’ individual audio systems.
New mobile app: With limit on the number of parking spots, EVO also quickly developed an app for customers to make bookings online and pre-order food. Guests could order menu items from the theater kitchen via this custom mobile interface built specifically for this initiative. All payments were made through the app with no cash transactions to avoid contact.
On premise food sale (Source of revenue): While EVO started the drive-in initiative for free in order to gain momentum, the source of revenue was food. The EVO Drive-In also featured a contact-free way to order food using the app. To ensure safety, delivery staff wearing nitrile gloves dropped off carefully prepared meals at vehicle’s driver-side door. EVO had protocols such that viewers were supposed to keep their doors closed until the runner was ~10 feet away.
EVO market: In addition to the drive-in concept, EVO Entertainment recently introduced grocery and alcohol delivery. The company launched EVO Market, which provides essentials for customers in the area which can either be picked up or delivered to their door.
Those sales, combined with the drive-in dining offerings, resulted in over $23,000 in food and beverage revenue in a weekend. [vi] The idea to transform their theaters to drive-in model was very well received by the customers with all shows fully booked.
Long-run advantage: While the current mandate in Texas has stopped drive-in theaters too for EVO for the time being, the infrastructure and technology put in place by EVO Entertainment will serve it well as soon as the state relaxes the rules. While mandates will still most likely be against gathering inside movie halls and public would be wary of such crowded public places, EVO will be able to continue generating revenue through this revised operating model of drive-in theaters.
Act Now: While every organization thinks about adopting technology and digitization, transformations are usually slow. Evo stands as a great example for other organizations how companies can adopt innovation in a few days and gain competitive advantage against its peers.
Innovation for sustainable differentiation: Like EVO, companies need to think about driving innovation and operating model transformation to create a foundation for change and to deepen or sustain their differentiation against competition.
Understand regulatory options and be agile: As we see here, COVID19 has introduced new regulations and mandates. Companies need to work around these regulations such that their businesses remain relevant. Remaining agile with technology (e.g. app developed by EVO or changing screen and acoustic technology) can help organizations weather through changing regulatory environments.
[iv] Thomas, David. Screen with a Voice: a History of Moving Pictures in Las Cruces, New Mexico. Las Cruces, NM: Doc45 Publications, 2016.
Student comments on Evo theaters: Social distancing and watching movies
Fun article – makes me want to go to a drive-in movie complete with snacks. One other key lesson I’m taking away from this is that sometimes digital transformation is not re-inventing the wheel, but instead breathing new life into not existing but even obsolete innovation such as the old school drive-in complex through mobile apps, sound technology, etc. Apple is famous not for inventing products from scratch but actually resurrecting products people thought were gone forever – tablets, watches, etc – and perfecting them. The pandemic has made some old habits like these come back, and digital can play a great role on giving them a new life.
That is a great point indeed! How Apple also has driven innovation through resurrection of old ideas or products already in use. I believe this is a great move for EVO at this time. It looks like social distancing is here to stay for long, so even if theatres reopen, they would not operate in full capacity. EVO can then recoup the lost revenue by continuing this model alongside their physical theaters ( given, parking lots will be half empty as well if only 50% of the theater capacity can be filled at a time).Would be a good combination of old and new ways of working in the world of “new normal”.
This is a fantastic example of scrappy innovation. The movie theatre industry has taken the brunt of COVID, and there really are not any other revenue options to fall back on for them. I wonder if Evo was able to rely on relaxed laws in Texas to make this happen (i.e. converting a parking lot, allowing food and alcohol to be served to vehicles etc.) My sense is that a lot of states would not allow this flexibility even in light of the Covid crisis.
This is unlikely to be a long term, digital solution for the company, but more of a digital bandaid to be removed when things (hopefully) turn back to normal. I would also be really interested in seeing what their P&L looks like before and during this fix. At this point, any revenue is good revenue given this asset-heavy, fixed-cost industry, so this might be just enough to get through this troubling time.
Great points Nicholas. So you are right, they were able to do this when Texas laws were relaxed. They have been stopped recently, however Texas is reopening again very soon! So I believe they are starting back soon. To your point about band-aid fix- In normal circumstances, I would agree with you. However, with the COVID situation, I think social distancing will be around for very long. Even when cities open, restaurants and theaters won’t be allowed to operate in their full capacity for a long time to come. e.g. :
In that case, both the physical theaters and parking lots will be atleast half empty. EVO can then utilize their drive-in theaters to make up for the lost revenue from this drop in capacity.
Finally, to your last question about revenue before and after this change: As I mentioned in the blog, EVO was making up for lost revenue through sale of food in these drive-in theaters and impromptu opening of their grocery delivery services. For the actual movies, for now they kept it free in the name of good cause at this time of distress.
This is a wonderful example of a throwback innovation brought to help the present! A couple challenges however which I wonder how they will overcome:
Bathrooms – When I have gone to drive in movie theaters in the past (they did still exist!), when people had to go to the bathroom (often right at the worst time in a movie), there was a row of porta-pottys that were available. I don’t imagine that this is an option in a social-distanced time.
Security – Movie Theater Parking Lots aren’t known for their security. Unless tickets are free and they plan to make up money in food fees, they would need to develop some way to prevent unwanted cars (or people on foot!).
Great points! For he bathrooms, EVO is allowing their indoor bathroom facilities to be used but not more than 10 people at a time and they are being cleaned after each use. Security, I agree would be a concern. Right now, what they are doing is what you mentioned- the movie viewing is free and they are making money from the sale of food and their quick move to delivering grocery online. This, according to the CEO, is in the same of a good cause ( providing free entertainment) at a time of distress. However, when they start charging for the viewing as well, security measures need to be taken to may be guard off the parking lot or have tickets to be checked before entering the parking area from where the screen is visible.
Such an interesting and fun read, Sneha!
I think that this is a perfect example of how “old” and simple ways of doing things is sometimes the best. It also shows how important it is to think outside the box and really focus on your value proposition (and be creative in the way of delivering it!). I think it’s also very interesting how they tried to monetize through other aspects – such as the food delivery. I’m surprised that it was so successful in that end given that I would have imagine people bringing their own from home! In any case, bravo for the creativeness in these times! I hope these drive-in options continue after COVID-19 because I would love to experience one in person!
Completely agree Loti! I believe in today world of data and technology, reviving old ideas that were discarded in the past can bring more value than earlier. Like drive-ins, now with digital apps for example EVO can collect so much information about their customers and later use it to improve its services- a thing that was not possible in the past.
Thank you for sharing such an interesting post, Sneha! I really enjoyed reading about how EVO has taken a creative response to the COVID-19 crisis. While so much of the rest of the world is looking to leapfrog into the digital future with automation, artificial intelligence, and mobile technologies, EVO is demonstrating how innovation can mean returning to the roots of what makes a customer experience special. I can see this being a very popular proposition during this time for people who want to safely enjoying some semblance of normal recreation while also getting a new experience with the drive in theater. It would be interesting to see whether this revitalizes the drive-in theater market at a larger scale, even beyond the pandemic.
Agreed Jennifer! I would love this to continue post pandemic too – could be a fun experience! Especially for families with babies and kids who feel awkward going to theaters as their children disturb other people by screaming and talking 🙂 They can still have big theater experience from the comfort of their own private cars!