This might explain why Sony acquired Alamo Drafthouse

It will take more than a back-to-back pair of impressive sequel openings to fix this dismal summer movie season. And it’s going to take way more than that to fix moviegoing altogether. Nearly halfway through 2024, the $3 billion cumulative box office total this year is down 40% from where it was at this point 10 years ago. Something needs to change—and fast.

One obvious way to get people inside movie theaters is to vastly improve the experience of going to the movie theater. If filmgoers know they can just wait a few weeks to watch new releases at home for less money, studios and theaters are going to have to collaborate on some fresh and compelling new incentives to get people out their front door.With last week’s historic acquisition of Alamo Drafthouse Cinema, the 12th largest theater chain in the U.S., Sony Pictures is in a strong position to lead the charge.

“It’s a streaming world now, and obviously this theater’s in trouble, and that’s part of what led to Sony’s acquisition of the Alamo chain,” says entertainment lawyer Sky Moore. “They don’t have a streaming platform and that’s why it totally makes sense for them to expand into theaters.”

If anyone would have insight into the implications of this acquisition, it’s Moore. Honored by The Hollywood Reporter as a leading industry lawyer, Moore foresaw streaming’s capacity to disrupt standard distribution channels a full decade ago. “Netflix will likely expand from creating original series to creating its own large budget films, with the initial premiere online,” he predicted back in 2014.

That prophecy, of course, proved out.

The explosion in big-budget, Oscar-worthy streaming originals coincided with the COVID pandemic, during which the U.S. lost more than 2,000 screens in three years. Now that studios appear to have ceded control of distribution, they’ve become, in Moore’s words, “production companies for the streamers.” Despite the occasional world-beating tentpole like Top Gun: Maverick, and last year’s phenomenal “Barbenheimer” moment, theatrical moviegoing is in existential peril. And it is in this unprecedented environment that Sony acquired Alamo.

Not until recently could a movie studio like Sony Pictures technically even purchase a chain of theaters. A landmark antitrust decision known as the Paramount Decrees had previously forbidden such deals since 1948, when the Supreme Court ordered major studios to divest from cinemas. By the 1980s, some studios were challenging the rule, with Paramount and Warner Bros .becoming joint owners of Mann Theatres in 1986, and Sony itself purchasing the Loews theater chain in 1994. With bigger fish to fry now than the threat of studios keeping their rivals’ films out of their dedicated theaters, the rule was formally repealed in August 2020. Somewhat ironically, the only studio that has branched out into theaters since then has been Netflix. At least until now.

The million-dollar question, though, is why did Sony acquire Alamo?

The company has been coy about its intentions so far, with some speculating it could be a play to expand the reach of its recently acquired anime streaming service, Crunchyroll. It’s possible Sony bought Alamo because this is the perfect, crucial moment to reinvigorate moviegoing. (The new Alamo Drafthouse Cinema will reportedly be managed within Sony under a new division called “Sony Pictures Experiences.”) Alamo may have had a brush with bankruptcy in 2021 and recently shed six theaters, but with 35 remaining locations that span top markets like New York, Los Angeles, and Austin (where it was founded and headquartered), the chain is everywhere a player in the exhibitor space would want to be.

“My hope is that Sony bought Alamo so they can control the experience and make it more attractive to consumers,” says Moore. “I don’t think they’re going to just operate the chain as it has been operated in the past. I think they’ve gotta change the whole format.”

Alamo already has a reputation for elevated moviegoing. The chain shows both big studio flicks and more obscure arthouse indies, curates quirky programming events, offers movie-themed dinner and drink options with its dine-in service, and enforces its strict no-talking policy with fun, celebrity-assisted videos. However, there’s still room for upgrades, as there are with most theaters. As Moore suggests, Sony could outfit Alamo theaters with its own version of Regal’s immersive 4DX system, which incorporates elements like chair-motion and water mist, beef up theater sound engineering, and revamp the lobby toward primo social media moments.

These kinds of upgrades are prohibitively expensive and most theater chains don’t have that kind of dough. Sony does, though. Perhaps more importantly, Sony has a lot of vertical integration opportunities for whatever rival version of 4DX it could potentially develop.

“What Sony can do is program the seats and the theatrical experience to match Sony films in a distinctive way,” Moore says. “Whereas an independent theater could never do that, because who knows what film’s gonna show up.”

Sony could apply the company’s electronics mastery toward propelling the next great leap in theatrical sound design, giving the people who bought the company’s Dolby Atmos home theater systems more incentive to leave their homes. And the studio has the opportunity to take Alamo’s custom pre-roll videos further, by drawing from the talent pool of stars in their films at a level Alamo couldn’t reach. The possibilities are practically endless.

More ominously, of course, there is always the possibility that buying the chain is less a matter of optimizing theaters to entice more moviegoers than it is about finding creative ways to push the profit margin of Sony’s movies at the point of purchase. Instead of a fresh twist on 4DX, Alamo regulars might be getting price hikes (as indeed happened at Crunchyroll) and a narrower selection.

For now, Sony’s acquisition of Alamo merely demonstrates its commitment to preserving the theatrical experience. If they don’t invest in innovation, though, it might all be just for show.

“If Alamo and the other chains continue to operate as they have, it’s all gone,” warns Moore. “It’ll just be down to a few summer blockbusters at a few theaters. Unless they change direction, it’s over.”