Are movie theaters doomed? Do exhibitors see the big picture as theaters lose their competitive advantage?

After three straight years of decline, movie theaters in the US may have recently ended a period of crisis with an increase in annual admissions (+ 3%) in 2006. This article argues, however, that major problems are not over for the industry. Most movie theaters in the multiplex era have adopted a remarkably similar strategy, one which is also very vulnerable to recent trends such as the explosion of home cinema, pay TV, video-on-demand (VOD), discounting by mass merchandisers of DVDs, computer games, and the collapse of video windows. Just as technological convergence has created a challenge for movie theaters, as it has in the past, so too can new technologies and creative use of assets (combined with multiple target marketing) offer a counter measure for at least some movie theaters; at least, until the next challenge arises. What is unlikely to succeed is the status quo, especially when so many multiplexes offer the same format as their competitors, appear to adopt a narrow definition of what business they are in, and manifest a ‘one-size-should-fit-all’ approach to customers. The industry has employed differentiation and niche marketing much less than other industries. As the extensive variety of necessary strategies cannot comprehensively be explored herein, this article focuses on two new technologies from the IMAX Corporation, DMX and MPX, as an example of how a theater operator might counter audience declines.