It’s a Wonderful Life for Specialty Content Distributor Fathom Events

As moviegoing recovers from the pandemic, Fathom has emerged as a specialty distributor of content that is a little off the beaten path for movie theaters. It has a longstanding distribution deal with the Metropolitan Opera in New York City for live screenings of the Met's incredible productions. Fathom is also the distributor bringing Winnie the Pooh, Blood and Honey to America this winter. Patiently explains the business model behind the company that is owned by the nation's three largest

exhibition chains, AMC Entertainment, Regal and Cinemark. Ray has been the head of Bathom since twenty seventeen, and he has a long background in exhibition. In closing, he offers his thoughts on what the road to health looks like for the multiplex business. That's all coming up after the break. Y Nut, CEO of Bathom Events, thank you so much for joining me today. Thank you for having me. It's great to be with you. Guys. Well, it's an interesting

time to talk about the exhibition business. There's no shortage of transition, no shortage of opportunity, and for obvious reasons that the world has been talking about for the last three years, a lot of challenges in movie going, which although I have grown up covering the television business, I have since I was twelve years old and able to ride my bike to my favorite movie theater. I have loved.

I truly loved the moviegoing experience. I'd like to start just by having asking you kind of describe this sort of size and scope of your business and what Fathom brings to the exhibition community. Well, Fathom, Fathom is currently an event cinema business, but to get some context from that, you know, I spent most of my years on the theater exhibition side of the business with United Artists Theaters and then Regal Entertainment Group and then I came over

to Fathom about five and a half years ago. And when I came over, it was things were known as alternative content, and alternative content was something that over the first couple of years in doing this job, I got a little uncomfortable with. It just didn't didn't resonate with me. I don't think it resonated with a lot of our audience as well, or even the industry. So we started

to transition into what we're calling now event cinema. And that's as technology developed, and you know, there became a new interest and a little thing called the pandemic cap and Whi's got people thinking much differently about content on the screen, not just commercial product, but other content and

backups in production and everything. So so right now, you know, the scope of the business is isn't giant, but it is an opportunist to growing business right now, and it's a great place to be where theater exhibitors and content providers are coming up with new content, exhibitors are hungry for additional content, and so you know, it's a it's a great place to be right now. And you know, my crew is definitely excited about the opportunities ahead of us.

You are jointly owned by AMC, Regal and Cinemark, which is that's a big footprint in exhibition ranked there. But you also send your events. Your special events can go to any exhibitor that raises their hand and says, I'd like to bring this to my theater or is it just for that those three circuits. No, I'm glad you brought that up, because there are misconceptions about there because we're owned by AMC, Cinemark and Regal, that we only distribute to them, and that's not the case at all.

We distribute to them obviously, but we distribute to ninety seven other theater circuits domestically and theater circuits worldwide as well. In fact, you know, when it comes to distribution, probably our owners are you know, exercised as much discretion, if not more, about the content that we bring to the screen because they are the biggest and everybody's knocking on their door to distribute content to them, including us obviously.

So it's it's it's really good. We you know, from a technology standpoint, we have one of the most cost effective ways to get content from our office or from the content providers to the movie theaters, and that's through what we call our Digital Broadcast Network. It's a satellite based network that has eleven hundreds theaters and twenty two hundred screens domestically, and it's very easy to get content and efficient to get content. So a lot of our

content partners like that. But we also launched something just last year. You know, eleven hundred theaters doesn't sound like a lot, but it is sometimes for events cinema. But we launched something called DCP only, and what that is is we have the ability to now just go ahead and do things like a regular movie, distribute content like

a regular movie to movie theaters. And so some of our recent events like The Chosen for example, and others that decent distribution are up to two thousand plus screens. And what we changed is our philosophy. And we used to anyone and we partnered with on the exhibition side used to have to have and install that digital broadcast network.

We've eased that a little bit now and said, you know what, if you've got a digital projector and you can accept a DCP, then we're in business with you if you if you want our content and we think it's right for you as well. How do you go about what makes for good a good Fathom event offering. Your upcoming slate, which we'll talk about, has a quite a range of things going on. What do you look

for to make up for the right thing for Fathom Events? Yeah, you know, as I previously mentioned, this is one of the things that cause me to balk a little bit about the brand alternative content and move into events cinema and actually talk a little bit about where we're going in the future, because we're actually working on transitioning the industry and our company from away from the events cinema

brand into what we're calling a specialty distribution. But what we look for is content that has an audience, and that's the first thing a lot of people. The reason I was uncomfortable with alternative content because it makes it sound like anything other thing commercial product that's out there can be slapped up on the screen and boy, there's going to be an audience there. But people have to realize we started this business on a Monday through a

Thursday type of business. It's very difficult to get people off their couching into movie theaters or you know, Monday, it's going to be something special so there has to be an audience out there. And I have a spectacular team that does the research, does the programming, does the marketing, and does all of the operations for everything. We're an end to end solution for our content providers. But the main thing is that you have to have that audience.

And we've done some things that people, you know, when we announced it, they'll raise their eyebrows and say, what in the world is that, But they find out that we've done our research. You know recently, you know, just February fifteenth, we opened Winnie the Pooh and um, you know this was a horror picture. We need to pooh blood and honey, which is I should say, winning the poo blood and honey, don't a mil I don't think he ever anticipated Christopher Robin having this, but it is

an interesting it's an interesting example of copyrights. Have you know, the copyright has expired, so Winnie the Pooh is now the new versions can be had. But so you did your homework on that. Yeah, it's a great example of us identifying an audience for that. We were watching you know, socials on that and you know, when my team first brought it to me, I was like, I don't you know, I don't get it. And then they brought me all the backup and the research and everything, and I so, okay,

it looks like there is an audience for it. And you know, opening night it did at least in North America about seven hundred and sixty thousand dollars, so you know, on a Wednesday night, that's uh, that's that's pretty darn good for for event cinema. So we were very happy with that. But that gives you a little bit of a flavor of of you know, how we go about

looking at our content. And by the way, our content is very diverse, as you probably know, and you know it's everything from the Metropolitan Opera to children's programming to anime original you know, original programming. Uh. And the biggest category that we had last year, which was huge for us, was faith based. So um, so there's you know, you have to do a lot of research and understand what audience is. We'll get up off that couch I refer to and get to the movie theater on on a

weekday or on weekends. We do get this distribution on weekends as well. We had, uh some of the time documentaries we had ten of the thirty top documentaries in the industry in twenty twenty two, and you know that was led by our number two, the number two documentary in the industry, which was Mother Teresa. So it was a dot on Mother Teresa. So a lot of our faith based content, our films, we have a lot of live content that does come with them because we have

added values. So somebody through our network will do either prerecorded or live added content, but they're added value, i should say. So, so you know that has been a and we're getting into different categories as well. If you look at the Chosen, which we've done three events with them. Now we're getting into episodics, so we did season three episodes one and two late last year and then we did episodes you know, the final episode seven and eight

as well. And you know, to your point that you were talking about maybe early about the communal experience and that type of thing, that's a great example about something

that we sourced out there. We've been talking to these guys for years and we knew that they wanted to gather communally because the only place they've ever been able to see their content is through the app that they have so we've made that available to them in movie theaters, and they came out in droves for not only a Christmas movie called The Messengers in twenty twenty one, but also the episodics that I just mentioned as well, in the example of faith based films or a Winnie the Pooh,

Blood and Honey. What is the benefit to a film distributor, an independent distributor to going with Fathom rather than trying to set up an you know, an art house deal or a regional circuit deal with a more with an AMC or a regal or a cinema. Do you offer them better better economic terms? The economic terms are very favorable, But I think one of the biggest things they come to us for is distribution. And they know that, you know, per my previous comment about who we distribute to, not

only our owners but others out there. They know they're going to get good distribution through Fathom, and they're going to get a marketing partner as well. And with that marketing, you know, comes things like you know, they'd have to pay for trailering, you know, if they go to traditional route. Our economic deal and our comprehensive deal involves dedicated trailering that we have as a deal with our owners out

there as well. So so there's marketing assets that they get get access to, certain things that we have access to with our owners. Maybe that's the loyalty programs that are out there. So a lot of its distribution, a lot of its marketing, and again it's an end to end solution. A lot of our content providers they just you know, they don't want to, you know, go through everything that there is to go through a traditional distribution and it's a very turnkey approach with us. So that's

what a lot of the content partners do. And there's a lot of content partners that are coming to us that that have done traditional distribution as well. I mean we did Life Mark with the Kendrick brothers. You know. Fireproof is what they've done in the past amongst other movies, thirty to sixty million dollar movies and Fireproof did about five and a half million dollars with us. That was a picture with Kirk Cameron, who we've worked with in

the past to do live events with us. So it's it's just a it's we try to make it very very easy for the content providers to get their content on screen and distribute it. Is the box office split? Is it about comfortable to what it would be through a more traditional exhibition. Um, you know what our content Our economic model is based on a rev share off the tickets, and it's very unusual. We don't pay a

dime to acquire content. We basically license content for a period of time and then there's a piece of the box office that automatically comes off the top and goes to our theater owners or theater affiliates, and it's all equals, so it doesn't matter whether it's our owners or affiliates. And that percentage is a little bit less on weekdays because of the opportunity costs, and it's a little bit more on weekends because the opportunity costs of getting that

screen on the weekend is a little bit more. And then generally after that we would depends who. It depends on who brings what to the table in terms of a marketing plan, but generally it's fifty fifty after a there's a contribution to our theater operators. And so the reason it's set up that way is that everybody's got a dog going to haunt that that way and everybody has an incentive to bring what they have to the

table to make that film as successful as possible. Exhibition, Fathom Content, and any of the marketing partners that might be brought on as well to handle the P and A. So so yeah, it's it's it's a very different model, and in many cases it's it's much more favorable to

the content provider than they could get if they went direct. Well, as you're talking about independent productions, that you know, a turnkey solution to P and A, which is so such a big part and important to get right and expensive part of the movie making after you've spent all the money to make the movie. So I can see I can see the appeal of that, especially to independent Talk a little bit more about the focus on Monday through

Thursday and why that matters to exhibitors. It sounds like, you know, getting people in there, any anything that will get people in there at a time when the room is usually is going to be a good thing for an exhibitor. It is. And you know, coming from exhibition, and I'll speak maybe not in current times, but in times you know, way prior to the pandemic. You know, these theaters are all least for the most part, for most of them, you know, probably ninety five theaters at

least are least out there. So there's a tenant landlord issue, and they're paying rent. These theater operators are doesn't matter whether it's Monday or a Friday night, they're paying. They're paying the same rent. And I can tell you that, you know, way back in the day, we actually had discussions about does it even make sense to leave the theater open Monday through Thursday, that's how quiet they are.

And you know, obviously the answer to that is the least prohibited and you couldn't do that, but if you could, it would make financial sense to do so, because you're doing most of your business Friday, Saturday and Sunday, no big secret. So I think starting the business, you know, you're ago, you know, Alternative Content and starting the Fathom business. That was actually a business that was purchased by amc

reegoing Cinemmark back in twenty thirteen from National Cinemedia. Now National Cinemedia has made people know as the leading cinema advertising operator out there. A company that I helped found as well, and it was a step child. You know, Alternative Content was a stepchild to advertising in theaters because most of the revenue was coming from advertising at that time.

And so you know, the theater owners now amc reegoing Cinemark, found it in their best interests to separate this business, focus on itself, and then make it something more than that Monday through Thursday business. And that's literally what it has become. I can tell you it was probably a thirty million dollar business when the Three Circuits bought the company. When I joined in two thousand seventeen, that jumped to fifty five million dollars, and then by two nineteen we

grew to eighty million dollars before the pandemic. And just to give you some context, in two thousand and twenty two, our company was eighty six percent of two thousand nineteen numbers, where there's you know, the general industry was sixty six percent, give or take of two thousand nineteen. So it gives you a little context about the growth opportunities that I talked about before with the Gun Cinema. I can't do the Keger in my head, but I know it's good.

That's pretty impressive. And in terms of like, is there a sweet spot for the time of day that you have an event is in my understanding, it's kind of earlier than an usual evening evening sweet spot for a for a more traditional film. Yeah, we're usually taking up maybe you know, one show time a day or a traditional run during the days, maybe five show times on average, that type of thing. And it depends, it really depends

on the type of content. If it's children's programming, we're probably going to be looking at a Saturday or Sunday morning. You know, we're trying to get in there where it's between nap time with the kids, depending on the age or we're you know. So these are the kind of things that my team goes through in terms of recommending optimal distribution times with play age and showtimes, and they're

very very good at it. So, you know, there's that, and on the other end of the spectrum, maybe there's the Metropolitan Opera, so that comes you know, we do about twelve events a year and that comes out of comes out of the Met in New York Live, and that's a matinee on a Saturday. So that at the average age of a Met goer is about seventy three

years old. So a little bit a little bit on the other end of the spectrum from the kids, and then we repeat it with a matinee and a evening show the following the Wednesday as an encore to give that audience an opportunity to get to the movie theater as well. So it really given how diverse our businesses

and our content is. Um, you know we need to pooh for example, you'll you'll probably be running or exhibition will be running maybe seven and a ten o'clock show, It doesn't matter what night, you know, that type of thing.

So it's it's really all over the place, but it's very focused and targeted at when can we create a convenient time for that customer to get to the movie theater Having been to that, I have had the good fortune to have gone to a Metropolitan Opera production, and I think it's it's wonderful that through this distribution, this long standing distribution arrangement, I know that the MET is one of your long standing partners, that people can see

the amazing spectacle and talent that is on display in

these operas. It is it is I think you know, any anybody the MET will tell you that it is an older audience and sadly seems like it's fading, and hopefully this is a way to make it available to people that would never be able to get to Lincoln Center and see the the incredible spectacle that is just that is just this this art form that is you know, that that really needs that needs the boost of having more people than can get to Manhattan and Los Angeles and Paris and Rome to be able to hear this

incredible music, the beauty of the Met when that's I mean, it's been You're right, it's been a long, long term relationship. We have a great, great relationship with them, and it was an ingenious idea that would predates my time at Fathom to actually take that live out of Lincoln Center and bring it not only to the United States but

all over the world. And I think the one thing that really impressed me when I first became familiar with the Met and the relationship and the programming of it was was kind of like you said that if you're sitting in that movie theater, you're actually seeing something that you cannot see. If you're sitting in that seat at

the mat, you're seeing something in backstage. You're seeing costume changes, you're seeing some backgrounds, you know, stories about the actors or whatever, and it really is fascinating and will grab your attention in movie theaters. And that's also something about Fathom in general. Every single one of our events, whether it's a classic movie or the mat or whatever, has

added value content. Like I said before, for example, for some of our classic movies, now we just hired Leonard Malton to give a four or five minute introduction to every single one of those. We have Casablanca coming up and I just saw, I just saw his intro to that, and he did an absolute fabulous job. So you know, one of the renowned critics that is still left out there. He just that he's a super super guy into the super job for us. So it brings that added value

to the audience. And by the way, we command a little bit higher ticket price at the box office as well because of that added value. So that all plays into the model with Fathom with classic movies. I did see Casablanca was on your on your upcoming slate. What, of course there are many classic movies. Is there something that makes a classic movie that really work for a Fathom Events presentation? Yeah, the first The first thing is an anniversary title. So it's it's it's got to be

an anniversary. You love anniversary's. We love anniversaries, and I mean, you know, we look at things like every five years. So we do have a slate that says, Okay, this one's coming out, that one's coming up. But the as I always say, the classics are what reminds me of how old I'm getting when I see a rain Man that we're going to do later this year, or National Lamp Run's vacation or something that just doesn't really seem like it should be a classic, but it actually is.

We're all getting older, so so you know, the classics have been a great, great source of entertainment for our audience. Is a great source of revenue actually, and we've got

such a great partnership with all the studios. But the reason for the getting back to the anniversary typically you'll get home Entertainment division of the studios to participate with the marketing or whether that's PR or you know, whatever it is social and they may be releasing a blue Raid do you know, whatever it might be as part of the anniversary, so we'll help them with that advertising

in our movie theaters as well. So great mutual relationship. Yeah, and for the studios, you know, to be able to dust off a you know, custom blanca and get it, you know, get it, put it out on it, give it another run. It's I think some of these are some of the most amortized movies of all time. But but also I mean, you know, it's a chance to see them on a big screen. I was fortunate that I did grow up. There was a wonderful revival house in South Pasadena where I grew up, and I just

got to see so many great movies. And there's just no there's no replacement for seeing it on that big silver screen. It's it's it's it's interesting because we did. It's a wonderful life and this past holiday season great movie obviously, but you could, you know, here's the thing.

You could see that as all your listeners knowing, you know, you could see that on TV starting the day after Thanksgiving, if not Thanksgiving, and running all the way through Christmas, and and on Prime Network too, right, So it people came out to the movie theaters to see it, and I have my doubts, and I'm like, but it just tells you what a great, great movie that is, and how people want to take their grandkids to that or whomever you know, their family members and just make it

a communal outing at the movie movie theaters. So it's a great example of the classic movie that you can see on that little box at home if you want, but people wanted to actually see it at movie theaters Somewhere. Frank Capra is smiling over that. Don't go anywhere. We'll be right back with more from Ray Nuts, CEO of Fathom Events. And we're back with more from Fathom Events CEO Ray Nuts. You mentioned you get good trailer support from your parent companies, which is a very big footprint

and obviously a huge boost. But are there other things that you do. Do you use social media? How do you get the word out with your target audiences, which sometimes are not the most artment moviegoers. Yeah, I mean we have a great, great marketing department. There's we rely a lot on social and I know a lot of people just talk about social, but our social is very, very targeted to that audience. Uh. In terms of the trailer,

it's great. You know, I've mentioned winning the pool a couple of times, but you know, we were fortunate enough. We try to program content so it gets the eyeballs that it needs as well. So we were trailering in front of Knock at the Cabin for two weeks prior to winning the Pooh coming out, so you know the

audience that we need. UM. So there's that. We also rely on our content partners to bring a solid marketing plan to the table and that's all negotiated in advance of us accept that are licensing and distributing content to the theaters. So if there's if there is a solid marketing plan, we obviously are interested in it. But I will tell you there's we do about one hundred and seventeen while last year we did one hundred and seventeen events during the year UM, and we look at about

three thousand pieces of content. So it gives a little perspective on how many you know, things that we look at. UM. And I sort of look at at Fathom as kind of kind of servicing this middle window that's really not competitive with anything at the end of the day. UM, it's you know, there's content that that is worthy of product production that goes to the major studios and so forth.

Although I will say Fatom is the temph largest distributor in North America right now behind all of those guys Disney, Warner Brothers and so forth. Um. And then on the other end of the spectrum is content that you know, we look at and it just doesn't meant for the big screen. So we reject that and it probably never does get get to hit the big screen. For the most part, we service that thing right in the middle. And um, and it's a it's it's not competitive, it's

an incremental window. And it's a way for content partners to certainly um, you know, monetize in a different window and an incremental incremental window um their content with Fathom, right. I know that before coming to Fathom, you have a long a long history, a long track record of working in exhibition and film the film distribution area. What, um, you know, what what do you think in the big picture?

I know this, we could talk for another hour about this, but in the in the big picture, what do you think is going to be? What are what's the road back to you know, real health for traditional exhibition. I just loved if you have any thoughts about what the marketplace needs to do, because one thing I know is that even before the pandemic, there was there was some

pain in them in the sector. It was, there were there were some there were some problems that were kind of coming to the bore, and then of course the pandemic just was the wallop that you know, nobody really saw coming, but would love your perspective on the larger inhibition. Yeah. I had spent thirty to thirty five years on the theater exhibition side of the business with United Artists Theaters and then a Regal Entertainment Group before coming over here

to Fathom five and a half years ago. And I've seen in those years many many changes in this industry. I also come from the cable television background, so it was you know, VCRs and then cable television that was going to put theaters out of business and that didn't happen, and it was windows and that has had an impact on the theatrical business. But it hasn't put the theaters

out of business either. You know, theaters obviously went through a very difficult time, as did Fathom during the pandemic. So coming out of there we had a Fathom, we had an acronym called Hope. You know, it was the you know, I started this right at the beginning of the pandemic. I said, I don't know where this thing's going, none of us with faces before, but it's the health of our organization. We need to remain optimistic, we need to be persistent in what we're doing, and then we

need to excel coming out of the pandemic. And certainly in that excel period right now. I've been very fortunate enough in my career to maybe be at the right place at the right time. I formed four or five joint ventures with theater operators. Fathom was one of them. NCM was one of them. DCIP financing the technology to put into movie theaters DCDC, which actually you know, put a network into theaters. And so you know, I look at Fathom as being in the right place at the

right time right now. In terms of the biggest the bigger picture with the industry, there's there's no smoking gun that is, in my opinion at least that's going to quote say the industry or move it forward. It's people with vision that entails many different things, and I'll just relate it to distribution of content because that's what I'm in right now. You know, people recognize, you know, when Fathom finishes eighty six percent of twenty nineteen the industry

sixty six percent. That should send a message that this is viable in terms of the future of the business. Not Is it the holy grail that's going to say the industry. Absolutely not. I'm not going to ever pretend that that's going to be the case. I hope I eat my words. But anyway that that that probably won't happen. Will it be a vital factor of many different factors

in the industry. Absolutely, And so I think I think the industry has some visionaries that have done some things in the past, have learned some things in the past, have been humbled. You know, we've all been humbled by the pandemic obviously in the past. And I think that those folks with the greatest vision of a little here, a little there, and a little over here will will really help the industry grow and becomes something that, you know,

whatever the next phase is. But I can tell you that the kind of content that Adam is distributing, we will play a significant part of that moving forward. Thanks for listening. Be sure to leave us a review at Apple Podcasts. We love to hear from listeners. Please go to Variety dot com and sign up for the free weekly Strictly Business newsletter, and don't forget to tune in next week for another episode of Strictly Business.