Decoder: Alamo Drafthouse CEO on the future of movie theaters

On this episode of Decoder, Nilay talks with Shelli Taylor, the CEO of Alamo Drafthouse. Shelli stepped into her new role as CEO during the pandemic. In the conversation, Nilay and Shelli discuss the steps she had to take to get her company back on solid ground — including justifying high fixed costs of expensive lightbulbs — and how the government has failed to manage the pandemic effectively for business owners. They also talk about what it will take to safely reopen theaters and what the future looks like, especially in the streaming age. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Nilay Patel?

  Hey everybody, it's Eli from the Vergecast. We've been running episodes of my new show Decoder on Tuesdays in the Vergecast feed. This is the last week we're going to do that. If you've been enjoying Decoder, and I hope you have, head over to the Decoder feed and subscribe. It's a new show. I really appreciate your support. I appreciate all the feedback you've given. It has been a really fun watch experience, and we've got some great guests through the rest of the year and into next year. It's really fun who has wanted to be on the show. So go subscribe to Decoder. I really appreciate it. After this week, we're going to take a little break from publishing anything on Tuesdays in the Vergecast feed, but chat show is going to keep going just as crazy as ever. So we'll see you there on Friday. All right, here's Decoder, our guest, Shelly Taylor, the CEO of Alamo Drafthouse.

• 0:43Speaker 01

  This episode is brought to you by On Investing, an original podcast from Charles Schwab. Each week, hosts Lizanne Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab Center for Financial Research, bring you fresh insights on what's happening in the markets and why, and what the implications might be for your portfolio. Join Colin and Lizanne as they explore questions like, how do you evaluate corporate bonds that look interesting? And what sectors are on the move right now? Download the latest episode and subscribe at schwab.com/oninvesting, or wherever you get your podcasts.

• 1:28Speaker 01

  This episode is brought to you by On Investing, an original podcast from Charles Schwab. Each week, hosts Lizanne Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab Center for Financial Research, bring you fresh insights on what's happening in the markets and why, and what the implications might be for your portfolio. Join Colin and Lizanne as they explore questions like, how do you evaluate corporate bonds that look interesting? And what sectors are on the move right now? Download the latest episode and subscribe at schwab.com/oninvesting, or wherever you get your podcasts.

• 2:13Nilay Patel?

  Hello and welcome to Decoder. I'm Neelai Patel, editor in chief of The Verge, and Decoder is my new podcast about big ideas and other problems. Today, we're talking about a big problem that needs big ideas: how and when to reopen movie theaters during this pandemic. My guest is Shelly Taylor, the CEO of Alamo Drafthouse. That's the quirky and beloved theater chain with locations across the country. Now, Shelly's in a really interesting spot. She started her job as CEO on April 30th. That's this past April 30th, after the pandemic had begun and after Alamo had already shut down 41 locations. Shelly had been an executive for Planet Fitness and Starbucks, and Alamo's

• 2:53Nilay Patel?

  founder, Tim Leeg, recruited and hired her before the pandemic to manage growth and expansion. But instead, she found herself confronting a crisis. We talked about that transition and what steps she had to take to get her company back on solid ground, where she could save money, and where she thought cuts would damage the Alamo customer experience. I will tell you, Shelly is not shy about saying the government has failed to manage the pandemic effectively. We also talked about what it will take to safely reopen theaters and what the future of the movies looks like, especially in the age of streaming. Streaming had already shifted the movie business towards blockbusters. All those mid-budget romantic comedies have kind of turned into Netflix movies. But the pandemic means even blockbusters are shifting to streaming. Wonder Woman 1984 is on HBO Max

• 3:38Nilay Patel?

  Christmas Day. It turns out there's more discussion between the big studios and theater chains about that than you might think. Shelly offered us a peek at those conversations. Also, I completely love a business that has a high fixed cost for expensive light bulbs. You'll see what I mean. All right, here's Shelly Taylor, CEO of Alamo Drafthouse. Here we go.

• 4:10Nilay Patel?

  Shelley Taylor, you're the CEO of Alamo Drafthouse. Welcome to Decoder.

• 4:14Speaker 02

  Thank you. Glad to be here.

• 4:15Nilay Patel?

  I was just reading your bio and the backstory here. I gotta start with this. You became the CEO of Alamo Drafthouse on April 30th. So you have stepped into chaos. I think Alamo actually shut down 41 theaters in March. What was this recruiting pitch like? Like, did they call you and say, hey, are you interested? Like, was it already in the works? Just, it seems like a wild way to become the CEO of a movie theater chain.

• 4:41Speaker 02

  Yeah, it is. It does feel wild, but it was in the works at Christmas when Tim and I met and started talking. And, you know, I was just drawn to this incredible brand and this opportunity to, you know, help take something iconic and grow it even larger, right? And then all of a sudden, the pandemic hit and here we are. So we've got this little issue to get through, then we can go back to the original plans.

• 5:10Nilay Patel?

  What was the, just the first day, April 30th, you show up, you gotta introduce yourself to everyone. Like, there's usually a script, right? The new CEO follows. You say something like, first, I just want to listen. There's like, there's the usual stuff. Was it very different this time? Or did you just come up running?

• 5:27Speaker 02

  A little of both, right? I mean, you do talk about, like, just really wanting to listen and to get to know people. You don't have the advantage of the water cooler in the office and that proximity. But at the same time, there is nothing like a crisis to create a need for connection and speed to trust. And really fortunate that the company and the teammates have been so welcoming and willing to just assume good intent and want to move forward versus having to do some of that initial stuff. So it was pretty fast. And no one's kicked me out. We're seven months in and I'm still here and things are going pretty well, considering.

• 6:09Nilay Patel?

  So I always try to ask everybody to begin about decision-making frameworks. Before Alamo Drafthouse, you were the CEO of a large group of Planet Fitness locations. You were at Disney before that. Tell me about your general way of making decisions. How do you think about evaluating your choices and then actually make, coming to a decision?

• 6:29Speaker 02

  You know, I think it's a couple of things. One is just knowing who and what you are. It's the beauty of everywhere I've worked has had a really clear sense of their purpose and values and the problems that they're trying to solve in this world. So always starting with that framework and, you know, driving from there. I think that one of the things that I took from Starbucks and have valued over the years is that you always put people into that equation. So when you're looking at a decision, it's the stakeholders, it's your customers. You know, it's the people on your team, you know, having all those points of view. And then sometimes it's the broader community, depending on what the product is.

• 7:15Speaker 02

  And so I think if you start there and then you put in a good dose of data and a good dose of your gut, usually that's a great way to go. I mean, it's pretty simple and obviously depending on the complexity of what you bring in or don't bring in, but you know, it really is values and people and direction.

• 7:34Nilay Patel?

  So the reason I ask that question is because right now you're managing in a crisis where there is a flood of data. You have a very physical plant kind of business. People go to a movie theater and sit down and stay there for a while. How are you managing the influx of COVID information? There's a massively disjointed federal and state response. There's people who are refusing to wear masks. There's, right before we came on, New York City closed its schools again. It feels like there's just a flow of information about the pandemic and how it's going and how we're handling it. You're saying there's like, add a lot of data, but the data is messy. The points of view are messy. How are you just managing that?

• 8:15Speaker 02

  Yeah, that's a great question and I appreciate, and I really want to reemphasize, the lack of coordinated government approach is like crippling the nation. And if there is a message, and I know lots of people are saying this, but if there is a message to our government right now, you know, it is critical that they have a coordinated approach. You know, and the way that we're approaching it is, you know, one, you know, just my own prior experience, living and working in China and seeing how this has been approached in the past, you know, helps watching countries that are, you know, and businesses in countries that are making good decisions helps. And then we've just been, you know, just trying to take a very...

• 8:59Speaker 02

  Steady approach, and that is with the information that we do know and that is not constantly changing, and some of that is, but there are a few constants out there. You know, is how can we make our experience as safe as possible from purchasing your ticket to the minute you leave the theater? And we haven't wavered from that. You know, we've done a lot of, you know, pretty scrappy, fast innovation for online ordering, both of tickets and food, you know, how you come into the theater, doing the spacing of people so that six foot distance. We had, before it was popular, you know, we said that we were going to enforce masks for everybody. We thought about our kitchens, creating a smaller menu so that we could social distance within our kitchens.

• 9:44Speaker 02

  How do we not breathe on food, touch food? How do we help people exit the theaters? I mean, you just name it. We've taken every single precaution that we can, and we've gone as far as we could. So we've just said, what is the safest stringent possibility? And yes, there's going to be this constant influx of information, but until there's something that comes in that says differently, we're not going to waver. And, and that's just been our approach. And I don't know with all the variables out there, how anyone can do it differently.

• 10:11Nilay Patel?

  Is that a set of advisors and team members you needed to build? I feel like most movie theater chains didn't have a lot of like epidemiologists on staff before COVID. But now all of us are, you know, we're all looking for that expertise. We're all looking for those guidelines. How have you built that muscle and that skill to evaluate those decisions?

• 10:29Speaker 02

  Well, we do have a really great source of, a lot of people who are willing to help us, whether it's, you know, our, our PE firm, Ultimate Capital, gives us a ton of information and advice. Whether it's, you know, our, our insurance and, you know, brokers on that side bring in a ton of advice. And then, you know, we've got strong relationships with University of Texas UT.

• 10:56Speaker 02

  You know, and the information that you can get, you know, publicly. So, you know, we've, we've probably done what a lot of people do. We don't have a ton of money right now. Our resources are very skinny, so we've had to kind of do it yourself as best as possible. And, you know, we'll continue to, to probably operate in that method, but it comes back to that need for a coordinated government of approach to this. And the government really could be doing a better job at providing clear guidance that does not consistently change to businesses and quite frankly, is equitable to businesses.

• 11:28Nilay Patel?

  What do you mean by equitable?

• 11:29Speaker 02

  Just small examples. In some cities, we're not allowed to open, or we can open, but we can't serve food, yet the restaurant next door can serve food. That just doesn't make sense, you know, and how you operate, you know, what's the logic and, you know, set a, a simple, clear set of criteria that everyone operates off of. Because part of the problem is this, the noise and the, and the confusion that goes out to the, to our, our customers and our guests. You know, it's safe here, but it's not safe with you. And people can't discern that, you know, so it really should be agnostic to the business. What, what is safe and what's not, to the best that we know today. Right? Yeah. Asking for a lot, probably.

• 12:11Nilay Patel?

  Well, you know, there's a new administration. Well, we'll see how it goes.

• 12:14Speaker 02

  Yes.

• 12:15Nilay Patel?

  One of the things about the pandemic that I've heard from many CEOs, executives, is that this has accelerated trends that we already saw coming. In some cases, those trends are positive. We've seen a massive acceleration in e-commerce. Everyone already saw that coming. We just turned the knob up. There's been a pretty loud conversation for years about the future of movie theaters. And some of that has played out in different ways, like rom-coms don't really get made by Hollywood, but every other Netflix show is like basically a rom-com. And so we've just seen the dynamics of the industry change. I've always thought of Alamo Drafthouse as being slightly different than your average gigantic chain movie theater. You have food. It is an experience. You're running old movies. People come there as a social event.

• 12:58Nilay Patel?

  Do you see it as this is accelerating the trend that was already coming? Or, you know, you started by saying, we'll just get back to work when it's over. Do you see this as an aberration on the plan that you already had for your company?

• 13:10Speaker 02

  Well, I mean, so, yes, the world is accelerating in many ways. What won't go out of style is community and social experiences. And so I think while the industry was ripe for disruption and we're seeing that, Alamo's secret sauce, really, right, is creating these communal experiences for people, bringing the community together to laugh, cry, gasp, whatever, but have fun together. And that that won't go out of style. And so for us, it will be going back to the secret sauce of what makes us special. And it is, you know, coming into, you know, we, we show over 2,000 films a year.

• 13:51Speaker 02

  It's more than double what other chains show because we, we bring in a really thoughtful, you know, slate to, to our audiences and that's what they want. They want more than just the big blockbusters, you know? And then we do create great food, you know? And sometimes that food ties to the, to the film, which is really fun. And all the different experiences that we do create. And so that, that won't go out of style. I do think what's accelerating and things that were on our list is we wanted to do the mobile food ordering in advance where if people wanted to figure out what they want to eat and order that with their tickets and not have to do that in the theater, we, we wanted to do that, so we brought it forward, you know? And, you know, Alamo on demand, that was something that was in our hopper of a great

• 14:35Speaker 02

  idea of how do we curate really different streaming opportunities for our audiences that, that the big streamers aren't and probably will never do. You know, so we have brought things forward and I think as we move into the future, there'll be some other things that we think about, but the core won't change. You know, that, that community, that experience and, and creating something that you can't get at home, that won't change, won't go out of style.

• 15:02Nilay Patel?

  We're going to take a break, but when we come back, I'll ask Shelley about what goes into creating the physical experience of seeing a movie at Alamo Drafthouse. The seats, the screens, the food and those light bulbs.

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• 16:10Nilay Patel?

  All right, we're back with Decoder. Alamo Drafthouse has built itself as more than just a movie theater. It's an experience. So I wanted to ask Shelley about how she thinks about the basic parts of operating a movie theater and where it goes from there. I spend a lot of time talking to tech CEOs and they they ship me a phone and they're like, it's great. And that's the end of it. And certainly they have lots of people working in offices and they have a physical plant to manage. But your product is a physical experience for people. So I'm curious, how do you think about, you know, seats? Like, we're gonna have to install some seats. Like, what is the decision making process to like, choose the seats in the theater and maintain them over time? Like, do you go to competing theaters and sit in their seats and think, well, these are better than mine? I gotta, we're gonna have to improve them?

• 16:54Nilay Patel?

  Like, that's a set of decisions that I think rarely get foregrounded. But it seems clear that you have to think about them all of the time.

• 17:02Speaker 02

  Yeah, so Tim Leegar, founder, I don't think he went to competitors and said, I mean, you know, some degree, what are they doing? I mean, he's created kind of the, you know, cinema eatery experience. But, you know, what he does is like, he's such a huge super fan, right? And he's like, how do I want to experience this? And one simple detail that you wouldn't necessarily notice is the space between the screen and the first row. Like, I think we have eight to 10 feet on any other theater, meaning like, we go back. So we could have squeezed in another row or two, but we said, no. Like, we want to make sure that even if you're in the front row, that is a seat worth having. Um, you know, when we look at beer on tap, and again, it's just, you know, all these details.

• 17:47Speaker 02

  But when we look at beer on tap, uh, we go to the local market. We're like, what is important for this community? And we buy local beers. We still have, you know, some of the traditional beers that you would expect. But we think about all those things because we're like, if you're going to spend the money, I mean, if you're going to go out of your house, come to the theater, all of that and spend the money. Like, what do you want? You want something where someone who loves movies has curated it and thought about all that. And it's like our pre, you know, our, our pre-show and no texting and no talking. Like, hey, you spent a lot of money. We know you don't want to hear all your neighbors, um, next to you. It's all those little details that Tim has spent, you know, and the company, but, uh, you know, Tim is the visionary, has put into, you know, creating this experience.

• 18:32Speaker 02

  And, you know, even in COVID, we've thought a lot about that. Like, how do we, you know, we're not, we're still making our pizza from scratch. Uh, quite frankly, we, we haven't changed what makes our great quality great.

• 18:44Nilay Patel?

  How do you think about the technical side of just showing a movie, right? That's changed a lot over the past decade. You're talking about sound and screen. There are audio formats and speakers. How much of a tech operation are you actually running just to hit play and make sure it all sounds good and looks good?

• 19:02Speaker 02

  Yeah, well, I, this is not my area of expertise yet. But I'll tell you, our, our projectors are amazing. I mean, they've come a long way. They're a very expensive piece of equipment. What we do do differently, um, than most of our competitors is that we're changing our bulbs out regularly and we don't wait till, for them to get to the end of life. And that seems like, uh, and it's very expensive. They're thousands of dollars for one of the bulbs. But it makes a huge difference in the quality of the screen, um, and, and that film that you see. So we, we do a lot of things like that and it, and it is technical, you know? And, and we have some of the best people in the industry who work for us, um, you know, that, that guide us in that and, and stay on top of it.

• 19:47Speaker 02

  Definitely not where I can speak fluently yet.

• 19:50Nilay Patel?

  Just to be clear, you're the CEO, it's April 30th, you start, you're like, okay, show me the P and L's. And someone's like, well, we got this COVID problem. Also, here's our, our light bulb cost. That's a real, and you're like, this is higher than the industry and we're good with it.

• 20:04Speaker 02

  Well, yeah, I mean, I'm super curious, right? Like, I, I was like, I want to see, you know, even if we're not showing films, like, take me up and show me the projector. You wouldn't geek out and say, you know, show me all this stuff. So I, I, you know, I've spent time in theaters, I've worked a few shifts, not enough, but I'll get out and do more. Um, and trying to learn it rapidly, you know, but our, our focus really is on survival. It's working with our banks, it's working with our landlord landlords, you know, all of, all of that. And then quite frankly, trying to take care of our people, you know, in the situation, that's, that's a lot to do.

• 20:41Nilay Patel?

  You've never, I'm so, I'm so focused on the light bulb thing because it's such a, it's such a good stat, right? Like, we spend more money on light bulbs because we care, but there's never been an instinct to say, hey, we could, we're in a crisis. We could save a ton of money if we just run our projector bulbs longer.

• 20:56Speaker 02

  Yeah, no, that's not our, that's not our goal, you know? I think there are places where we can improve our P and L and we are finding those and making improvements across the board. But it won't be in the experience and it won't be how we treat people, whether it's our teammates or our guests. That's not where you save money. You save money on how you negotiate contracts and, you know, all, all the costs behind the scenes that don't touch people. That's, that's where we need to be more disciplined and, and where we haven't had to focus. And, you know, quite frankly, now we are, like, the spotlight's there, but it will not ever be on quality.

• 21:34Nilay Patel?

  So tell me about negotiating those contracts. I, in reading before the interview, it sounds like your landlords are working with you. They're developing new cost structures. Do you think that that is a, well, tell me what some of those are? And then do you think that that will last through the pandemic? That landlords are working with theaters because we know these are important to the community? Or do you think it will shift back to your standard lease agreements?

• 21:55Speaker 02

  Yeah, so first of all, it is a huge range. We have some landlords who are amazing and get the fact that there's burden sharing throughout the supply chain for any business. I mean, you know, these are different times than normal. And then we have some landlords, quite frankly, who they just don't care and they just want the terms as they are today and are very difficult. And, you know, so we've, we've got the gamut and, and everyone does. But, you know, the conversation that we're having, whether it's with landlords, whether it's with banks, vendors, this isn't like a poorly run business. And, and I speak for thousands of businesses across the United States right now, not just

• 22:36Speaker 02

  Alamo, but there are many businesses like us that were super healthy until March. And now all of a sudden, we're in a crisis situation and bankruptcy is not the solution. Like bankruptcy is the solution for needing to shed off a bunch of your real estate assets or assets. And that's not necessarily the case. And so the way that we're going to change our economy or jumpstart it again when we come out of this, and, and elements, you know, aspects of the economy, some, you know, tech is thriving, right? Or some tech. But for service industry and those that are impacted by people physically walking in the door, it has to be burden sharing from all, everyone, from the banks, your debt,

• 23:19Speaker 02

  you know, your debtor, your creditors, to your landlords, to your vendors, but you as the business have to burden share too. And right now, we do have people that think it should be all about the business. It's an impossible scenario. And so I think for everyone, you know, to look out and say, how do we, again, this isn't about win lose, because if it's a win lose, the nation loses. It needs to be a win win for everybody right now, and it's just not going to be a great win win for a while. But if we can survive 18 to 24 months, the economy will come back. We know that, like we are resilient as a nation, but we do have to, to find that path.

• 23:57Nilay Patel?

  Are you, in addition to doing sort of the corporate work that you're talking about with contracts with vendors, have you engaged on the political side? Are you out to the states you're in? I would say, are you out to the federal government, but that seems quite messy. Is that work that you're doing as well on the policy side?

• 24:15Speaker 02

  So I would really like NATO and John Fittian, and you know, they are doing a lot of that heavy lifting and we are thankful for their leadership in that, you know, lobbying and having.

• 24:26Nilay Patel?

  NATO is the National Association of Theater Owners, not the defense organization.

• 24:31Speaker 02

  Thank you. And it's a good thing you said that. My first week on the job, I'm all, you're calling NATO? Give me a break. So, yes, and now it's part of my lingo. But, yeah, so they've, they've taken a huge leadership role, but we too have, you know, been talking, you know, Tim talked to, was on the phone with Nancy Pelosi's office. I'll be on the phone with the city council in San Francisco, you know, I've talked to local lawmakers here in Texas. You know, we are having those conversations because again, and, and when we have these conversations, it's not just about Alamo and what we, we matter and we care about Alamo. It's, it's really trying to help everyone think about the broader business community and how do we move forward together?

• 25:16Speaker 02

  Like, that is critical right now.

• 25:18Nilay Patel?

  Over the summer, one of the biggest controversies in Hollywood was whether or not to release Christopher Nolan's Tenet into theaters during the pandemic.

• 25:27Speaker 05

  Big news for the movie business, Warner Brothers' Tenet from Christopher Nolan. It was set to be the first big theatrical release post-COVID in August. It's being pulled from the release schedule. Warner Brothers saying it'll share a new release date for later in 2020 shortly.

• 25:41Nilay Patel?

  The movie eventually came out and no one went. Tenet was supposed to be a huge hit, but as of right now, it's only generated 57.4 million in box office sales in the US and Canada and 300.4 million globally. And it's going to come out digitally on December 15th. So I wanted to ask Shelley about what that data point told her about the timeline of reopening and really about the future of movie theaters.

• 26:04Speaker 02

  Well, first of all, just a huge thank you to Jeff Goldstein and to Warner Brothers for a studio to take a chance, right? And I think it wasn't, I think there's a couple of things that were happening. One is, there is a lot of noise in the marketplace, even today, where people do not know if movie theaters are open or not. So not even if they're safe, they just don't even know it's a possibility. And trying to cut through that noise has been really difficult. And so when I look at it, I don't see it as, there was a message in it. I see it as, the industry works in a certain way, and we just didn't have some of those key elements. One is enough, and not because of Warner Brothers, but because there's just so much noise,

• 26:48Speaker 02

  but a clear message out there to people that theaters were open, and that they're open in a really safe way, and in a fun way. You know, like, the messaging that we did come out with as an industry was a little dry, like, "We're safe because of, you know, a professor telling you," versus, "Come back to the theater, we've been super smart, but you're gonna have fun, you know, so we've gotta get better at that." And then, you know, no, no movie is gonna stand on its own. It's kinda like, you don't wanna be the only restaurant on a block, you want several. And it's the same with the movie slate, you've gotta have a number of movies out at one time, to draw in audiences. And so again, Warner Brothers was huge in taking that first step, and shame on everybody

• 27:29Speaker 02

  else who, who, who pulled their movies out at the last minute and didn't follow through, you know? And so we, you know, for the, for the studios, we've gotta have a coordinated movie slate again, and a coordinated message of, "We're open," and not just Alamo, but all movie, all movie theaters. It's really hard on the industry when you hear that certain chains are shutting down and not open, it sounds like we're all closed. Well, we're not.

• 27:54Nilay Patel?

  What kind of audiences are you seeing come in now? I know you've, you've been doing some private rentals to families and groups and so on. I know that's been a success. Are you seeing just sort of the day-to-day traffic to the movie theater that you were expecting?

• 28:06Speaker 02

  Well, the private theater, so first of all, super proud, right? Like, again, stood that up really quickly on, with no budget and small resources. So huge kudos to my team and all the people that did it. And the private theater is super fun. It's turning out to be about 55% of our revenue.

• 28:24Nilay Patel?

  Wow.

• 28:25Speaker 02

  Yeah, I mean, you think about it. You pick the movie, you create your own community, and you come together and get to have this great event for, shockingly, a pretty affordable price. And prior to working at Alamo, I would have never thought it was possible I could rent a theater out. Like, that just felt beyond anyone's means. So we've proven we can do that and create this great experience. We still have a lot of just general showings and people coming and have been asked this a lot, and we haven't put a ton of energy around it, but anecdotally, I can see a wide variety of people. You've got the Alamo fans, you've got a pretty wide age range. It's not just millennials or whatever, you know?

• 29:08Speaker 02

  So I think it's just movie lovers and people who, you know, are wearing masks, have found a way to be safe and are picking a few things they want to do, and movies are one of them.

• 29:19Nilay Patel?

  By the way, when I was in high school, one of my friends, her dad was the manager of the local theater, she had a birthday party, and it was the coolest thing. So you're right, I mean, that's, it's one of those things that everybody dreams about. It's cool that you can do it, but you're not getting first-run movies such as they are anymore. That's Jurassic Park and The Goonies and older movies in that experience. What does that tell you about the value of the experience of going to the movies versus the novelty of the blockbuster movie coming out?

• 29:46Speaker 02

  Well, it goes back, I think we need both, right? I don't, I don't think it's an either-or. But I do think that it speaks to the fact that people are looking for experiences and that, you know, we truly have been for a while, and I think into the future, we're an experiential economy. And so the fact that people can come and find their favorite movies, they can create their own parties and dress up. You know, or do something fun around it is is critical. First run movies and blockbusters are still going to be important. People want new content and they want to come and see it. You know, that huge, you know, that that film, you know, think about the filmmakers. They're putting their life into telling these amazing stories.

• 30:32Speaker 02

  They're spending a ton of money and they want that to be on a big screen, big sound, you know, with a large audience. And people want to see that too, because it's great at home, but it is not the same at home as it is in the big theater. You know, so I think it's both. I think the private theater will will easily carry into the future. We think there's something there. You know, we're going to continue to to work with that product and and see how it evolves and grows. But we we need both and we that will be probably one of the changes for the industry as it evolves. It it won't be either or it won't be or is both.

• 31:07Nilay Patel?

  Well, because I'm looking at kind of the, you know, the the big film studios, Disney, Warner, they all have their own streaming services now. They're very excited about them. Disney puts out Mulan. They try a new pricing model on top of their existing subscription. Went OK, maybe they'll do it again. Obviously Warner has HBO Max, they're like, whole company is pointed at that product. Do you think there will be a shift to releasing stuff on the streaming services at maybe even a high price and in theaters at the same time?

• 31:38Speaker 02

  Yeah, I think, you know, so first of all, we take a lot of hope in watching the fact that more and more blockbusters are being held and waiting for theatrical. If that were the case, you know, there's a whole bunch of movies that could have easily been put on a streaming immediately. And I I'd like to think it's, you know, that the the studios understand, the filmmakers understand there's a lot of lost revenue if you skip theatrical. And there's a way to probably do both, have incredible theatrical and then go on to streaming. And and to shortchange that process probably doesn't make sense.

• 32:16Nilay Patel?

  Do you think that theater owners, and I realize Alamo is a very different kind of theater chain than kind of the the big ones that have held back some innovation on the studio side. But do you think the theaters have have held back some of that consumer innovation? Like, I have always thought to myself, I would just pay a hundred dollars to watch this movie at home and rent it for, you know, just for a night. But I, there's no way I'm gonna go to a theater to watch this like mid-market movie. Just like, let me watch it here now and I'll be done with it. That has never happened. Theaters have always been opposed to it. The theaters have been opposed to Netflix going out to awards because they, they stream the stuff. Like, there's just been a lot of that noise here that seems like maybe it'll come out of the pandemic and those questions will get resolved.

• 33:00Nilay Patel?

  But what is that relationship between sort of theater owners and the studios as the studios try to innovate and quite honestly, use this moment as leverage to get some things they've always wanted?

• 33:10Speaker 02

  I, I think there's a couple of things. I, I think first of all, if theaters and studios think that the battle is between us, then we've lost, all of us. The battle is with COVID and the battle, you know, ultimately is how to best serve your guest. And so, you know, first, like, coming together to, to fight COVID and then get into this new world, I think is gonna be important. And when we get into it, it's, to me, it's silly to think that there is streaming or theater. There's this or that. Content is coming at us faster than ever. No one knew that YouTube would be huge.

• 33:51Speaker 02

  I mean, just take, take whatever innovation over the last 10 years with content and people are consuming more content than they've ever consumed. So I think the question is, how do studios and theaters continue to say, what are the best ways that we can serve our guests and create incredible experiences for storytelling? And so, yes, we may be different, but we also do not want our, our fellow theaters going out of business. We, we, you know, we need them, we all, we need theaters and we don't want to be the lone survivor. That doesn't make sense. But I think it really is unifying around how do we serve our guests? And, you know, for us, the secret sauce is incredible experience, you know, experience.

• 34:35Speaker 02

  We, we take every little, we sweat every little detail. We think about the napkin. We think about how clean our theaters are. We think about, you know, the popcorn. I mean, we think about the quality of the sound. We do an incredible amount around our screens and sound so that that experience is always perfect. And then we're gonna continue to innovate of, you know, whether it's in the theater or whether it's at home, but it, it's gonna be both and people are still gonna come to the theater. I mean, that's just, I can't imagine a world without a theater. I really can't.

• 35:07Nilay Patel?

  When you say we need theaters, you said it a few times. In the post pandemic landscape, it feels like one potential outcome is there's theaters like Alamo, which are curated, which are more cultural events. And there's big chains that show Marvel movies and Little Else on 45 screens. Is that, does that seem like the most likely outcome? Or do you think the big chains will have to change even more?

• 35:30Speaker 02

  Yeah, I mean, everybody wants that crystal ball, right?

• 35:33Nilay Patel?

  Yeah.

• 35:34Speaker 02

  You know, I think that, I think that everyone will have to evolve and change to some degree. And I think as much as this sucks, the pandemic and, and I, there's very few, if any, silver linings because of the damage it's done to people. And I don't want to undervalue that at any, in any way. But at the same time, as much as this sucks, it is a microscope on our business. And for each of us to look back and say, you know, everything from, you know, how do I, you know, select real estate and how do I build out? And what are those costs involved? And are there ways to be more effective and efficient? Can I think about the size and, you know, type of footprint for a theater differently?

• 36:19Speaker 02

  Think about how big an auditorium should be. You know, in some places we're probably overscreened and other parts of the nation, we're probably underscreened. You know, so thinking about all of those to the unit economics. And again, without hurting your quality, there's a lot of lessons to be learned in that and we certainly are learning them and we'll, we'll move forward with those lessons. And, and you know, probably everybody has to, but you know, I, I can speak to the, the big chains and what they're going to do or not do.

• 36:49Nilay Patel?

  We're going to take one more break, but when we come back, we'll talk a little bit more about the future of the physical theater experience and whether we'll see Almo Drafthaus pivot to outdoor drive-ins.

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• 38:24Nilay Patel?

  We're back. I have a few more questions for Shelley about how to keep the movie theater experience relevant during and after the global pandemic. I feel like one of the things about the internet and streaming services is that we have one sort of national cultural moment all the time. Everyone's just, here's the thing that's on Netflix, we're all going to talk about it. It seems like theaters have a big opportunity to create regional experiences and regional moments in a way that has really gone underexamined, right? We just don't do that a lot anymore. Is that something you're thinking about leaning into? Do you have regional curators, or does that happen at the top of the draft house?

• 38:58Speaker 02

  Yeah, it's a mix, right? Like, I mean, you have people in the region who know that audience best and are creating experiences, and our roadshows are a great example. You know, we've done things like, you know, Jaws on the water where, you know, you do an outside screening of Jaws and everybody's sitting in a lake on the water. I personally am terrified thinking about being on the water, watching Jaws. I don't know how people do it, but you know, we've done all sorts of things like that, you know? And so that is something that we've always leaned into. Again, it really goes back to the origins and the vision of Tim of, you know, creating experiences and really being

• 39:40Speaker 02

  the best damn, you know, cinematic experience possible. So, you know, we've always leaned into it. We always will, you know, and it will, and it will continue to evolve as, you know, our guests' desires and needs evolve.

• 39:56Nilay Patel?

  So there's been a flood of drive-in movie theaters popping up. I went to a drive-in movie the other day. Actually, they held Jaws and people came in their pickup trucks with inflatable pools in the back, which was pretty good. Is that something you're thinking about as a, like, we're just, we'll just stand up a bunch of drive-ins and that'll be it?

• 40:13Speaker 02

  Yeah, that's a good question. You know, there's a lot about creating a really good, you know, screen and sound experience at a drive-in. It's just still not fantastic. And we thought, we really did, we thought a lot about, do we go do this for the temporary? Or do we stick to kind of our traditional model of our theater and focus there? And we've, we've chosen to stick with the traditional model versus kind of run after what we believe are short-term fixes.

• 40:45Nilay Patel?

  Yeah, my local drive-in was definitely being run off of a MacBook. Like, we saw the desktop and we saw, saw the mask over and double-click on the movie. And I was like, I don't know about your licensing situation. That doesn't seem, that doesn't seem right. But everyone was happy. So it was, it was a thing. So we only have a few minutes left. I want to ask, basically ask questions about crisis. But you started, you were recruited before the pandemic hit. You came in, you had a plan. What was the vision before the pandemic, before you entered crisis mode? What was it that you wanted to accomplish in your role as CEO of Alamo Draft House?

• 41:18Speaker 02

  Yeah, and you know, our, our goal was to continue to expand and grow and to do it in a way that we never lose our soul, you know, because a lot of times size and scale means that you have to give up that specialness or, or make it a commodity. And so the goal was like to really scale snowflakes and to continue to provide the most incredible cinematic experience possible and, and continue to evolve it and, and really give voice to as many films and filmmakers as we possibly can. And I don't think that goes away. I think it's just going to change, um, you know, or, or maybe take a little bit longer before we get solely back to that, but that's still, you know, the goal.

• 42:03Nilay Patel?

  When you say scaling snowflakes, you mean each individual theater is a unique experience that needs to be managed independently?

• 42:10Speaker 02

  Yeah, I mean, right now, when you go to an Alamo, in fact, it cracks me up. People have no idea that we have more than a couple. They're like, what do you mean there's 41 Alamos? You know, that's my community theater. That's where I go and I see my friends and everybody knows me and, you know, so that, that experience, you know, and finding the economy of scale, that's hard, like, you know, to, to scale and, and keep that soul where everyone thinks there's only one Alamo. And that's what we want to do. And, and I believe that you can do that.

• 42:41Nilay Patel?

  What do you think the, the most critical elements of getting scale right, but still making it feel small? Because I always, just very personally, I always think of The Verge as a big thing that feels small, right? Like, I think our audience, they know, they know who we are, but we have bigger ambitions. So what do you think are the key elements to making it feel small even as you get bigger?

• 43:00Speaker 02

  Yeah, you know, so it's always a cost issue, you know, of how do you do that? And so I think the way you do it is you know what your secret sauce is, you stay focused on that, and then you scale the hell out of your back of the house, you know, your accounting functions, your supply chain, you know, all of that stuff. You bring technology and then make it as, as effective and efficient as possible so that you have the money, the time, the mind share, the resources to create those individual experiences so that when you do- Go to Alamo in LA versus Alamo in, you know, Dallas or, you know, Winchester, Virginia, you know, you have like that local feeling and that's what we, you know,

• 43:43Speaker 02

  that was our goal and will continue to be.

• 43:46Nilay Patel?

  Well, last question, it's a hard one, I apologize, but what is the, I don't know if anybody has the answer, but I'm curious, I'm asking everybody. What's the, the next sign you're looking for, for your business that we will be sort of on the right track? Is it the vaccine news today? Is it a more coordinated federal and state policy? What's the indicator that you're waiting for that says, okay, we can get back to the plan?

• 44:11Speaker 02

  I think, you know, yeah, I agree, this is a hard one, but I think there's a couple, you know, first of all, I do think the announcement of the vaccine gives me incredible hope. What's not being talked about a lot are the therapeutics, and I think that is huge. You know, so combination of vaccine, therapeutics, and then a, you know, coordinated government approach, that kind of from a macro perspective is what we need. And then from an industry perspective, we need to have the slate come back in totality, meaning, you know, we need a coordinated slate again, and it's not one movie pulls out, but rather the whole thing moves. If it needs to move out to April, it all moves out to April, but they don't,

• 44:53Speaker 02

  one studio doesn't leave another studio hanging or whatever, like that, that can't continue. So when those two things happen, you know, I will, we will have a ton more confidence of moving forward. And I'm pretty hopeful that that is, you know, April-ish timeframe.

• 45:11Nilay Patel?

  I do too. Well, Shelley, thank you so much for joining us. That was a great conversation.

• 45:15Speaker 02

  Thank you, and it was a pleasure to be here.

• 45:18Nilay Patel?

  Thanks again to Shelley Taylor for taking the time to talk today, and thank you for tuning in. I hope you enjoy it. As always, I'd love to hear what you think of the show. I'm at Reckless on Twitter. You can email us at [email protected]. If you enjoyed the show, please share it with your friends, subscribe wherever you get your podcasts. If you enjoy the show, please share it with your friends and subscribe wherever you get your podcasts. Decoder is a production of The Verge and part of the Vox Media Podcast Network. It is produced by Sophie Erickson. Our audio engineer is Andrew Marino, and our music is by Breakmaster Cylinder. We will be back on Tuesday with another episode. We'll see you then.

• 45:59Speaker 06

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