When the National Association of Theatre Owners (NATO) announced in June that Ellis Jacob and Rolando B. Rodriguez had, respectively, been elected to their board as Chairman and Vice Chairman, it seemed like a fairly ordinary organizational procedure.
NATO needed to fill the role because it’s previous Chairman, former Regal Cinemas CEO Amy Miles, left the industry in March and stepped down as an officer of the trade group. Jacob, who was Vice Chairman at the time, became the interim Chairman until the Board could elect a new one for the remainder of the two-year term. NATO’s four officers are drawn from and elected by the 17-member Executive Board which is stocked with senior executives from leading North American exhibitors.
Thus electing two well respected industry executives like Jacob and Rodriguez makes sense. When not serving on NATO’s Executive Board, Jacob is President and CEO of Cineplex in Canada. Rodriguez, who is taking over Jacob’s former position as Vice Chairman, is President and CEO of the Milwaukee, Wisconsin based Marcus Theatres.
Shortly after the news of Jacob and Rodriguez’s election as officers of NATO broke, we received a couple of inquiries here at Celluloid Junkie wondering what exactly the organization’s Executive Board does. Sure, we often see those who have served as officers on NATO’s board get lauded at CinemaCon, the trade group’s annual convention, but certainly they must do more than give acceptance speeches for the awards they receive.
We figured we may as well go straight to the source and ask Jacob and Rodriguez directly about their new roles on the NATO board. During the following conversation, which took place the first week of August, they were gracious enough to speak with us about a wide range of subjects relating to NATO, the state of the industry as well as the many changes and challenges the business is facing.
I guess we should start off by asking what activities and responsibilities does the NATO Executive Board oversee?
Ellis Jacob: Well first of all let’s define NATO, which represents 33,000 screens across 50 states in the U.S. and cinemas in 96 countries worldwide. In addition to that, NATO has helped create the Global Cinema Federation, which includes representatives from all over the world, including ten of the largest circuits in the world, that sit on the main Global Cinema Federation board. It includes four North American circuits too. As far as what we do I think basically really a coordinated effort of working together as a united group. Whether we are a big exhibitor or we are a theatre company that only has a number of screens in a small market and it’s really to advance and protect the motion picture exhibition business and we’ll work on things like technology, moving to know the marketing and the future of the business as we move forward with the disruptions taking place. Also supporting any of the efforts that are being created by different exhibitors in our areas of the marketplace. And Rolando, please jump in.
Rolando Rodriguez: Well one of the elements that we try to do as a board is, number one, stay within the confines of what’s legal because obviously it’s made up of competitors within the industry. But NATO is intended to obviously protect elements that are of interest to all exhibitors. And in particular, when you think about lobbying efforts that are associated with new governmental regulations or city ordinances or state ordinances that will have an effect into the viability of the industry, well those are things that are important for all the theatres across the U.S.
We just got through refreshing our NATO strategy which basically comes out of really three key letters that we put together in what we call GPS. And GPS stands for Growing, Promoting and Servicing the industry. Within those elements you can imagine that we’re trying to pursue things that promote the industry and certainly the viability of growing the business, of promoting not only the industry and exhibition within the consumer basis and then servicing the exhibition industry, which part of that is a lot of training, a lot of sharing of key information that is valuable. Both to large and smaller exhibitors alike, through a lot of the training and development programs that NATO shares within the industry.
Ellis Jacob: We also, as everyone knows, run one of the biggest industry events in Las Vegas called CinemaCon that’s put forward by NATO where we have exhibitors from all the world and distributors from many parts of the US and other countries also participate.
Rolando Rodriguez: And then we also have in October what they call our marketing, shorter version of a big convention and that goes back to what I was just sharing earlier on the marketability of the industry. There’s a lot of focal points that come together in that working with the film companies to obviously share information that’s in the vested interest of continuing to promote the inudstry, how to actually connect with the consumers better, as well as building those strong and lasting relationships that we share.
So then we’re really discussing both NATO’s activity and your roles as board members. So does the board act the way it would in any other corporation, steering the organization in the right direction and giving it guidance?
Ellis Jacob: Sure as long as it doesn’t interfere with the competitive nature of the business, because they’re in the room at NATO there are competitors sitting at the same table. So we focus on things that have a direct impact on the industry as a whole and the relationship we have with our distribution partners. Things like technology is applicable to all of us. Movie theft is a huge issue that we all focus on and that we can help each other with and work together and steer the bigger and smaller companies as we work. And we’ve created some position papers as part of the Global Cinema Federation on a lot of these subjects.
What is one of your goals during your time as chairman? When you pass the baton what would you like to have achieved?
Ellis Jacob: I think the key thing for me as a chair is to basically continue to enhance our partnership with our distribution suppliers and work together in a coordinated effort as a united group. Part of that was setting up the Global Cinema Federation, which is only just over a year old. So I think those are things that to me are really important as to the future of the industry and also the changing dynamic on what’s happening with distribution and the advent of streaming and how we keep the movie exhibition industry strong given all of these external forces. And though we go back to when the television came out and then the VCRs and the DVDs and everybody said it was the death of the business, we have still survived and prosper and done extremely well because we do provide a great social experience for our guests in one of the best environments that you can replicate at home. As the home theatre improves we technologically have raised the bar significantly in our theatre environments.
So that’s a good way to get into some of those outside forces that are affecting the industry. The most obvious one today is MoviePass, even if it currently looks like it may not survive. As much as everybody thinks it’s a threat or it’s going to lower the price threshold of movies, people seem to like the idea. Those that are using it say they go to the movies more often. Where is NATO’s stance on such services and then as exhibitors, what have you been seeing? What do you think about the subscription model, whether it be MoviePass or otherwise?
Ellis Jacob: Look, I’ll let Rolando take the details of it, but on an overview basis, in all honesty, I think there is a place for subscription. It’s just a matter of what is the most viable and most efficient way of basically having both the companies and the consumers get the maximum benefit out of that process. And remember there’s basically relationships between the studio and ourselves and there’s a lot we can do with them together. Once you introduce a third party sometimes these things get complicated. And Rolando, you’re living it.
Rolando Rodriguez: Yeah, I think you put a nice summation of it, Ellis. I think the general feeling is clearly there is a demand that has been outlined by the consumer on the subscription service model. The good news about our industry is that it stays innovative and it continues to see different exhibitors and third parties like MoviePass, trying to figure out what that model is and how it works. And I think that’s the greatness about our industry. That you have several different exhibitors out there testing this model and seeing how it works. The consumers at this point in time are clearly seeing a benefit that’s associated with it. And I think that, you know, this is a model that will be closely watched by all of us. This will be a case where each individual exhibitor executes and we’ll see what works best and how it works. And then, as Ellis indicated, we have a relationship with the film studios and we have to keep in mind how does that model not only benefit the consumer, obviously, but also satisfies our partners in the film community all while having a viable business. What happens to MoviePass, you know, it’s hard to say, clearly they’re trying to figure out survival at this point in time. But there are a couple of other models being tested out there.
Since you both mentioned working closely with distributors, one of the contentious topics that is periodically raised is releasing films day-and-date on home video with their theatrical release. But these discussions seem to have died down. Has there been any talk with the studios and NATO about doing day-and-date releases again or has that been put on the back burner for now?
Ellis Jacob: I think it’s a subject that we both as partners have to understand and be careful about. Because as I always publicly state, you don’t want to trade dimes for nickels and you don’t want to be in a position where you’d say, “Okay, I’m going to go day-and-date and then you lose a considerable amount of the benefits of releasing a movie theatrically.” And the thing is that I always say the theatrical exhibition businesses is the engine that drives the train. If a movie does well theatrically it does well in all its ancillaries. If it doesn’t do well theatrically it isn’t that strong in the ancillaries. And in Canada we started a program called SuperTicket where you can watch the movie in the theater and then come out and have 48 hours where you can buy the movie and we deposit into your locker on the Electronic Sellthrough Date (ESD), which is 70 days or 80 days later depending on the movie and the studio. So we worked very well with all the studios on that to basically test the desire to own that movie at that point in time. So I think when it will work is when basically the model is beneficial to all parties.
Rolando Rodriguez: You’re correct. It’s gotten a little bit more dormant as far as that dialogue. One of the things that Ellis and I have experienced over many years of being in the industry, is that typically the way other models or other dialogues about new models are introduced is no different than all other industries out there when they feel that somehow times have gone bad. You know, if you look at last summer, obviously a lot of folks were singing the woes about the industry. Last summer we unfortunately didn’t have great movies and you saw little bit of a dip. But now let’s talk about this year where we had a good first quarter and record second quarter as an industry and that’s fabulous. All of a sudden when the model is working, which happens to be very much tied into great movies, we have an amazing product that has a unique window with the consumer to experience in a movie theater. And when the model really works is when you have great theaters where there’s been a lot of investments made by the exhibitors and there’s great movies that have been developed by our partners in the film community and those two things come together and we have an amazing, amazing summer. Now the dialogue has switched over into subscriptions as you well know.
The other topic of conversation these days, at least as far as threats to the exhibition business are concerned, is streaming video. Netflix and Amazon are probably the best examples of services that have started to make their own content. Though when it comes to Netflix, the movies they’ve done haven’t been as good as their television series. Unlike Amazon’s titles, the films Netflix produces don’t seem to move any needles.
Ellis Jacob: Sperling, how many times do you go to a dinner where people talk about a Netflix movie? I’ve never had that happen. They talk about the Netflix series but they never talk about the movies. I would say Netflix, and this is old data, but I would say 80 percent of their viewership is driven by series, not by movies.
Now, Amazon has taken a different tact because Amazon has said, “Hey, we like the movie theaters. Why don’t we play in the movie theaters and respect the window? And then we’ll put it on Amazon Prime.” And you know, “The Big Sick” was one of their movies that did really well and “Manchester By The Sea.” I remember I was at the Golden Globes and Jeff Bezos was there with all his stars and friends and it’s a big thing to be in that position with great talent and great product and he gets the best of both worlds because he’s playing the movie theaters, so it’s getting visibility and it’s getting its branding until he puts it on his service.
And then he owns it forever.
Ellis Jacob: And then he owns it forever. Now netflix is taking the position that, “Hey, we don’t need the theaters. We can, just do it through the subscription model.” And I think there is, you know, a potential benefit for Netflix and for the cinema chains to be able to say, “Okay, you respect the window and both of us can benefit.” Because we are gaining from the big marketing of the film. The trouble is you don’t get statistics from Netflix, like you do on a Monday morning that says “Mission Impossible” did 60-odd million dollars on the weekend. We don’t know how many people watched Netflix’s movie when it opened.
Both Netflix and Amazon are technology companies and technology is a topic NATO focuses on based on what you were saying. In the past NATO’s efforts may have been concentrated on digital cinema but what is the organization and its exhibitors looking at now tech-wise?
Ellis Jacob: Well, as you know, most circuits, across the world have moved to digital from film. That was one of the biggest changes and now we are looking at consistencies as it relates to sound systems, technologies as it relates to projectors and what the future holds as far as the experience that we provide to our guests when they come through the door. Because when you have consistency the experiene then is the same from one theater to the other which is really important. You don’t want to have huge variances between locations. I remember ten years ago you pretty much could see the movie only one way. Today you can see a movie in premium large format. You can see it in IMAX. You can see it in VIP. You can see it in 4D and you can see it in 3D. You can see it in D-Box. There are so many choices that consumers have in the way they want to see a movie. Now I may not like 4DX, but there are customers that love it and come out there and it becomes a huge part of their experience when rain is coming down in the auditorium. So those are kinds of things that we continue to do to keep the business at the forefront when it comes to that entertainment experience.
What about you Rolando, is there a focus for you when it comes to technology? One of the questions everybody has is that now with everybody being digital there’s not going to be a second virtual print fee (VPF), so when a projector breaks or a server goes down the replacement is an exhibitor’s responsibility. Then they have to ask themselves when upgrading whether they should buy one of the new laser projectors or LED screens. So is NATO helping exhibitors make those decisions?
Rolando Rodriguez: Look when you think about technology we’re, as an industry, continuing to look at that price value relationship with the consumer in that, as you well know, that may be the screens, but that also frankly, something, that you’ve mentioned that the laser projectors and how all of a sudden the price of laser projectors have actually gone down quite a bit. And so the question is how do you provide the best picture and sound available inside of those auditoriums. Now to your question on the VPFs, frankly, that’s going to be an interesting dynamic, but obviously each exhibitor is dealing with it depending on their current situation. But even in thinking about VPFs ending, look at the flexibility that opens up for the industry now for all of the smaller independents that may not necessarily have that fee to contend with. So again, it’s going to be an interesting dynamic how that plays out. There’s a lot of film out there. Sure we have a great relationship with our existing film companies, and we want to keep building on that, but I think it also opens up a window for alternative programming and also for a lot of the smaller film companies to be able to find a way to get into the theater screens.
There has always been speculation that once the VPFs came to an end smaller films or independent distributors would be able to swoop in and, thanks to digital cinema, release titles theatrically which they couldn’t afford to do before. The question will become which of these films or distributors can actually make an impact and have the resources to market a film nationally, if not internationally?
Rolando Rodriguez: Yeah, absolutely. And I think, look, it’s not to take away from our major partners because the major film companies are the ones that really helped out with this transition into digital, which has been good for the customers and it’s been good for the industry, but I think as the business dynamics continue to change, the financial positioning of what it mean is changing as well. And so you’re going to have to look at what is that evolution, the aftermath of VPFs with no support. And for exhibitors, I’m sure everybody will figure out what is the best model to kind of help support more product, more alternative programming, and more capability to connect with the consumers.
A lot of those titles have always been played by independent cinemas and arthouses, some of whom have been doubts about NATO or how the organization could help them. What would you say the benefits of NATO for such exhibitors?
Ellis Jacob: Look, we’re open to exhibitors and in some cases we’re working with the not for profit locations because for them it provides them with a great ability to be aware of all of the changes that are taking place on a regular basis. And also in some cases we created a consortium when it came to the digital business for some of these smaller circuits to help get VPFs.
Rolando Rodriguez: And even beyond that, if you think about it Sperling, one of the advantages of being part of NATO, whether you’re a small independent circuit or if you’re larger, there’s obviously the strength of the association that speaks on a lobbying basis for the entire industry. Like we’ve been seeing over the past probably five, ten years or so, depending on the political spectrum that transpired in our country there are elements that are very important for us, for all of us, whether it’s a one screen independent or a circuit of 5,000 screens, that there is a need to have one voice that speaks for the industry and the ability to protect some of the elements that could impact the industry very negatively. No different than many associations. Whether you’re in the restaurant association or whether you’re in the hotel association.
So are you going to the studios and to government agencies and lobbying them on a regular basis or is that left to the staff at NATO?
Ellis Jacob: We have some meetings where Roloando, myself in our positions would go with the executives of NATO and talk about the hot button issues that we’re facing together. Recently we met in LA with the Directors Guild to talk about things like technology, to talk about things like ratings, to talk about things like the window, all of those things because it’s important that we’re all working together as a business and as an industry. And you know, the Toronto International Film Festival is coming up. There is going to be 200 odd movies in this festival and they’re from all parts of the world and directors come in and it’s important that the consumer sees out there that the movie industry still is a very important part. And the exhibitors form a key role as far as the promotion and the showing of movies. Because one of the negative things, I think that’s taken in place is everybody thinks that the movie business is now being replaced by streaming. And that is absolutely untrue. If the content is there, people will come out to see movies in theaters. And I’ve always said we as exhibitors set the best table. We don’t deliver the steak. The steak is coming from the studios. And if the studios provide us with great steaks like Disney has done this year, you’re going to have great numbers and we won’t be worrying about what the future holds. We will be anticipating the next great film that going to come out next week.
Rolando Rodriguez: Let me just give you the other point of view on this Sperling, which would be if you look at the opposite end on key topics, the NATO executive team really works very hard on them and the governing body of the board just provides strategic thoughts that are associated with them. But it’s really kind of the NATO group that goes out to address things like the American Disability Act and some of the regulations the government may be trying to pass through that hopefully are good for consumers. But how do we work through as an industry to make sure that those rules are not so punishing to smaller exhibitors where they could potentially put them out of business. So you have to find a fine balance, like with the dialogue that’s been occurring in our country vis-a-vis guns and the rating system in theaters. We’ve had a very effective rating system forever that’s been very well accepted by parents and has been very well executed by exhibitors working with the MPAA. So those things require true representation from NATO representing all of its membership.
And is that something that you participate in as board members or is that something that NATO CEO John Fithian and his team do? Or is it both? Is it just a whole group effort?
Rolando Rodriguez: It’s a combination of both, but the large portion of the heavy lifting a lot of times is done by John Fithian and his team. But he also believes that there is involvement and participation that happens from exhibitors. So there are what we call capital days where exhibitors from across the U.S. come in to Washington and participate and meet with congressmen and senators. So it’s really a collaborative effort
You mentioned that you set the best table, but you don’t deliver the steak. Is there some concern with Disney buying Fox that the steak might be coming from too few ranchers? And that those ranchers might begin to have too much power over exhibitors? Obviously this is referring to the current merger mania going on.
Ellis Jacob: I think it’s merger mania on both sides because you’ve got exhibitors merging and you’ve got studios merging. But at the end of the day it’s all about the quality of the content and the sufficiency of the content. The area I worry about is the movies that are basically focused on the 50+ demographic. The movies like “Shape of Water” or “La La Land”, you know, those kinds of movies. And we need those movies because that demographic wants to go to the theaters, but they don’t all want to see “Star Wars” or “Avengers.” They want to see those quality movies and we need to make sure that those movies continue to be made. And what the good news is that as the bigger studios stop focusing on those films you’ve got the STX‘s you’ve got the Annapurna‘s, you’ve got different up and coming groups that start to focus on those films. This fills that gap.
Can you further define the Global Cinema Federation? There are those in the industry that believe it’s an offshoot of NATO or that NATO controls the group. Do you find that there’s confusion about it?
Ellis Jacob: NATO is a part of the Global Cinema Federation. Not the other way around. In all honesty when we go into those meetings, we have some basically strong representation and comments from all the countries around the world and that makes a big difference because some of them may be faced with issues we had in the past and some of them may have issues that we haven’t been faced with yet. So it works quite well for both education and unification of the exhibitors.
Rolando, what are some of the benefits you have seen with Global Cinema Federation?
Rolando Rodriguez: Each country obviously has its own regulatory actions they have to deal with, but there’s commonality in the industry which is very important. We all have a vested interest in seeing how does the viability of the business continue to function? How do we look at the diversity of film that are all over globally to provide more product from around the world and more information to exhibitors worldwide. We talk a lot about the product that goes over to China and to the European countries, but there’s a lot of product being made in Europe and in Asia that will have a place, ideally soon, in the U.S. and to me more product means sharing more of the art form and more of the culture and more of the aspects that could benefit our industry in the long term. So I think there are a lot of benefits that are associated with the Federation. No different than we have at NATO for the U.S.
Ellis Jacob: Yeah, and at the end I would summarize it as saying, hey, this is a coordinated effort of working together as a unified group, that’s what we’re trying to accomplish through the Global Cinema Federation and there’s so many things like MoviePass and technology that we put out position papers on so that everybody around the world, including our partners can see what we are focusing on.
In closing, is there one thing that you would want people to know about NATO that they may not know now or maybe that they do know but that you want to reinforce?
Ellis Jacob: I think they should know that our focus as leaders is basically to advance and protect the motion picture exhibition business, whether it’s in North America, whether it’s in other parts of the world, and to work closely with our distribution partners to continue to make the model work better and provide our guests with the best experience that they can have. And like Rolando, you know, used the promoting serving and growing those to me, are key strategic focuses that Rolando personally worked on as part of the NATO strategic committee.
Rolando Rodriguez: Yeah, I would say Growth, Promote and Serve are kind of our key positions. But it’s all intended, and this is probably the one thing that I think it’s important for everyone to hear, We’re in a fun industry. We service consumers. We touch people’s emotions every day. I can’t think of any industry that can make people cry, laugh and think all at the same time. We have an amazing product with incredible film companies as well as incredible exhibitors out there that make it a fun experience, an entertaining experience for consumers. I think we have an amazing industry that provides a lot of fun for consumers and there’s no way that anybody else can match the price-value relationship that we offer consumers.
Ellis Jacob: And it’s always a new business because, if you think of about an employee that works for a gold mine and the price of gold goes down. It could be years before they’re back on track. With us, one weekend could change our business dramatically, as far as what the desire is for people to come out and watch a particular film.