Sony stayed out of the streaming wars — now it’s betting high on the theater experience

Sony Pictures Entertainment has acquired Alamo Drafthouse Cinema, a theater chain known for its distinctive film screenings and in-seat dining experience. Announced on June 12, this acquisition underscores Sony’s strategy to attract moviegoers back to the big screen while competitors like Disney and Warner Bros. have invested heavily in streaming. 

This represents a critical pivot away from the high-risk streaming model. By investing in high-quality theater upgrades and leveraging its extensive back catalog for lucrative repertory screenings, Sony is taking a profitable and unique approach to modern cinema. The acquisition revitalizes the Alamo brand while also positioning Sony to capitalize on the growing demand for distinctive moviegoing experiences.

If done right, it may set the stage for the next major shake-up in Hollywood.

Sony played an arms dealer during the streaming wars, and avoided wasting a fortune

In an era where streaming has become a dominant force while theatrical attendance remains a key success metric for studios, there’s a massive benefit to standing out among the cinematic competition.

While other studios have heavily invested in streaming platforms, Sony has chosen a different path, aiming to sidestep the massive financial outlays and uncertain subscriber growth of the streaming race.

In contrast, Sony’s strategy of focusing on the theater experience has already paid dividends. It’s allowed them to attract high-profile directors like Quentin Tarantino, Ridley Scott, and David Leitch, who prefer the cinematic format over streaming releases.

Sony Pictures Entertainment and Alamo declined to comment.

It’s way cheaper to build the best movie theater chain than it is to build a mediocre streaming service

Sony’s interest in Alamo is rooted in its approach to cinema. Known for its eclectic film selection, idiosyncratic screening parties, and immersive dining options, Alamo Drafthouse offers a moviegoing experience unlike anything the standard multiplex has to offer. According to Bruce Nash, founder of The Numbers, this makes it the perfect chain for a studio like Sony to buy. 

“The box office is down about 15% compared to pre-pandemic levels, primarily due to changes in audience behavior and a shortage of new releases following last year's strikes,” Nash said. “This decline is a make-or-break situation for many theaters, pushing them to explore options like increasing ticket prices or diversifying their revenue streams.”

Sony plans to finance state-of-the-art technological upgrades at Alamo Drafthouse locations, including advanced projection, sound, and theater-management systems. 

“Sony can afford to take a longer-term view compared to a lending bank,” Nash said. “They’re confident that their upcoming blockbusters will boost revenue.” 

For an electronics conglomerate like Sony, the impetus to invest in exhibition upgrades is straightforward: after all, they’re the company selling the upgrades anyway.

These enhancements are designed to create a superior experience that draws audiences away from their home screens, offering a compelling reason to return to theaters, and at the end of the day they’re selling them to themselves.

With 36 locations, the total estimated cost for these upgrades is, ballpark, on the order of approximately $18 million. Sony’s acquisition of Alamo Drafthouse, estimated at somewhere between $174 million to $258 million, plus the upgrade investments, represents a fraction of the billions other studios have poured into streaming services.

And if Sony’s investments do create a superior cinema product, perhaps one that compels Alamo’s rivals to upgrade their own screens? Well, Sony still wins then too. 

Sony’s content is already the stuff that’s succeeding in cinemas

Sony’s extensive back catalog, bolstered by its recent acquisition of Crunchyroll and its catalog of anime, provides a wealth of content for Alamo repertory screenings, a business model used by theaters to play older movies that appeal to niche or existing fandoms.

Replaying a classic movie or a cult film with a small but robust fandom is a very profitable way for theaters to boost their margins, particularly in a system where distributors claim a high percentage of revenues from first-run movies. 

The ability to feature beloved classics and anime hits at Alamo theaters offers Sony a significant opportunity to increase engagement and monetize its library. By tapping into dedicated fan bases, this strategy provides a steady revenue stream, enhancing the financial viability of Sony’s approach.

Furthermore, the American market has been an increasingly successful one for anime films, which are the bread-and-butter of Sony subsidiary Crunchyroll. The company’s existing library, from the classics to animation, are uniquely suited to succeed in cinematic exhibition in 2024.

Maintaining Alamo’s quirky, community-focused appeal is essential for Sony’s strategy. Balancing corporate integration with Alamo’s distinctive ethos — known for its themed screenings and strict no-talking policy — will be crucial in retaining its dedicated audience while updating the overall theater experience.

According to Nash, “The theater business can be a ‘buy’ for studios, if it aligns well with their broader strategies.” 

One area of concern is the franchising model. 

Currently, Alamo Drafthouse operates with a mix of corporate-owned and franchised locations. Franchisees have traditionally enjoyed significant autonomy, paying a $10,000 fee to license the Alamo name. Whether this independence will continue under Sony’s ownership or theaters will instead start feeling more like corporate ventures remains to be seen.

Sony’s game plan likely includes integrating Alamo Drafthouse into its broader portfolio, leveraging the theaters to promote its films and media properties. By creating a seamless ecosystem — from movie production to theater exhibition — Sony can maximize revenue streams and brand value.

This unified approach offers several advantages.

First, Alamo theaters can serve as exclusive venues for Sony’s new releases and promotional events, providing a controlled environment to showcase its content, without the billions a streaming startup would cost. But more specifically relevant for Sony, Alamo can become a platform for cross-promoting Sony’s other ventures, such as Crunchyroll and PlayStation. As Sony continues to expand its view of experiential cinematic entertainment, we may even see VR in theaters soon. Finally, given Sony’s experience in the exhibition technology space, building the best theater chain in the country from a technical perspective is a way better value than it would be for an exhibitor that doesn’t incidentally own an entire cinema projector company.

“More studios might follow Sony's lead and purchase theater chains,” Nash said. “This could reshape the market, with studios benefiting from direct control over theatrical distribution, ensuring their films get prime placement and marketing support.”

Ryley Trahan is freelance entertainment writer and the founder of nihf.com. He hosts the weekly movie review show Two for the Show.