“Nobody in 2008 was putting reclining seats in a movie theater,” said the VIP chief executive officer. “So we introduced this thing, one thing led to another and it took off from there. The obvious challenge is keeping up with demand and expansion. It’s more operational than sales.”
More than a decade in, VIP has installed more than 600,000 of its seats in more than 500 theaters around the world. In the U.S., the company has three-quarters of the market, and its share of the market internationally is expanding rapidly,
Among the customers are the biggest names in the business concluding AMC, Cinemark and Malco.
Replacing the seats in a theater comes with a caveat, however: Overall seating drops by 50 percent or more. For example, at Cinemark in Tupelo, which tapped VIP to replace its seats in 2017, the number of seats dropped from 1,384 to 613. At Malco, which also used VIP for its 2018 project, the number of seats dropped from 1,745 seats in 10 auditoriums to 1,012 seats.
But fewer seats actually lead to higher revenue, as ticket sales and concessions sales increase, Simons said.
And he said nixing some of the chairs isn’t as big a deal as it might appear. Most theaters don’t fill them anyway, but with reclining leather seats – some of which can be heated – there’s a better chance of filling them.
“One of the benefits from this business model that these seats provide is higher concessions sales,” he said. “Ticket sales are a revenue share, which is one thing, but concession sales is where the money is … what you see in these theaters that changed their seats is that their revenue went up, but their margins increased dramatically.
And theaters are indeed bumping up their concessions beyond the traditional popcorn, candy and nachos. Malco, for example, introduced its grill concept as part of its Tupelo remodel, adding items like salads, chicken tenders, burgers, paninis, pizza and desserts.
With its growth over the years, VIP has added manufacturing capacity and workers. The company added another 160,000 square feet of manufacturing space in 2016, bringing its total footprint to 600,000 square feet. The company now employs more than 550 people in New Albany, where they produce up to 1,200 chairs a day.
VIP’s global footprint reaches Europe and is growing. Four years ago, VIP completed deals for projects in the United Kingdom, Australia and South Korea. The company has added customers in Italy, Germany, Sweden and Norway. A sales office is open in the UK, and later this year, a 150,000-square-foot plant will open in Poland with 150 employees to help serve VIP’s European customers.
VIP Cinema Seating brought in a private equity group in March 2017 to invest in the company and to provide capital to fuel its expansion plans.
“The investor group will help fund a lot of initiatives,” Simons said. “You ready a certain level and your investments have to be more than operations and more than sales. It almost becomes a culture investment. Those initiatives hopefully will bear fruit.”
One of those fruits has led to the hiring of a marketing director for the first time, something Simons said the company couldn’t afford two or three years ago.
“There are a lot of things we’re doing from an operational standpoint and a marketing standpoint” he added. “We’re finally able to use some high-price engineering firms to create that wow factor which drives our business. We have some key employees – specialists in operations and specialists in finance that change the whole culture of the business.”
LOOKING AT CHINA
China is the market on which Hollywood has its eyes set, with its more than 1.3 billion people. That also presents an opportunity for VIP.
“That’s a market that is an open opportunity,” Simons said. “But we have the largest theater company in Europe as a customer, and we’ll be busy with them for some time. We don’t want to go crazy.”
And more competitors are appearing as well.
“There are some residential companies getting into it, some mattress companies … despite all that, we’ve maintained our market share,” Simons said.
Meanwhile, a new line of business has opened up for VIP: maintenance work.
While built for commercial purposes, like any other seating going through rigorous use, VIP seats get worn out. Theaters come back to the company for repair and replacements.
“The replacement cycle is five to seven years,” he said. “So a couple of years ago, we started a focus on the maintenance side to deal with it to make it more palatable for customers. We had a lot of features and advantages of flexibility and modularity of replacement parts. We have a whole replacement division that makes parts.”
Product research and development, meanwhile, continues at VIP as it works to keep and expand its market share and to keep ahead of the competition.
“There’s a lot of business to the business,” Simons said. “You have to have a road map for the future. In the early years, we didn’t have one.”
Theater seat conversions average about $500,000, and depending the size, could cost more. The Malco in Tupelo, for example, had stadium seating, and the work there will take a little more effort. The cost for that project is more than $900,000.
With projects continuing to come domestically and internationally, VIP is in an ideal situation.
“It’s pretty exciting,” Simons said of the company’s trajectory. “The reality is we have 600,000 seats in circulation. We service a worldwide audience. We’ve created the No. 1 income stream for theaters across the industry. And all of this is coming from New Albany, Mississippi. Amazing.”
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