Fandango might have built its brand on selling movie tickets, but the West L.A. firm is looking beyond the box office as it positions itself for blockbuster growth going forward.
While its core ticketing operation continues to grow, Fandango has also rapidly diversified its business through an acquisition spree, bringing in promotions businesses and media properties that offer a variety of content. The hope is that those movie fans will stick around and buy tickets, too. The effort is part of Fandango’s plan to ingrain itself in every stage of film consumption.
“We want to be everywhere people are thinking about movies,” said Fandango President Paul Yanover. “The way that consumers relate to movies is multifold. There is a lifecycle experience.”
Industry experts note that the firm’s acquisition binge is not just a strategy for growth – it’s one of survival. But that might not seem obvious based on some its most recent financials. For instance, the company said 2015 ticket sales were up 81 percent from a year earlier. Fandango charges a $1.30 convenience fee, on average, for each sale. The fee is split with exhibitors, though the company declined to say how the money is divided. Fandango serves more than 26,000 screens in the United States, though it does not disclose how many tickets are sold annually on its platform.
The firm’s ticketing services have proved particularly popular for purchasing tickets to blockbuster films on opening weekend. The company claims to have sold 37 percent of opening-weekend tickets for “Star Wars: The Force Awakens” in December. And because a low percentage of consumers purchase their movie tickets online – 10 percent to 15 percent by some industry expert estimates – there is still room to grow.
But having seen consumers adopt the digital ticket-buying habit, theater chains such as AMC Entertainment Inc. and Cinemark USA Inc. are rapidly expanding their in-house online ticketing operations, threatening Fandango’s dominance of the category. AMC charges a $1.25 convenience fee for tickets purchased through its website, a sum it doesn’t have to split. ArcLight Cinemas, a division of Beverly Grove’s Decurion Corp., only offers online ticketing through its website.
Interestingly, some of the theater chains trying to squeeze Fandango’s market share are the very entities responsible for its existence. Fandango was founded in 2000 by a group of more than two dozen chains, including Cinemark, AMC, and Regal Entertainment Group. Comcast Corp. acquired Fandango for an undisclosed amount in 2007.
“The movie exhibitors said: Wait a minute, Fandango is charging $1.50 for this?” said Michael Pachter, managing director of equity research in the downtown L.A. office of Wedbush Securities Inc. “I think it is inevitable that these guys take it in-house.”
Upstarts are also muscling into the industry. Atom Tickets of Santa Monica, whose app allows groups of moviegoers to organize, raised a $50 million Series B round in February from investors that include Lions Gate Entertainment Corp., Walt Disney Co., and Twentieth Century Fox Corp.
These market forces may have prompted Fandango to think bigger.
“We are probably one of the only brands who is thinking about connecting consumers across theatrical and home entertainment,” said Yanover. “By being involved in every step of people’s relations with movies and making it convenient, it allows us to act against that audience base with difference business models.”
Fandango declined to break out its revenue by division, but a spokesman said online ticketing represents about 50 percent of sales.
Partially displacing online ticketing is a growing movie promotions business obtained when Fandango acquired Quantum Rewards in 2013. The company’s promotions service includes gift card distribution in more than 72,000 stores and an internal ad agency, which creates and runs campaigns on behalf of studios. In February, Fandango ran a $5 discount code on the side of Dr. Pepper 12-packs for tickets to “Batman v Superman: Dawn of Justice.” The code was redeemable at Fandango.com and gave the company insights into which consumers were likely to take advantage of a discount.
Consumer data and targeted marketing offers Fandango a potentially lucrative growth path, said Ben Spergel, executive vice president of consumer insights at C4 R&D, a Beverly Hills market research firm.
“There is a wealth of data out there that will keep studios and theaters advocating for online ticket sales,” he said. “Everybody wants to know more about their consumers because that’s the way they make a better consumer proposition.”
To help consumers plan movie outings and drive potential ticket buyers to its website, Fandango has acquired several media properties in the last three years, including movie-rating site Rotten Tomatoes, Movie Clips Inc., and video-streaming services MediaNaviCo (M-Go) and Flixster. Fandango’s media properties had 63 million monthly unique visitors as of December, according to research firm comScore Inc.
“They are trying to drive a critical mass of audience to their website with a number of different services and products,” said Eric Handler, a media and entertainment analyst at MKM Partners in New York. “When you have larger audiences, it makes it easier to sell tickets.”
Fandango is also expanding internationally. The company acquired Brazilian online ticket retailer Ingresso.com for $71 million, according to a securities filing.
“We think there is a lot of opportunity internationally,” said Yanover. “The U.S. is a fairly mature market and Latin America has a lot of growth in it.”
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