By  on January 12, 2005

KNOXVILLE, Tenn. — Retailers aren’t the only ones lambasted for lack of merchandising prowess and creativity in making their stores exciting destinations for shoppers. Regal Entertainment has something of a similar challenge.

The movie theater chain has Hollywood’s glamour and glitz to count on to lure in customers. But enticing moviegoers to buy more products before disappearing into film-screening rooms, as well as finding other means to drive sales and cement customer loyalty, is another matter.

While some may view theaters as a straightforward business mainly involved in selling tickets via a small box-office window or occasionally over the Internet and then hoping a reasonable percentage of customers will purchase high-margin concessions to beef up profits, J.E. Henry, senior vice president and chief information officer of Regal Entertainment Group here has a different vision. His aim is to turn the front end of the theater into a prime selling area, aggressively leverage customer-specific reward programs, install multipurpose customer-activated kiosks, or CATs, and integrate headquarter and individual store systems to maximize operating efficiencies and free managers to focus more on driving business.

If it sounds a lot like retailing, it is. The focus on tightening controls, automating processes, striving to remain relevant to fickle customers in a rapidly changing and, one could say, fashion-oriented environment is similar to what retailers face today. Also the same: the drive to leverage technology to achieve some or all of those goals. 

Regal Entertainment Group operates 557 theaters in 40 states plus Washington, D.C., under the Regal Cinemas, Edwards Theatres, United Artist Theatre Company and Hoyts Cinemas brands. The company generated $185 million in net income on sales of $2.49 billion during the 2003 fiscal year, the latest full year for which figures are available. Sales in 2004 were somewhat more lackluster as a result of what many consider to have been a weak film year.

In addition to its film-screening business, the company operates Regal CineMedia, a subsidiary that sells in-theater advertising, operates a video network for distributing digital content at its theaters and also books theater space for large and small business, community and faith-based meetings. Regal Entertainment Group is 78 percent owned by the Anschutz Corp., which is headed up by Philip Anschutz, the Denver billionaire who is also majority owner of Qwest Communications. At the heart of Regal’s IT makeover and quest to expand business is a conversion to the Microsoft Windows XP-embedded operating system for running all the point-of-service terminals in the box offices, concession areas and self-service kiosks. The XPe operating system replaces a Linux-based one that Regal developed in-house before the company acquired the United Artists and Edwards chains in 2002. The firm decided it needed to revamp its operating and decision-making processes to fit in with the much larger and fast-growing enterprise which also involved rolling out new hardware POS terminals and CATs, both from Fujitsu. 

Unlike many large IT overhauls that sound promising but run into problems and fail to deliver expected paybacks, Regal thus far is encouraged by results and forging ahead with plans for a chain-wide rollout of new systems and applications this year and next, Henry said in an interview at the company’s headquarters.

The decision to convert to a Windows operating system was made after Henry engaged EntTek, an entertainment technology company, to work with Regal in formulating an IT infrastructure plan for the long term. The company also worked with Transition Partners, a consulting firm, on transforming the company’s IT and business vision and decision-making processes into one that could encompass much greater growth and change heading forward.

As part of the formation of a new business IT plan, “We decided we didn’t want to be in the POS business. We conducted a 10-year ROI [return on investment] that showed XP-embedded would be much less costly than Linux over that time period. Also, MS had a great mechanism for delivering software down to the workstation level. Given those facts, we made a decision to move off of Linux.”

The new platform is designed to allow Regal to implement a customer loyalty program, offer and redeem gift cards, download software automatically from headquarters and more effectively leverage investments the company made in new hardware, including the CATs.

“We’ve deployed [the operating system] at four sites in an alpha test and have had great results. This month [January] we expect to go into an expanded beta text in which all our theaters in the Atlanta, Nashville, Knoxville and Chattanooga markets — approximately 29 theaters — will be converted to the new platform,” Henry said.“We will run those 29 locations in a beta test for approximately 30 days to test volume and make sure any critical bugs have been addressed. To this point, we haven’t had any critical bugs, which is amazing. Then in late February we will start deploying to all our sites, with an expected completion date sometime in late May or early June,” he added.

The new platform will allow employees in the concession area to scan product rather than input prices manually, as is typically the case in theaters. The benefit of that is not only more accurate pricing and inventory management but also speed in serving customers, which in turn should lead to higher sales and a better shopping experience. “Obviously, we want to decrease the amount of time someone spends on line, and the result generally will increase sales,” Henry said.

The new platform will also enable Regal to automatically download to each theater location exactly which films should be running in which screening rooms and on what dates to make the changes. Today, all of those changes are made manually at the theater level. Another improvement involves pricing, which will be able to be changed for any theater automatically at the headquarters level. Before the new system was put in place, price changes to tickets could only be made during a very small window of opportunity between when the theater closed at night and opened the next morning, Henry said.

One of the biggest — and certainly most visible — changes to the Regal Cinema customer experience involves the installation of CATs in all the theaters, along with a host of other consumer-centric applications such as instant activation of awards for Regal’s customer loyalty program. Some 250 CATs have been installed in theater locations to date, with another 200 slated for rollout in 2005 and the remainder in 2006.

The kiosks now, or in the near future, will allow a consumer to get cash, purchase tickets with a debit or credit card and pick up tickets that have been reserved online, via Regal’s Fandango Internet ticketing agent. By year’s end, customers will also be able to buy gift cards through the devices. Moreover, the uptime for these machines is running in the 98 percent to 99 percent range, compared with 60 percent or so with its older kiosks.“Today we might have 10 box office workstations and maybe two or three CAT machines. But I can see a scenario over the next five to seven years where that ratio is reversed and maybe we would have only two box office workstations and 10 CAT machines. Fortunately, the machines are designed to look like an ATM and most people are comfortable using ATMs,” Henry said.

Regal is also working with its Internet partner Fandango to implement a print-at-home ticketing option. “So customers could print tickets, including a bar code, at home and then take that piece of paper, scan it at the CAT machine, and receive their tickets right there. It is a very simple transaction. We expect the print-at-home functionality to increase penetration as far as the number of tickets being purchased online. It is much more convenient for the consumer,” Henry noted.

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