I’m always a bit surprised when people with absolutely zero knowledge of a company’s capital structure, expenses, detailed pricing data, profitability, customer insights or any experience whatsoever in the relevant industry feel so much confidence telling a business that they know the secret to what ails them.

Here’s a simple counter theory: movie theatres suck because based on decades of pricing experimentation, detailed customer surveys, and teams of economists building indifference curves for their customers they discovered that >90% of customers don’t care about quality and only price — because the movie per se is of secondary importance to hanging out with friends without adult supervision (for teenagers) or just getting out of the house (for families); all of the things you don’t like help contain costs. Just like airlines have discovered in their decades of experimentation with quality and cost. Unlike airlines, a few niche movie theatres are able to compete on quality in the luxury/fan segment because the capital costs are substantially lower.

I would have expected a VC to show a little bit more business-humility, though.

Alamo Drafthouse has been around over two decades and has a 29 locations. That kind of glacially slow organic growth does not exactly suggest they have hit on some magic formula of cinema success. It seems more likely that they have simply tapped into a very narrow market segment in a tiny handful of cities. (A VC almost certainly wouldn’t invest in a business with that kind of growth!)

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