Alamo Drafthouse Cinema: Tim and Karrie League (2023)

Introducing Tim and Carrie League

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4:07Book 21-plus days in advance. Up to $80 per person in taxes and fees apply. Other restrictions apply. Hey, everyone. It's Guy here. So this week, we're bringing you a very, very good and very funny episode from our archive. It's my conversation with Tim and Carrie League, who founded the Alamo Drafthouse Cinema. And this episode is so full of amazing anecdotes about how Tim and Carrie opened this small movie theater in a parking garage in Austin, Texas, and turned it into a national chain.

4:45And just to put things in context, I spoke with them back in the spring of 2023, just as life was slowly getting back to normal after COVID. And I'll share some updates about Tim and Carrie at the end of the episode. But for now, enjoy the show. I stayed late one night, and I was really proud of myself because I sheetrocked the entire kitchen, every last bit. And you were like, awesome, I've done it. And I called in the inspection before 6 a.m. And it was funny because the inspector at the time, he's like, you know, Tim, I'm going to pass you for this, but I just want to show you something about sheetrock.

5:22See these little divots here? That's where you can put a little joint compound, and you don't get these big bumps that are on all of your walls. Because you've installed all of these backwards. Yeah. It's still sheetrock. It still works. Just don't ever tell anybody about this because it's too embarrassing.

College days and early sparks

5:44Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Tim and Carrie League took two demanding businesses and mashed them into one by launching Alamo Drafthouse Cinema, a national chain that serves dinner with the movie. In 2019, movie theaters in the U.S. sold about $11 billion worth of tickets.

6:22But in 2020, ticket sales plunged 80% in a single year. Now, of course, that had everything to do with COVID. But the industry is still trying to fully recover. Ticket sales this year are a lot higher than last year, but still way off where they were before the pandemic. People's habits changed. They started getting used to watching new releases at home. And it's hard to know if that change is permanent. But like any crisis in any industry, it also means there are opportunities for brands that can figure out how to differentiate.

6:57So when it comes to movies, big theater chains are trying to create better experiences. Upgraded seats, better sound, bigger screens, and food that is actually good. But long before the industry was trying to turn movie watching into a movie experience, Tim and Carrie League were experimenting with that exact idea. In 1993, with his own savings, Tim rented out an abandoned movie theater with the idea of showing classic films while serving full meals and drinks.

7:28He and his wife Carrie refurbished the place themselves. And in order to save money, they literally lived behind the screen of the theater. Now, that project fizzled out after about two years, mainly because the theater was in a rough neighborhood in Bakersfield, California. Not exactly a prime spot for sipping a glass of rosé while appreciating the finer points of Citizen Kane. But that shaky experiment in Bakersfield eventually grew into Alamo Drafthouse Cinema, a chain of now 40 movie theaters across the U.S.

8:01that was among the first to offer full meals and drinks served to you while you watch a first-run film. Now, running a movie theater is hard enough, but adding in a restaurant on top of it is even harder. Each of them have their own challenges around licensing, labor, logistics, you name it. But Tim and Carrie figured out how to make it work by focusing on building a sense of community at each of their theaters, which you will hear about. And as with so many other founders I've talked to on this show,

8:31Tim and Carrie didn't have the slightest intention of going into business, or in this case, starting a chain of movie theaters. They both went to Rice University in the late 1980s, where Carrie studied microbiology and Tim mechanical engineering and art. And they first met when they were freshmen. The first stage of our courtship was mornings were and still continue to be challenging for me. I'm much more of a night owl, late person. And so I had an 8 a.m. calculus class. And so I would wake up, set an alarm, open up the door,

9:05and wait for Carrie to walk down the stairs and then hand her my homework to turn in so I could go back to bed. So that was how we sort of – that was sowing the seeds of the relationship, you know. Yeah. All right. So you guys meet there. And you become a couple, like freshman year, and that was it? Yeah. Second semester is when we started dating. Wow. So all of those kids that you knew back then and may still know some of them today, are they surprised that you got – I mean, because they're all – you know, everyone remembers, like, that couple that meets freshman year of college

9:38and maybe stays together for four years or maybe splits up. But here we are, like, we're talking, like, 35 years later. I think that they thought that it was strange that we were together at the time. And, in fact, I think that a lot of people didn't know that we were together probably until senior year. Huh. Like your parents. Yeah, your parents didn't know. Wow. Yeah. We were definitely an odd couple.

Leaving corporate jobs for movies

10:04Yeah. All right. So you guys graduate in 1992 from Rice University. And, Carrie, you decide to pursue graduate work in microbiology to pursue maybe a PhD. Yeah. And I will say that my relationship with Tim was a deciding factor in where I went to school. Because he was going to California to go work for Shell. Right. And that job was in Bakersfield. And I've been to Bakersfield many times, and there are, like, oil rigs there. Is that – I mean, is that why there's a Shell presence there, presumably?

10:37Oh, yeah. I mean, if you watch the movie, There Will Be Blood, that's kind of the Kern Valley oil epicenter. It's a huge reserve. And so it all stems from Bakersfield. And you're an engineer for Shell. And, Carrie, you're up at Davis, UC Davis, which is, like, what, five hours apart. But still, you're both in the same state. And tell me about that job, Tim. I mean, was it – I mean, you get there in 92. I'm sure you're paid pretty well. But it was maybe soon you get there and you realize it's not the right fit?

11:11Yeah. It's really – it was day one. You know, I filled out my paperwork. I, you know, signed up for my 401K, got my health insurance all sorted. And then the head of HR said, okay, well, all you got to do now is go down to the basement and pick out your art. And, like, I mean, she didn't know, but that, like, left me cold in my tracks. Like, what exactly does that mean? And I can't wait to go see what this basement is. And so I went down and you had an office with a window and three walls. And so you went down to choose what paintings would be on your three walls between – you know, they had landscapes and oil derricks or a combination of landscape and oil derricks.

11:49So you could choose whatever, like, spoke to you and then put it on your wall. And it was at that day where I was like, okay, I don't think I'm going to fit in here. And I got to now, maybe a little bit too late in the game, figure out what I want to do with my life. Wow. And, Carrie, you're up at UC Davis and presumably working towards a Ph.D. in microbiology. Yeah. It was interesting because I was with this other group of Ph.D. candidates and I'd say, oh, I see that negative land is coming to town.

12:23Does anyone want to go see a show? And they'd tell me, no, I think that the new edition of Microbiology Today arrives in the mail today, so I can't go anywhere. And that was sort of when I realized that in a competitive field like that, you could have no outside interests and I was doomed. And when we would call each other every night and see each other almost every weekend, a huge part of our conversation revolved around, we've made a terrible mistake.

12:56What are we going to do? And we would fantasize about opening a small bookshop or, you know, running away to be tour guides in Costa Rica or, you know, millions, millions of ideas. All right. So the two of you are in different parts of California, presumably trying to see each other as often as possible on the weekends, maybe driving up Tim to Davis. And you're at Shell, I think, for maybe a year or maybe less.

13:28I don't know how long you actually worked there when you when you come across a movie theater in Bakersfield that is available for lease.

Opening the first theater

13:37Yeah.

Opening the first theater

13:38So on my way to work was this abandoned theater. It had always been there. So I passed it, you know, 100 times. But one morning, it was different. It had the red marquee letters on it said for lease. And it was those red letters that was really the, you know, stereotypical light bulb moment. I just drove in in the morning, couldn't stop thinking about it all day. It was Thursday or Friday. And I went out to a bar that night and just was waxing poetic about this great idea about opening up a cool venue showing really amazing art house and classic movies in a classic old theater.

14:13And I just got obsessed with it. I think it was called the Tijon Theater. And so this theater is available for lease. And you start to think, hey, this could be cool. But like, did you call Carrie and say, hey, this. Yeah. Tell me about that conversation. Well, I just want to clarify some of your language. It seems to imply some sort of thoughtful approach to decision making. It was a methodical strategic plan.

14:44Yeah. I think the amount of time we're talking about from turning left on Baker Street and seeing that for lease sign to signing the lease, I think, was about eight days. Eight days. Yeah. So, I mean, I know I talked to Carrie immediately. Yeah. And was super excited about the idea. And then probably the next conversation was that we're going to do this. We're going to make this happen. I got some business books at the library. This is not going to be that hard at all. We can totally do this. And it was, I don't know, I say often like my two greatest strengths at the time were arrogance and ignorance that just drove me forward because I should have thought it through maybe a little bit more.

15:25And, I mean, I'm not criticizing at all, but I think you were like 23 at the time. And, I mean, there's a romantic idea of running a movie theater, but there's a difference between the idea and actually doing it and knowing how to do it. Yeah. And it had everything you needed inside. It had a screen. It had projectors. It had seats. It was – you just had to like do some dusting and it was ready to go. Oh, I wouldn't quite go that far. I would come down on a weekend and I would load my car up with as many seats as it could hold.

15:56And then I would spend the rest of the week every evening reupholstering seats. Like yourself? Yeah. Carrie reupholstered 90 percent of the 500 seats of the first theater and I would spray paint the bases and backs and then Carrie would take the raw materials and watch movies through the week and then meet me the next weekend. Because at this point I had really given up on my biology.

16:21Yeah. So the plan was – all right, let's take this over. And do you remember how long it took you before you were ready to open it? I mean you signed the lease. I think it was in 93 at some point. But do you remember – was it a month or two months or three months before you actually had done the work to renovate it? I think it was around three or four months. We didn't have any projectors. So there was a friend of ours that ran a punk club and he had stripped out some projectors from a dollar theater.

16:55And I bought those from him for 2,500 bucks. And it was part of the deal that he had to show me how they worked, like how to take them apart and how to operate them. And you were – I mean you were still working at Shell. So you were financing all these renovations through your salary and savings? Yeah. So I lived very, very frugally because I was planning to do something. So I saved every nickel that I made. I was probably making close to 50 grand a year in the mid-90s. Yeah. And I had accumulated $50,000 in two years at Shell.

17:30And so that's what I used to open up the first one, that nest egg. And did you sort of think through how you were going to do this? You were going to work – do your day job and then run the theater at night or like hire people to run – because movies also play during the daytime, right? When you're at your other job. Not at ours. We were just at nighttime. Okay. But I should probably take this opportunity to apologize to the Shell Oil Company for being probably one of their worst employees. Right. It got to a point where the head of HR said, well, Tim, we've come to a crossroads.

18:04You're either going to need to quit or I'm going to have to fire you. So then I was down to one job. And, you know, so we opened up and it turns out that it was a lot harder than I expected and it was all consuming and I was underwater. I was just floundering. I read that you guys opened with Citizen Kane, which is awesome. I mean, great, obviously, California story and one of the greatest movies of all time. And were all your dreams fulfilled that night? Was it sold out, packed and – It was amazing. Glamorous and – yeah. It was amazing.

18:34It was a wonderful night. There's – you know, there was – it's pretty full. I think it was maybe 250 people there and it just felt amazing and great. Everything was working. I was exhausted but, like, completely fulfilled. And then the next day we showed Krzysztof Kieslowski's Blue. Oh, yeah. Good film. A wonderful film. Yeah. And two people came. Two people. Yeah. There's something that I should mention about the location of the theater that Tim had signed the lease for.

19:08Which was that in Bakersfield, there's a very distinctive delineation between the right side of the tracks and the wrong side of the tracks. There's literally tracks. Right. And, yeah, we were very firmly on the wrong side of the tracks where we were continually having to shoo away drug dealers and prostitutes off of our front steps. Yeah. And there was a payphone attached to the theater and I got so angry because of the drug traffic out of that payphone that I probably, with hedge clippers, cut off the receiver at least 15 times.

19:43And they just kept on replacing it. Going back to arrogance and ignorance, you know, something that was drilled home to us very strong was that location, location, location mantra that some people that may have paid any attention to running a business, opening a business might have heard. I didn't – that was news to me. And so how did you – I mean I don't obviously know the economics of a movie theater but presumably like a certain percentage of every showing, you know, you want it to be, I don't know, 10 or 15 percent sold in order to cover your costs or something like that.

20:16Yeah, because running a movie theater isn't like the church night movie where you charge everybody a dollar and give them popcorn because that's not actually – technically you're not supposed to do that. I think you have to pay a license fee even though, you know, that happens all the time. But in a movie theater, like you have to pay the distributor for the rights to project that film onto a screen. And so whether 10 people are there or 100 people are there, it doesn't matter. You still have to pay. Yeah, and going back to that time, one of my first moves was I bought a copy of Box Office magazine and it had the names of all the studio and the indie distributor contacts with phone numbers.

21:02And so I just ended up calling everybody and, you know, it's just saying, hey, you know, we're going to be opening up an art house theater. I don't know how this works. Like how does this work? Can you tell me how it works? How do I get movies? And really without fail, they were so kind. Like it was just – it was a novelty I think. And the way it generally works, there's a minimum of like a couple hundred dollars versus 35% of the box office. That's kind of like the standard for second run art house films. And I can tell you that we predominantly paid the minimum because 35% did not equal $200.

21:38So the accounting was not that challenging. I don't know what the numbers are. But was it ever sustainable? Did it ever get to a point where this was like – No. No. A lot of times we would hope and pray that nobody would come because that means we could go get a cup of coffee somewhere and have a night off. But inevitably, you know, two minutes before showtime, one elderly couple would come in and they'd watch whatever we're playing and, you know, the show must go on. But it never gained much traction.

22:11There was a diehard group of probably 200 people in Bakersfield that loved what we were doing. You know, that was our community. But, you know, they go to the movies three or four times a year and it just wasn't sustainable for us. Yeah. Although our costs were very low. We had no employees. We lived in a little room that we had carved out behind the screen. Behind the screen. In the theater. Yeah. And we ate meals that I prepared in the crock pot every day using probably a dollar worth of ingredients.

22:46Wow. And we didn't have any shipping costs because we would drive down to Los Angeles and bring up the film prints ourselves and go to the depot where we got the popcorn and the candy and we would also pick up the posters and the advertising materials that we would need. And we didn't even process that that's not normal, you know, like we were the only ones coming to National Screen Service and the popcorn depot to pick it up in our car and drive it back to Bakersfield. But it did save us, you know, upwards of probably $150 a week on shipping that we just didn't have.

23:22I have to assume that that the money that you make in a movie theater is from like concessions, from like popcorn and candy. But one of the things I guess you guys started to do there was to serve food with with movies. How did you how did you decide to start doing that? So we started partnering with local restaurants. It was kind of when we worked really hard and we put together special events that were thoughtful and creative, then people would come.

23:53And so we would do these events where we'd show, you know, like Il Postino and have an Italian feast associated with it and have an elevated ticket price. And we'd split the profit with the restaurant. And by the way, did you were able to sell alcohol? Well, we wanted to. That was the original plan. And during that three or four month period of construction, you know, I had finished a pretty heavy day of construction. So I'm wearing a dirty T-shirt and cut off shorts. And I was, you know, 24, I think, 23 at the time.

24:25But I looked, I think, about 14. And so I just strolled into the Alcoholic Beverage Commission office and said, I'd like one of those alcohol licenses, please. And we were turned down. So that was one of the main reasons. I think if we could have gotten that alcohol license, we might have actually been able to sneak through and make it work. But I will say at this time, about a year into it, you do the math on it. We've been under the most high stress environment of a failing business, living together 24-7 without a break from each other for a year.

25:02And we're still in love and we're still enjoying our time together. So, you know, after, what, eight years of being together, I finally realized that means it's like it's time to propose. And so we got married in the middle of all that. This is in, I think, in 1995. And Carrie, when you told your parents that you were marrying Tim, they were like, great, you're marrying a guy who's got a failing movie theater. Awesome.

25:29They were very ambivalent about the whole thing, the whole time. So I think my parents were more disappointed in me, right, because of throwing away the career. And we explained this also to our parents. And I think this probably takes a little bit of the edge off of it is that we had come to peace before we started with the idea of total and complete abject failure, right? So we knew that that was a high probability given the nature of the business that we were going into.

26:02And so we had no obligations, nobody counting on us other than ourselves. And so why not? Like, give it a shot. It could be fun. It could be changing. It could change everything. And if we fail, we'll put our tail between our legs. We'll not talk about it again. And we'll go become engineers and researchers again. And so they knew that and weren't devastated by that. They were supportive. All right. So meanwhile, you guys are running this theater and you make it to year two. And I think you're doing some pretty cool things by year two.

26:35Like you start to host live music, live bands. And so can you tell me a little bit about this? I mean, I'm thinking about Bakersfield in the 90s. I grew up in L.A. and Bakersfield in the 90s had, I mean, Korn came from Bakersfield, the band Korn, right? I think that's the most famous, maybe like Merle Haggard is more of, you know, that kind of genre of country. But Korn was like the biggest band in the world at a certain point. So that coincides, right? So we had the Westwood One Radio Network Korn reunion show at the theater.

27:09Wow. So it was a big deal. And so this was a special show for them. That'd be a scary show. A homecoming show. It was awesome. They literally shook the plaster down from the ceiling. Yeah. And we also, we would combine silent films and music, which was pretty cool the first time we did that there. Oh, you'd have like live piano accompaniment? Or punk bands too. Punk bands to like silent movies in the 20s? Oh, wow. We kind of workshopped some fun ideas and said, oh, man, like this is a great crowd.

27:42Too bad we're, they're just drinking water out of the water fountain.

Rough neighborhood struggles

27:46The theater would last for about maybe a bit over two years. And I guess the kind of the denouement, to use a film term, was a live performance in 1996 that was a performance by Montel Jordan, who, if any listeners can't remember who Montel Jordan was, the song is This Is How We Do It, which is played at bar mitzvahs and weddings around the world today. I don't know what he sang after he sang that song, because I don't know if I don't, you know, you got to sit through like 12, 15 Montel Jordan songs until he gets to This Is How We Do It, which is what everybody came to the show to see him sing.

28:27And he's performing at the theater, and I guess there was a pretty bad incident that happened that night. Yeah, so there was some sort of a quarrel. We think it was sort of a love triangle dispute. And as somebody was driving away, somebody else pulled a gun out and shot and ended up shooting the person who was driving away in the head. And that person wrecked his car into our box office, basically, and died.

29:00Crashed the car into the ticket booth. Yeah, and so that was it. We were already, I mean, the neighborhood was really cool, because that street was an old street, and there was a lot of really fun, interesting business trying to make a go of it, but the crime was just high. And so the arthouse crowd never wanted to come, and with that press, we just knew that's it, and we were gone 30 days later. Hmm. And so you shut it down, and then what? I mean, now you are, your theater's done.

29:33I mean, what next? I mean, did you think about, maybe, I don't know, maybe I go to law school? Maybe, like, or did you carry, did you think, maybe I'll go back into a PhD program? No, we had been talking before that incident. We had been talking about trying again in a better location. We knew of the existence of other theaters that served food and drinks during a movie. So we strongly felt that if we could do something like that, and if we did it in a place that could support it, that it could be successful.

30:10We weren't ready to give up. When we come back in just a moment, Tim and Carrie decide to launch a new movie theater in a whole new city, and in the only parcel of real estate they can get, a parking garage. Stay with us. I'm Guy Raz, and you're listening to How I Built This. How I Built This

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Moving to Austin

34:13Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1996, and Tim and Carrie have shuttered the Tejon Theater in Bakersfield, California. But they can't give up on the idea. So they decide to look for another city where they can show movies and serve hot meals, all under the same roof. And we figured, well, we learned how to run a movie theater. We can learn how to run a restaurant. How hard could it be? Oh, man.

34:46But you decide to do this in Austin in Texas, which is obviously an amazing city. Why did you decide to do it there? We had been contemplating a variety of different cities that had a population of young people who like to go out. And fully half of them came off of the list just because I don't like cold weather. So like Minneapolis out, Boston out. Yeah.

35:16Yeah. It just seemed like a good choice. And we wanted to be in where the action was. And so we found a real estate broker, and they were touring us on sites, and we would put in an offer, and we were rejected. It's like, no, we're looking for somebody that has more than like a heroically failed business and actually a little bit of money to do this. And how much money did you guys – I read that you had raised about $250,000 from like friends, family, anyone?

35:49Yeah. So I had told you that my parents were incredibly ambivalent about everything that had happened up to that point. Yeah. And they didn't have a whole lot more faith in this project. But I just want to give a shout out to my parents, whom I adore, that they mortgaged their house. Wow. In order to lend us $100,000. Yeah. Wow. That's kind of nuts because your record by that – at that point was amazing.

36:20I mean, you guys are obviously smart and passionate, but like you weren't coming to the table with a record of success in the movie theater business. Yeah. So there's the $100,000 from Carrie's folks. My dad and my folks put in $50,000. We did some really, you know, silly proposal to our friends and we got maybe $10,000 from friends as an investment. We did a series of credit card, you know, take out the credit cards, max them out.

36:51So we got probably $25,000 from that. So I came into the Tejon, you know, putting $50,000 in, probably still had, you know, $20,000 in the bank. And then we left with $20,000 in the bank. I think it was – so we had – it was neutral. We also took the screen, the projector, and all of the seats out of the Tejon because it was being gutted on the inside after we left. Right. I wonder what that theater is today. It's a church. Oh, that's – okay. It's a common transition.

37:22Okay. And then Bank of America had to invest in America loan with – it was like a one-page form. Yeah. And so we got, I think, $50,000 from Bank of America, which we paid back within a year. And we had a long term, still have a relationship with Bank of America. And they said, well, you guys were probably in the 1% that paid that back. We're no longer investing in America on those terms. By the way, it just occurred to me, it would have made more sense for you to have started in San Antonio given that you're called Alamo Craft House.

37:58You don't have like a time machine or something there at the office, too, because it's really – so the story of the name is – I loved this neon artist in town, Evan Voiles. And so I sought him out. It's like, I want you to make a sign for us. We have $5,000. Can you do it? It's like, well, that's pretty low, but maybe you'll ask me to do more signs down the road. And so let's look. The only way we can make it at this price is you get a rusty old can, and I'll put some fresh neon on it. So – A rusty old can, like a piece of metal?

38:30Like an old vertical blade sign. Okay. And then he would put neon on that sign. Okay. Yep. Yeah, yeah. So that's his specialty. He does vintage-style work on vintage-style pieces or makes them from scratch, but those are more expensive. Okay. And you go to like a scrapyard and you just find something like that? Yeah. He had a neon graveyard. He had a property south of town with like 40 signs. And so we had it narrowed down to two, and I really tried hard to convince Kerry, the one that was really showy, and it already had letters.

39:02It's like, it's the same price. But we would have had to call our theater chain the Tasty – with two E's – the Tasty Burger. And it just – to her credit. It doesn't work. No, no, no. It's like, no, but – So our neon guy told us, you have to choose a name with – Five or six. Five or six letters. And so we looked at each other and we said, well, we want to be first in the phone book. So it has to start with A. And the top of our original building had that kind of Alamo-esque shape to it.

39:39Yeah. Because there was a time where people would say, huh, what movie theater should I go to? Let me open up the phone book. We have to explain this, yes, to all the people who have never seen a phone book. Can you grab the phone book so we can figure out what movie theater we're going to? Back in my day. Oh, man. All right. So you have a little bit of cash to put down for a lease and then – but where did you eventually find? Was there a movie – like an abandoned movie theater or a shutdown movie theater in Austin available?

40:10No. We rented the second floor space of what was serving as a garage at the time in the heart of the warehouse district. A garage for vehicles? Like a parking garage. A parking garage. Yeah.

Building the parking garage theater

40:24And wait. So somebody said, here's a garage. You can turn this into your movie theater? Yeah. Second floor only. First floor too valuable. You guys aren't worthy for the first floor. How do you – I'm just thinking. I'm in this space and I'm like, okay, there are 50 cars in here. Yeah, we can put the screen there. Like that's a lot of – I can't even imagine renovating a garage and turning into a movie theater. I don't know how we did it. I'm going to explain like the list of things that $230,000 bought us. Because we still had like $20,000 left at the end. So we installed the cheapest elevator.

40:56We installed both from scratch men's and ladies' restrooms. We upgraded the water service to supply those restrooms. We built a commercial kitchen. We built a projection room. We changed the structural of the columns on the building so we'd get five extra feet of ceiling height. And it doesn't – We put in the HVAC system. HVAC system. New HVAC. Like there was nothing. It was just – New electrical. New electrical, new plumbing. You know, I'm just processing it now. It's just – It's nuts. Another thing. It's not very wise. I mean just the money you'd have to put down to just get that into shape and not – let alone, you know, build the – I don't know, just make it look nice.

41:38We spent a lot of time at the library learning how to do construction. We bought – we took out books from the library about how to build stuff. And in addition, we knew that we wanted pizza to be the sort of the core offering of the restaurant. And so Tim took a job at a pizza place to learn how to make pizza. And I took a job as a waitress to try to learn how to be a waitress and then I would steal paperwork from the management so that I could try to figure out what the managers were doing.

42:13And so it was about six months of just gutting that building, turning it into a movie theater and building a pizza oven as well or – I bought a pizza oven off of, you know, out of the back of a newspaper. So every piece of equipment that we bought was used. Wow. All right. So it was going to serve mainly pizza but beer and cocktails as well? Just beer and wine to start. And it was pizza, salads, and sandwiches.

42:44And we actually baked our own bread for the sandwiches for the first few years. Wow. Which is – I say wow, but, you know, it ended up being – depends on the day. Sometimes it was wow. So – and did you – and were the – what was the seating like? Was it – were there like round tables like in an old jazz club or was it rows like in a movie theater with like little individual desks for food? Yeah, it was rows of seats that were spaced probably two and a half times as far apart as you would see in a normal movie theater.

43:18Right. And then we built these banquettes, long tables in front of the row. Mm-hmm. Okay. So not too different from what they look like now. Pretty similar. I read that before you guys opened. And, again, like I'm just amazed at the – just how hard this was to do and how you threw yourselves into it. But I guess when you guys were getting inspected, the inspector was like, you put the sheetrock on backwards. All the sheetrock's on backwards.

43:50Something I would do. But, yeah. So, yeah, I stayed late one night and I was really proud of myself because I sheetrocked the entire kitchen every last bit. And you were like, awesome. I've done it. I've done it. Called in the inspection before 6 a.m. And it's funny because the inspector at the time, he's like, you know, Tim, I'm going to pass you for this because technically it's all good, right? But I just want to show you something about sheetrock. See these little divots here on the side of the sheetrock? That's where you can put a little joint compound and you don't get these big bumps that are on all of your walls because you've installed all of these backwards.

44:26It's still sheetrock. It still works. Just don't ever tell anybody about this because it's too embarrassing.

Opening night and near failure

44:33All right.

Opening night and near failure

44:34So you pass the inspection and you're ready to open up. And you open up. This is kind of an epic opening because I think they're two of the greatest comedy films ever with a double feature, Raising Arizona and This Is Spinal Tap. Sold out. Tell me about that night. People come to watch those movies. The pizzas are slinging into the oven. And what was it like? It was smoother than I would have thought. Like there were things about it.

45:03There's like little granular things that went wrong. We had this idea. We'd have these little metal carts that you'd roll down the aisles, but it was a disaster. And after about five minutes, we'd say, ditch the carts. Ditch the carts. But, you know, it was great. Everything worked. And it just felt that we had made it. We did it. Everyone had a good time, staff and customers alike. We were on top of the world. We were on cloud nine. And this was, I think you had about 220 seats, right?

45:34Yeah. And now you're in, you've got a critical mass. You've got tens of thousands of students at UT. You've got music scene. It's, I mean, it's a cultural capital. Like this is, now you're like where you should be. Yeah. I mean, the problem is that day two wasn't good. So, it was, you know, remember Bakersfield, like Citizen Kane. Yeah. Wonderful. Everything was feeling great.

46:05And then the next day there were two people. So, we showed the Clint Eastwood movie the next day, Absolute Power. Because we weren't being an art house. We were kind of a second run movie theater showing Hollywood movies. Okay. But it was better than Bakersfield because we had three people show up on day two. But this time we had a staff and we didn't have any money in the bank. We had enough money for about three payroll cycles and then we're done. We're like donezo. Wow. Yeah. We had 26 employees when we opened up.

46:37Wow. And that was still pretty lean, you know, for what we were trying to do for a 200 person restaurant. And what we forgot was advertising. Oh, right. You have to put movie ads in the newspaper at the time, in the art section, so people could like flip through and see what was playing. You couldn't place those ads. Yeah. So, we started taking out some ads. And then we would also, when we closed down, and this, you know, probably sounds terrible, but, you know, we're desperate. We would go to the other movie theaters with some pretty snarky flyers.

47:11Like, why are you here? And just like cover the foot of it. You should be at our theater. And so, it's like, this is our target audience. Let's do them. And then we're, you know, routinely chased away from those marketing opportunities.

47:25But here's the thing. You're, I'm assuming that your value proposition wasn't, hey, we're an art house cinema in Austin or, hey, we're a second run movie theater in Austin. It was, hey, we serve beer and good food and you can see a cool movie. Yeah. That was what you were focused on. A hundred percent. And so, a couple things happened pretty early. You know, the folks at the Austin Chronicle were very kind and wrote about our events. And the midnight movie programming worked pretty quickly.

47:58And then about three weeks into operation, Austin Powers, the first one, hit the second run market. Uh-huh. And it hit us like a freight train. And... What do you mean? Well, at the same time, before that weekend, Anne Hornaday is now a critic for the, one of the Washington Post. Washington Post. Yeah. Yeah. So, she wrote a really nice article about what we were and what we represented and what we were trying to do. Yeah. And I was like a deer in the headlights in the box office, just like mechanically, like

48:31a zombie, just selling tickets. And in my head, I was panicking. Yeah. How many people did you have on staff that night? There was two in the kitchen and Carrie and two waiters. So, there was four. But the bartender showed up in the middle of the rush. And I was like, damn, put on an apron. And so, he actually worked that shift. And then I waited tables. And, you know, thankfully, we made it through that night. And from there on, it was actually pretty great.

49:01Like, it worked after that. Let me ask you about the food part for a moment because I've been to Alamo Drafthouse and it's super fun to eat while you're watching a movie. But it's also different, right? I mean, I guess it depends because you can go to any movie theater and somebody's crunching on popcorn and it might be really loud. But, like, there was going to be an element of just disruption because you would have servers. Like, people are moving around, getting up, getting the food. And so, how did you kind of think about managing that in those early days?

49:33You know, it's not perfect, right? I mean, we take a hard stance on, you know, guest behavior in terms of no talking, no texting. But we acknowledge that we're not a pristine environment. You know, there's cinemas in France that don't allow any food at all into the cinema. It's just a pure experience. And we're far from that. But it's a huge part of our training to, you know, wear black and crouch down and know the movie. Don't disrupt during, you know, a key pivotal moment.

50:05And now we're in a different era where we're, you know, to preorder in advance and you don't have the checkout process. So, you're kind of eliminating the touch points of server interaction with you. So, all right. So, the Austin Powers kind of thing just really kind of just helped you guys find your footing. And I think, like, within a couple months, maybe within a year, you started to do more of these special themed menus. Like, if you played Streetcar Named Desire, you would serve New Orleans food or if Godzilla

50:42was being screened, you'd serve sake. Yeah. So, it was a leap for our ability for our culinary team because we weren't, you know, hiring, you know, Michelin rated chefs. So, yeah. Like, I think it took us a while. Like, I remember week two, you know, the servers would finish and they'd pick up their checks and they'd check out. And then Carrie and I would just clean the theater. And then one of the waiters said, you know, everybody's going to kill me for saying this to you guys. But the way it works in restaurants is the waiters actually clean the theater.

51:17You guys don't, you guys shouldn't do it. I just, I don't want to do it, but I just can't watch any further than watching you do this every single night.

51:25I'm curious about some of the things that you did because this was, we're talking when it was one theater and there's something that you guys, I mean, there are many of these sort of events that you would mount. Like, for example, you started this thing called the Rolling Roadshow. And I think one of the things you did was you somehow got like 60 or 70 canoes and you hauled them out to the edge of a river and you had, you screened the movie Deliverance so people could watch Deliverance in canoes on a riverbank.

51:57We'd have, we'd hire banjo players on the river. So you'd do this river cruise and Carrie roasted a whole pig on a spit. You know, it's just for the squeal like a pig parallel. For six hours. So, but it was so awesome. Amazing. I wish I was there, but it doesn't sound like a super efficient, like you weren't sort of thinking, all right, is this going to bring us a return on our investment? Are we going to be able to make money off this? Is this going to be sustainable? It was just like, this is going to be fun. Let's do this. Yeah, all of the extra stuff that we did, the feast nights where we would show a food

52:34related movie with a matching menu, the rolling road show, the scavenger hunts that we would do. All of that was for us. That was for fun. And it was for the community that we had developed, all of the people that we saw, you know, week in and week out that would come to the theater and became our friends. Because people would come and they'd hang out in the lobby afterwards and, you know, people would have another beer and we'd just talk about things and a lot of ideas. If once you start doing crazy weird things, then everybody has ideas for crazy weird things.

53:09Yeah. You know, like I remember very distinctly, I mean, it wasn't a money making venture, but for five years we had an annual cannibal film festival where we showed cannibal films and purported to be selling actual human flesh. And then, but we did, you know, those were also the things that people would write about and talk about. It became part of the, like our identity to one up ourselves in these fun things, but all the while just having a blast. And they didn't not make money when we would always plan it out such that the ticket price

53:43did make us money. It's just that a lot of times there wasn't cushion. You know, we had to sell it out in order to make money. And most of the time we did. I want to ask you for a sec about the no advertising, because I think, and I think it's still to this day, you don't play ads before films, but back then, I mean, surely that was another source of revenue. Like you could have had another income stream from that. There were several times when we had the opportunity to find out how much of an income stream

54:16that it would be. And we both said, no, we don't want to know. We don't want to know. We don't want to have any regrets at all or any inkling of temptation. So don't tell us. But what, I'm just curious, why were you so opposed to ads? I mean, great ads can be really entertaining. I mean, obviously people watch the Super Bowl for ads. Oh, guy, that's, you know, in your heart of hearts, you know, that's not true. But I'm curious why, yeah, I mean, why were you so opposed to it?

54:48I thought that, and this, I do feel like it was forward thinking, that it would instill loyalty to us. Like, here's all the things I hate about going to a movie theater. We're not going to do this to you. This is, you know, maybe Super Bowl ads are somewhat entertaining, but I can tell you the caliber of cinema ads in the 90s was not. And I just found it offensive. And still are not. And just thought that that would be a long, like, that's how people are going to want to come to us, because we're different. We're not the same movie theater that you're used to.

Expanding across Austin

55:20All right.

Expanding across Austin

55:21So you've got this one really successful movie theater in Austin. That is what you, now you guys are living the dream. But I guess a twist of fate, which is often what happens in these stories, a twist of fate occurs, which is that a potential competitor is thinking about coming into, or a company that wants to compete and wants to have a similar model, food, drinks, movies, is thinking about opening up a spot in Austin.

55:51And that starts to change the way you think about expanding? Yeah. We had no plans to expand. And the landlord of the Village Theater, it was a fourplex in central Austin, called me. And he's familiar with the theater, and he'd seen a line around the block for our theater and said, hey, I just want to let you know that I have a ready-to-be-executed lease with a competitor of yours, and I'm going to sign that lease.

56:25But if you want it, you can have it. It's yours, because I'd rather work with somebody in town, local, and I like what you do. But here's the proviso. You have to sign it by this week, by this Friday, and you can't change a word in the lease.

56:41And how long was lease going to be for? Ten years. Ten years. Ten years. You had six days or five days to make a decision. Yeah. So no surprise, we signed that lease without changing a word and embarked upon construction project number two. How did you finance that? That one was $300,000, and we just financed it out of profits. Out of cash flow. Yeah. Wow.

57:11So that was so, okay, great. And did you have to do similar amount of work on it, or? No. Well, I mean, different. It was bigger work, and it was like, it was a bigger kitchen, because it was four theaters, you know, double the amount of seats. Four theaters? Yeah. Four screens? Four screens. I mean, that's like, that's like a restaurant with four dining rooms, with 200 people in each dining room, one central kitchen, and a waitstaff going from like, one dining room to the next, which are really far away. That's a big operation.

57:42It is a big operation. But interestingly, so we ended up running first run movies, like brand new movies there. I read that by 2003, because I think you actually opened a third location in 2003 that year. Is that right? Yes. We opened a third location. Also in Austin. Correct. And it was a very similar situation where the landlord called us and said that there was a competitor potentially moving in. I feel like most of the expansion that we've done, or that we did early on, was entirely

58:16based in fear. Yeah.

58:19I read that by 2003, Alamo was making much more money from food than ticket sales. And that might've happened even before, which makes sense, right? I mean, because that's really where you, especially drinks, right? When people are buying multiple drinks. I mean, it's all, it's really just about cost of goods. You know, the, you're, you're paying a majority of the ticket on first run movies to the studio, you know, and on food, you're, you're paying what rounds to 25% of just food costs, right?

58:51So you have a much better profit margin. So there's still profit to be made in the movie tickets, but the, you know, beer and alcohol costs are less than food costs. So that's where the real profit was, but it was, you know, it's a balance of probably one third, a box office, two thirds, uh, concessions. All right. So you, you've got, uh, you know, these, these three locations, I guess, and you're thinking about a fourth location. And I think around this period, people, people sort of approach you about maybe franchising and you, you did it.

59:23You, you opened a new franchise, a few franchises, I think around, around Texas, like in Houston and maybe San Antonio. Um, but I guess you weren't like really comfortable with that. Like what, what, what was going on? Tell me the story. Well, at that point, I think we had become really ingrained in the Austin community and we're enjoying the aspects of community building at a real scale and there was more, more headache on the franchising and I didn't, it wasn't where my passion was.

59:54Yeah. There was probably a lot of lawyers and meetings and you're, and you want to like mount cool movies and like have chit chats with directors on in front of audiences, probably. That's all good stuff. Yeah. I feel like we had been sort of dragged kicking and screaming to every level of expansion and finally we were ready to say, no, no, we don't want to do that because now the four screen first run theater was financing all of the cool stuff that we were able to do at the single screen theater.

1:00:26Then suddenly people were talking about going nationwide. Yeah. And I think we just didn't want to think about that. Did it, did it stress you out? Yes. When we come back in just a moment, a franchising deal devolves into a nasty lawsuit and gets settled in a very surprising way. Stick around. I'm Guy Raz and you're listening to How I Built This. How I Built This.

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Lawsuit and reconciliation

1:02:31Hey, welcome back to How I Built This. So, it's 2004, and with some trepidation, Tim and Carrie move further into franchising, basically turning Alamo into two companies. The first will be run by them and made up of the theaters they already have in Austin. The second will be run by two new partners who want to build well beyond Texas.

1:03:02It was actually a great deal, and it was causing us a lot of stress. You know, I preferred the putting on a show aspect of Alamo. Yeah. But it was very enticing to us, so we did it. So just to clarify, there were these guys, John Martin and David Kennedy, and they basically said, look, we want to create a new business that is a franchising business. We will run it and own it. You guys will own a part of it, and you were okay with that.

1:03:34Well, even in those early days of franchising, we were very upfront. It's like, this is not a normal franchise. And yes, we're undeniably a chain, but we started preaching this mantra. It's like, we're a loosely connected network of local community theaters. All right. So they're opening franchises. But meantime, you guys are now really able to just, those guys are doing the franchising thing, whatever. You're focusing on your own initiatives, and you really kind of double down on this rolling roadshow thing that you do.

1:04:05And then, like, you take it outside of Austin. Like, you guys did, like, it was so cool. I wish I was there. You screened Rocky on the Rocky steps of the Philadelphia Museum of Art. Yeah. That was a great tour. I think we did Rocky 1, 2, and 3. Oh. And it was a marathon. And we also had these giant slabs of beef up at the top of the stairs that people could take pictures of themselves punching. It was really gross. Like, Pauly in the meat packing.

1:04:36Yeah. Oh, my God. It's very wasteful. I'm sorry. But it was such a cool thing. And it dripped a lot on the steps. And I apologize to the city of Philadelphia. Yeah. I remember that scene. He's punching those carcasses of meat. And the newscaster, the news reporter's there. And they're doing a segment. And oh, my God. That's so cool. So you've got this going. And I guess around 2009, you start to have second thoughts or maybe second thoughts is an understatement about what's going on with the franchise.

1:05:09And you're not happy with how it's turning out. What was going on? What was making you uncomfortable about how the franchising was rolling out? It wasn't actually we who were uncomfortable. We were having a great time. But when we sold the franchise rights, we made very, very sure in the contract that we were going to be allowed to do whatever we wanted regardless of what direction the franchise took. Right. OK. And so we were just doing that.

1:05:39We were doing whatever we wanted to do. We were having a great time. And in the meantime, the franchise was working very, very hard on systems and efficiency and all of that sort of a thing. And they became increasingly unhappy with people calling them and saying, but the Alamo is supposed to do it this way. Why is this theater in Denver not doing it this way? And referring back to us. So that was making them very unhappy.

1:06:11And they wanted to retract some of the language in the contract that was going to allow us to not pay attention to what they are doing. And so you ended up in a legal battle with your former partners around this. Well, Guy, they sued us first.

1:06:33And they sued you basically because they wanted to change the language of the contract to make you. You know, it was like we were angry and we were just like baffled by it. It's like, no, come on. It's pretty clear language and just like trademark infringement and things like that. So then we countersued to unwind the deal basically. So we felt that there was things that had happened between us that they were in violation of. And so you're going to, you know, you push me. I'm going to push you. So we went to war.

1:07:04And it was clear that this was ugly enough that there were going to be no winners other than the lawyers. But the interesting thing about it is that to that point, we had never really met or spoken to Dave Kennedy, who was the guy who had put the money in to buy the franchise. So you didn't know him. We didn't know him. He didn't know us. So the first time you really kind of meet him properly is during this lawsuit? Yes. During the first day of deposition.

1:07:36And you're just sitting there hearing his take and then? And vice versa. So we went first, I think. And he sat and he listened to our deposition about the fact that, you know, a lot of the things that we did were not done for profit. Yeah. And during my deposition, they came out with an email where I had, I don't know if it was an employee or a partner in one of the events that we were doing. And I said, well, we really want to do this thing. And I know it's going to add a lot to the cost.

1:08:07But it really doesn't matter if we make a profit. And so they took this email and they threw it at me in a kind of an aha way, sort of accusing us of trying to, you know, tank the company by not caring about profit. And it gave me just a really great diving board for explaining the difference between short-term profit and long-term investment in a brand.

1:08:39And Dave Kennedy was sitting there listening to it. It was the first time he had ever heard me say anything outside of the contract negotiations, which went through the lawyer. Wow. And so what happened? So we finished the day of deposition. And afterwards, Dave Kennedy, to his credit, texted me and said, hey, would you have time for breakfast tomorrow morning? And I said, yes.

1:09:10And it was a pretty bold move on his part. Yeah. Especially because his lawyer would have been like, what are you doing? I know. Exactly. Ours did, too. Yeah. I mean, our lawyer was this tough-as-nails female barrel-racing rodeo champion. Missing half of her fingers. Oh, my gosh. I was so scared of her. Yeah.

1:09:32So he proposed the idea. It's like, hey, I have a left-field idea for you. What would you think about crushing the brands back together and you stepping in as CEO of the consolidated company? Wow. So basically, it's like, liked what we had to say, liked our vision for the company and the brand. And it was a wild idea. Yeah. He's heard what you've said in depositions and he starts to think, hey, that sounds such a bad idea. Yeah. Asks you to breakfast and offers you to be the CEO of a combined company.

1:10:04I mean. And 50% of the combined business also. Amazing. I mean, this is like a great example of why, like, mediation is often a better option than lawsuits. Yeah. Because you could, I mean, he's basically saying, why are we going through this? Let's just work together. Yeah. I mean, what incredible maturity and foresight. I agree. And the beauty was that once we did it, because obviously cutting ahead, we said yes. And the idea of growing so that we can truly support the movies that we love got super exciting.

1:10:39And helping craft that plan to open in L.A., to open in New York, and to, like, to be a force in the industry, that was a totally different game. And they had built a great structure and system and knew how to grow, knew how to expand. They had, you know, running laps around us in accounting, in operations, and we had the perfect counter strengths. Okay, so this thing, I love this thing that kind of happened again serendipitously, although probably at the time, I don't know if it ever thought it would happen that way or work out that way.

1:11:15But you guys have had this kind of very strict policy, let's say, about noise. Like, I don't know if you've ever heard of, like, a Keith Jarrett concert. Like, if you cough at a Keith Jarrett concert, like, he will look at you and ask you to leave. Like, he will walk off stage if he hears, like, candy wrappers, right? And your policy was like that around phone texting. Like, if you text in a theater, you know, we'll kick you out. We don't want you to mess up anyone's experience.

1:11:46And I guess this lady, this woman, went to a theater and was really mad because she was kicked out and then left a voicemail, which you guys then turned into, like, a YouTube video. Yeah, we consulted with our lawyer first because I wanted to find out property ownership on that. So, apparently, the way I understand the law is if somebody leaves you a voicemail, it's your property as long as you don't sell it because then you'd have to kind of work out a deal with the person. So, we didn't sell it. We just turned it into a little bit of a snarky clip because she was very mad.

1:12:19She was obviously a little bit intoxicated and was furious about getting kicked out because she was using her phone in the theater. In your effing little S-E theater. She was very funny. And, I mean, it's probably – I don't know how many. It's big for us. I don't know, 10 million, 12 million views on it. So, it became our calling card for a long time. Yeah. We always do a PSA to explain our policy to people before the movie. And that's by far our most popular PSA of all time.

1:12:50So, when you became – around the time you became CEO, I know, Kara, you took some time away because you had your children, twins. Yeah, and you may have noticed that, you know, when we've been talking about the expansion and every time we expanded that I was the one with far more reluctance. So, when the companies got crushed together and it was a major commitment to essentially unlimited expansion, that was when I tapped out and said, okay, I'm ready to have kids now.

1:13:25Yeah, yeah.

Culture reckoning and COVID crisis

1:13:27All right. So, I want to jump forward a little bit to 2017, which is sort of the year where the kind of Me Too movement really started to kind of explode, obviously, in the New York Times with their reporting and other organizations. And, you know, I don't think there was a single organization that wasn't affected by it, including yours, right? And you guys had somebody who worked with you or who's, like, running the magazine that Alamo Drafthouse was putting out. And he was accused of sexual harassment and left or was fired.

1:14:03And that would have been the end of the story. But I guess he was brought back a few months later. Yeah. What happened? So, it was challenging because, you know, it's – You'd known him for a long time, right? Long time. Yeah, yeah. He was a friend. So, I kept in touch with him and it was just – I saw that it was challenging for him because he didn't find any pathway to write anywhere anymore and was depressed and I was worried about him.

1:14:35And so, I made the decision at the board meeting to offer him a copy editing position that he could do from home. Because he sort of came back quietly and somebody saw his byline and said, why is this guy back in the company? Yeah, yeah. Yeah. And, you know, once that happens and, you know, especially at the time within, you know, a very important movement in our culture, you know, that it's also not a place for nuanced dialogue.

1:15:05But clearly what had happened is I was the leader of this company and I had made a mistake. And what was necessary immediately was to acknowledge the failure and mistake. And there were other allegations from the past that came forward and we had spent so much time focusing on guest experience and being laser focused on guest experience. And frankly, we could have done a much better job of building a proper culture, building, you know, a safe environment for work.

1:15:38You know, a lot of things were just casual. So, I embarked upon a tour and, you know, went to every location and apologized. And it was basically a listening tour of like what's wrong in the venues that I may not know about. And, you know, we truly want to be the best theater that has ever been. Help us. And did you learn about, I mean, on this tour, did you learn about things that people had experienced that you didn't know? Absolutely. Yeah.

1:16:09I mean, there were sexual harassment issues. There were allegations of racism. There was like, it was individual, you know, managers that I don't think were kind. Yeah. You know, so what we did in the wake of it is we established a really robust anonymous engine where I would start my day every day and just read comments from teammates across the country. And we had a monthly all-staff meeting where the ones that were the hardest, we would address them publicly in front of everybody.

1:16:42And, you know, we grew from it. It was really hard and painful and we're better because of it. I want to, and we'll talk about the movie industry in a moment, but I think 2018 was the higher watermark or maybe it was 2019 of box office sales. It was like really great. And even 2019 was pretty strong. And then, of course, COVID hits and you're in an industry, not only in the movie industry, you're in the restaurant business too.

1:17:19Like you get hit by this twice. Right. You're running restaurants and movie theaters in the same place. A lot of shared recycled air. Oh, my God. But, I mean, you guys shut them all down. You shut all your locations down. You go from like tens of millions of dollars coming into the door to zero in like a day. Yeah. You know, everybody knows it. It's not a unique story for us, but just we had no idea at the time in March of 2020 when, if ever, this is coming back.

1:17:54Yeah. And we knew, you know, very quickly knew our burn rate as to what debt was accumulating from some very expensive leases. And, you know, we had gotten a little over our skis in terms of being bullish on expansion and had mounted some debt and had a big team. You'd hit by that point, by that point, like 47 locations or something like that? 42, 43, something like that. Yeah. Yeah. You eventually had to file for Chapter 11 bankruptcy in March of 2021.

1:18:26Yeah. Tell me what, I mean, basically, you would not be able to pay your debts at that point. Well, it's a little bit more complicated in that we probably had about two payroll cycles left before we were done. Wow. And so in December, we took on some basically distressed asset financing, right? So that money is not cheap, but it turns out not a lot of people waiting in line to invest in movie theaters in December 2020.

1:19:00So, you know, but at the end of it, it did what it's supposed to do, right? So we're back. Yeah. We're healthy. Everybody took a little haircut. We took a big one. You guys had to sell, I think, get to sell a lot of your assets or some of your assets to a private equity group or a venture group, right? I mean, that's essentially what happened. That helps you emerge from bankruptcy. Yeah. And so we weathered it, right? So it's far from ideal, but, you know, we live to ride another day, right?

1:19:31So the balance sheet looks good, and we're actually growing and expanding new theaters. We're bullish on the future of the industry and looking for opportunities to grow.

The future of cinema

1:19:42So now we get to the conversation that you've been asked a bazillion times, and I'm going to ask you for the bazillionth and one time, bazillionth time, which is the future of movie theaters. Okay, and movie industry and streaming and all this stuff. We know that some big chains are gone.

1:20:01And so we know that there's been some shedding. But do you still believe that people will want to go to the movies in the same rate in 10 years from now, 5, 10 years? So when you've got, you know, on a 50-inch TV screen, today is like a joke. You can buy one for 200 bucks. Yeah. What is going to make people go to movies at the same rate that they've been going to in the past?

1:20:33Well, I guess I'll ask you a question of do you have a stove in your house? Yeah, I got a really good one. You mean a stove top? Yeah, it's awesome. Yeah. But you still go out to restaurants, right, every once in a while? Yeah. So that's really it. Like humans, and I think this is so evident after COVID. Like the first time I stepped back in a movie theater, we put together a very nostalgic clip about welcome back to the movies. But like I was in tears.

1:21:03Yeah. I was just so happy to be out of the home. You know, like every once in a while, no matter how much streaming content you watch at home, you want to get out. You want to be a part of an event. You want to have experiences. So I think there's legit pressure to up the game to make sure that our industry, cinema industry, delivers, you know, exceptional experiences. There's just something about, you know, a lot of times I hate the home experience in a way because there aren't the rules.

1:21:40Like if somebody calls me, I'm going to answer that call. If there's like a little pause where it's a little bit lull in a movie, because I'm addicted to my device, I have this urge to pull it out. So like being lights down in an excited theater, experiencing something fresh with a group of people, that's the core experience. Like that core product is beautiful. I love it. Yeah.

1:22:10If you think about all the ups and downs of this, and it's a tough business and you guys have really been up and down and up and down and up and have really built, you know, this incredible thing that, you know, people know and has become kind of like a model for other competitors and others to kind of create almost like a dinner theater experience. How much of where you are today do you attribute to just how hard you worked, the both of you, and how much to the luck that you came across?

1:22:44I would say that a lot of it has to do with hard work. We worked 11 hours a day for seven days a week for probably five years. But at the same time, we have been incredibly lucky because of all of the people that we've come across who have been so supportive and kind. From the film distributors early on to the people who helped us get started in Austin, we didn't tell you the story about the food purveyor at Cisco who knew that we were an impoverished couple that was asking him for samples to develop our menu just so that we would have something to eat.

1:23:24And he provided us with huge amounts of samples anyway. He knew that that's what we were doing and he did it anyway. So, yeah, also a good deal of luck in there. Tim?

1:23:38Oh, you know, it's definitely a mix, you know, and I'm not unaware of like the basic luck that I have, just the privilege of having a stable family life and supporting parents and a good education. And not really, like having a nuclear family, it's just like, it's, you know, it's all I know, right? But I know that that's not everybody and I'm keenly aware that that has given me what others don't have.

1:24:08And, you know, I certainly work really hard. I still like doing it. And on the flip side, just like life is just full of these weird little moments like having a for lease sign pop up or, you know, that we were able to get financing before we ran out of payroll, right? So I put the scales more in luck than in hard work. But gosh darn, I can work pretty hard when I need to.

1:24:39That's Tim and Carrie League, co-founders of Alamo Drafthouse Cinema.

1:24:48Since this interview first aired back in 2023, Alamo has gone through some pretty big changes. Sony Pictures Entertainment acquired the chain and Tim and Carrie sold their stakes in Alamo as part of that deal. Today, Carrie manages a creative hub. It's called the Baker Center in Austin. And Tim is back in the movie business. Last year, he opened a luxury movie theater in New York called Metro Private Cinema. It has private screening rooms and a tasting menu.

1:25:19Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And it's totally free. This episode was produced by Carla Estevez with music composed by Ramtin Arablui. It was edited by Neva Grant. Our production staff also includes J.C. Howard, Casey Herman, Chris Messini, Carrie Thompson, Alex Chung, Sam Paulson, Catherine Seifer, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

1:25:58How I Built This.