FUTURE FILE

Trends in Entertainment

& Retail Real Estate

 

EMERGING MOVIE THEATER STRATEGIES

 

Theater attendance is at its highest in 40 years.  Multi-plex centers are the first choice at most new and redeveloped sites to anchor with a dash of entertainment excitement.  But as ticket prices in major cities rise to astonishing heights, and as new film technologies appear to outpace existing facilities--how are theaters, old and new, going to keep those buyers coming back for more?

By Keith Alan Deutsch and Judi Biederman

 

Even though it is cheaper and easier to watch movies at home on a video cassette than to trek out to a movie theater, the Motion Picture Association (MPA) has announced that attendance at movie theaters in 1998 was at its highest point in 40 years.  During last year, 1.48 billion tickets were sold for a record $6.95 billion in gross income.  Although some argue that higher ticket prices have contributed to the rise in figures (average price up from $4.59 to $4.70), the MPA says that the number of tickets sold was also up 9.2 percent over the previous year. 

 

Experts expect total ticket sales to hold despite the “shocking” 1999 rise in admission rates-- up to $10 or more per ticket in major cities.  Total theater revenues are up 50 percent since the beginning of the decade!   And a wide range of ages is contributing to this profitable theater attendance.  Viewers 12 to 24 years old accounted for 37.4 percent of admissions in 1998.   But surprisingly, the over-40 age group has been the fastest growing segment of the audience, up by 35 percent since 1993.

 

General Cinema’s Art Deco facade is used for its multiplexes in Baltimore and Philadelphia

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Some observers say that the upswing in viewers and revenues is due to blockbuster movies like Titanic that depend on emerging big-screen technology for impact.  All of last year’s numbers--tickets sold, gross income, and attendance--were affected by Titanic’s totals.  

 

But other industry leaders attribute the rise in revenues and attendance not only to better movie theaters that can display to an advantage all the technical improvements in production values, but also to human nature.  Television and computer technologies offer at-home entertainment (including movies) that experts call a “cocoon experience.”  Web and cable surfing are experiences that can only be “enjoyed” alone--just ask anyone in the room who doesn’t control the surfing buttons! 

 

Movie theaters provide an emotional experience that is significantly, and psychologically, different from home entertainment, says William F. Kartozian, president of the National Association of Theater Owners. He adds, “We’ve been able to dispel the myth of cocooning.  People continue to enjoy shared experiences.” 

 

Jack Valenti, chairman and CEO of the Motion Picture Association, believes, “Most families don’t want to be tethered every evening to an electric box, no matter how magical its entrails or how sweeping its reach.” Valenti made his observations in his state-of-the-industry address to movie exhibitors gathered for their annual convention in Las Vegas.  Valenti also says, “People want to get out of the house from time to time to get that shared entertainment experience.”

 

Perhaps this need to get out of the house for shared family experiences explains the dramatic explosion of movie screens in America.  The total number of movie screens as of this minute, according to the National Association of Theater Owners, is a whopping 34,168.  That is an increase of 2,303 screens from 1997 and growing at an amazing rate.

 

Better movie theaters may be a factor in rising movie ticket sales and income.  And so may be the dynamic increase of available screens. 

 

But the startling increase in the construction of these new high-tech cinemas--often a first choice anchor for any new or redeveloped retail and entertainment specialty project--creates increased competition among all movie theater distributors.

 

And this growing competition raises alarming questions among many in our industry: How long can the movie theater boom go on before it crashes?  How many new screens can America support?

 

The big squeeze is not only on the smaller operators.  But most of these smaller operators, especially of older theaters, say they simply can’t compete with the multi-screen, high-tech glitz of the new mega-cinemaplexes that are snatching their business away.

 

But some of these theater owners are innovating new ways of presenting older or smaller cinema venues in order to offer an experience different from their bigger mega-plex neighbors. 

 

Competition is so stiff that even some big exhibitors are experimenting in the movie-going marketplace.  They operate with all guns blazing and spend millions in development before the first movie is ever shown, hoping to woo viewers with the most comfortable seats, the most movies offered, the most peripheral activities surrounding the theater, or the most diversity in types of films offered.

 

A small section of a sumptuous, elaborate, and very large General Cinema food court

 

All these new strategies help broaden the base of moviegoers in the communities where these experiments are conducted.  Here is a sampling of movie exhibition strategies now going on in large and small, old and new theaters from around the country: 

 

Two-screen Ohio Cinema goes deep discount  (try free)

 

The owners of the 30-year-old, two-screen Northfield Discount Cinema have decided to compete against a revved-up new area Cinemark theater by showing second-run movies at discount prices.  Catering to families and “limited income” moviegoers, Northfield has cut adult ticket prices in half to $2.75 and reduced matinee and children’s prices from $3.50 to $2. Concession prices have also been lowered.

 

The theater even offered free admission over a recent weekend to attract viewers and to inform them of the new policy. The facility then closed for a week for minor remodeling. Northfield owners say they will try to run three movies a week on rotating time slots between their two screens in order to compete with the multi-offerings of their bigger, newer competitor. Second-run movies are less expensive for theaters to show, and Northfield is hoping that they can carve a competitive niche in the local movie going public. 

 

30-screen AMC in Kansas kills 3 screens to offer dinner and a movie

 

In Olathe, Kansas, AMC Entertainment, Inc. is trying a new concept of one-stop evening entertainment for its customers. Even though the Olathe Studio 30 has enjoyed high attendance since it opened in December 1997, the company is shoring up its share of future attendance by offering a dinner and movie combination package. It is converting some of its auditoriums into on-site restaurants.

 

An AMC spokesperson said that the company will initially close three screens and convert the space into a sit-down, moderate-to-high-priced restaurant. If the restaurant is successful, three more theaters will be closed and the restaurant will be expanded or another restaurant will be added. Although some other AMC theaters have been developed with restaurants outside the theater or located nearby, this is the first time the company has combined the two venues under one roof. The new concept is dubbed as an attempt to recognize the value of customers’ time because they can park once and go to dinner and a movie all in one stop.

 

Stadium seating has become the rule, not the exception.

 

Premium Cinema™ offers champagne, wine, appetizers and valet parking

 

General Cinema Theatres, a subsidiary of GC Companies, Inc. (NYSE: “GCX”), is based in Chestnut Hill, Massachusetts. The company has more than 1,050 screens at 150 theaters in 24 states and hosts more than 53 million guests annually.  Premium Cinema™  features valet parking, champagne, wine, gourmet appetizers and the comforts and luxury of a private Hollywood screening room.

 

New Cinema strategies abound: game rooms  and party rooms  on the
one hand; champagne and gourmet dining on the other

 

Consolidated Theaters in North Carolina believes bigger is better

 

In Roanoke, Virginia, Consolidated Theatres of Charlotte, North Carolina is proposing a new 16-screen, 2,900-seat movie theater under the concept that competition simply means going into the market bigger and better than your neighbor. The project hasn’t been approved yet.

 

Consolidated currently runs six theaters throughout North and South Carolina and expects to open the new Roanoke facility in May 2000. Cost estimates for the project are running in the neighborhood of $11 million as the company plans to focus on super-high technology and viewer seating comfort

 

General Cinemas to try love seats and pastry

 

General Cinema Theatres and Philadelphia’s Pennsylvania Real Estate Investment Trust (PREIT) have announced plans to build a state-of-the-art 15-screen movie megaplex in the Northeast Tower Center in Philadelphia.

 

The new 80,000-sq. ft. theater complex will contain 4,000 seats and will feature stadium seating in every auditorium, digital sound, wall-to-wall screens, comfortable high-backed seats, a cafe serving Starbucks specialty coffees and fresh pastries, advance ticketing, “love seats” made for two, and a wide selection of concessions. Pending final zoning approvals,  construction on the facility is expected to start this month and
the theater is slated to open in the fall of 1999.

 

Robert Redford’s Sundance Cinemas to try documentaries & art films

 

The new Northeast Tower project will be General Cinema’s third new movie megaplex in the Philadelphia market in less than three years. In December 1997 and 1998, respectively, the company opened theaters at Franklin Mills Mall and the Plymouth Meeting Mall. The company has also announced that it will open one of its first Sundance Cinemas in Philadelphia next winter, adjacent to the campus of the University of Pennsylvania. A joint venture between General Cinema and Robert Redford, Sundance Cinemas will be a circuit of multi-screen theaters devoted to independent, art house, foreign and documentary films.

 

Sony Imax Theatres slated to premiere major Hollywood movie releases?

 

Sony Pictures Entertainment is rumored to be working on a plan to create unique “experience events” of any new Hollywood film through limited-run premiers of major Hollywood films in its growing chain of enormous screen Imax Theatres.  How films produced for a national roll-out will be screened in the enormous Imax format (which uses the largest film format in the world to project images on the largest screens in North America) remains a secret. Sony continues to open new Imax venues in major cities with no declared limit in sight.

 

Sony is as major a business player in American film as you are likely to find.  This industry mammoth not only owns a major Hollywood studio, Columbia TriStar, but in May 1998 it created one of the largest motion picture exhibition companies in the world when it merged Cineplex Odeon Corporation and Loews Theaters (the oldest theater circuit in North America) to form Loews Cineplex Entertainment. Today, Sony’s Loews exhibition outfit operates 2,870 screens in 450 locations.