Film-Tech Forum ARCHIVE: Theatre companies possibly overbuilding again?

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Posted by Evans A Criswell (Member # 381) on 10-22-2003, 04:51 PM:

Here in Huntsville, Al, in the past month, two new theatre projects have been announced. Currently, we have 3 theatres:

Regal Hollywood 18 (the most popular, which serves the south end of town, doesn't have to split product with anyone, and attracts many other moviegoers from other parts of town)

Carmike 10 (west side of town, splits product with Regal Madison Square 12)

Regal Madison Square 12 (west side of town in parking lot of Madison Square Mall, splits product with Carmike 10).

Two new theatres have been announced:

Regal 16-plex (west end of town about 2 to 3 miles south of the Carmike 10 and Madison Square 12, don't know if it will have to split product)

Rave 18-plex (south part of town about 3 or 4 miles from Hollywood 18, don't know if it will have to split product with Hollywood 18).

In any case, within a year ot two, the number of screens in Huntsville could rise from 40 to 74. On weeknights, and even on weekends, many auditoriums are nearly empty. The big movies on opening weekend are typically the ones that have the most people. The question is -- is the addition of 34 new screens in Huntsville a smart move by these theatre companies?

It would seem that on the west side, one of the existing two theatres would likely close.

In Athens, AL, there is currently a drive-in, and there hasn't been an indoor theatre since the early 1980s. A company is wanting to put a 12-plex there.

In Florence, AL, there are two Carmike theatres, one an old Litchfield theatre that is now 6 screens and an old Martin theatre that is now 4 screens. Both were originally built in 1978. That's 10 screens. Carmike is building a new 12-plex there. That makes sense. Florence is currently under-screened. However, since the announcement of the new Carmike 12-plex plans, two other companies have announced that they want to put new 12-plexes in Florence. Assuming the two old theatres close, that would put 36 screens in Florence in a market currently with 10.

Is this sort of thing happening everywhere, similar to the theatre-building boom of the late 1990s?

Will this lead to more financial difficulties for theatre companies again?

Posted by David Stambaugh (Member # 1102) on 10-22-2003, 04:57 PM:

quote:
It would seem that on the west side, one of the existing two theatres would likely close.

Maybe one of them would be viable as a dollar theatre? Cinemark had great success with that here when they added 17 new screens in the same mall where they already had 12 screens. Just a thought.

What are the "amenities" like at the existing theatres? Stadium seating? All-digital sound? Are they well-maintained and pleasant and inviting and all that? Convenient locations? A new megaplex in a "perfect" location, with all the latest hooha, can turn the market upside down in a small-to-midsize market. Cinemark 17 killed several other locations here...

Posted by Bobby Henderson (Member # 840) on 10-22-2003, 06:00 PM:

How many of these planned theaters have actually broken ground? Over the past few years in my region I've seen a number of big announcements that unfortunately fell apart before any construction could begin.

In Wichita Falls, Texas, Century Theaters was supposed to build an all-THX 16-plex. Starplex also had plans to build a stadium seated 14-plex. Neither were built. Carmike operates the Sikes Ten in Sikes Center Mall (which isn't a very good theater, but it makes quite a bit of money). The only other first run is the Carmike Century City Six nearby. Wichita Falls is definitely an under-screened market. I'm really surprised an outfit like Cinemark hasn't already built a 20-plex there. One single "destination site" could take much of the first run business in that market.

The "Bricktown" area in downtown Oklahoma City was the site of a couple announced theaters that were never built. Edwards Theaters was going to build a 24-plex with possibly an IMAX-3D screen to boot. Never happened. However, Harkins Theaters officially broke ground on a new 16-plex for the Bricktown area. The new theater is more modest in scope than the Edwards project. But Harkins claims their new site will be home to Oklahoma's largest movie screen and house with largest seating capacity (70mm capability would seem highly doubtful). The new 'plex should be completed in time for Summer 2004.

I'm kind of surprised to hear Carmike is building a new number of new theaters just in Alabama alone. I would assume they may be building else as well. It would be cool if they could add at least 4 or 6 screens to the Carmike 8 here in Lawton. Now that Lawton's Carmike has the west side of the city to itself, it is cycling out movies pretty fast on only 8 screens. People are learning to see the show quick or you miss it.

Posted by Charles Everett (Member # 889) on 10-22-2003, 06:04 PM:

Sometimes a chain will announce plans for a new theater only to see a competitor steal their thunder. It's happened in my area at least twice.

Hoyts was going to build a theater in Somerville -- then Reading opened its own theater in Manville. AMC was going to build a megaplex in Linden along busy Routes 1-9 -- then Loews opened its own megaplex at the Jersey Gardens mall off the New Jersey Turnpike.

Evans, you're in a good situation already in Huntsville. The Regal Madison Square usually has arthouse as well as mainstream fare (though it drops Lost in Translation tomorrow). Add the other 2 Huntsville theaters and you're well covered in that city. Regal might not build a new theater in Huntsville, but it might upgrade the Madison Square to all-stadium if the company has not done so already.

In Florence I'd see Carmike opening the 12 (I assume it's all-stadium), converting the 6 to subrun and closing the 4 -- while the other 2 companies pull out. Florence isn't large enough to support 36 screens.

Posted by Evans A Criswell (Member # 381) on 10-22-2003, 08:47 PM:

Charles -- all of the theatres in my area are stadium seating. The Madison Square 12 has had a lot of new projectors and digital sound installed in many auditoriums. I'm a bit surprised by these announcements of the new theatres since we seem to have enough screens, all stadium and nearly all of them with digital sound. All have adjustable screen masking (Regal fixed this in the old Cobb auditoriums, completed last March). And you're right, we're in pretty good shape theatre-wise here, and the Regal and Carmike split product.

Decatur has no stadium seating, and has been overlooked concerning theatre improvements or new developments. I'm surprised Regal hasn't converted the River Oaks 8 to stadium seating or another company hasn't built a new stadium-style theatre. Decatur has 16 screens, 8 of them excellent at Regal River Oaks, and 8 of them lousy at Carmike 8. These two theatres split product, so they don't really compete, which is probably why Carmike doesn't improve the lousy Carmike 8.

I wouldn't be at all surprised if some of these new theatre projects didn't fall through and never happen.

Posted by Gordon McLeod (Member # 33) on 10-22-2003, 09:34 PM:

I have noticed several large circuits that deliberatly announce they are building in a town (with no plans to do so) to keep smaller circuits from gatting any of the concesions from the municipalities that they are asking and getting [Mad]

Posted by Robert D. LaValley (Member # 1867) on 10-22-2003, 11:54 PM:

I've seen that companies would just rather build a brand new theatre with more screens then try to put money into a slightly older building to upgrade... Then again you might be right, it might just be over-building to push out the competition. Isn't amc closing everything under 12 screens?

Posted by William T. Parr (Member # 677) on 10-23-2003, 01:10 AM:

I do not believe AMC is closing everything under 12 screens. unfortuately they do have enough sense to realize that in several areas they have 4 adn 6 plexs that do very well business wise and the are would not support a 30 or 24 screen theatre, Of course AMC has dropped that concept all together and has settled on the 12 to 18 screen philosphy after building way to many of these huge ass wastes of money.

Posted by David Stambaugh (Member # 1102) on 10-23-2003, 11:30 AM:

A few years ago Regal announced a new 16-plex here to replace an aging 6-plex. Then Cinemark came in and quickly built a new 17. Regal not only dropped their plans for the 16, but closed the 6 as well as a 4 and a 1, and their remaining 8 seems to be barely viable.

Posted by Evans A Criswell (Member # 381) on 10-23-2003, 04:14 PM:

Why would a theatre company rather build a new theatre than upgrade an existing one? Regal upgraded their Madison Square 12 and Hollywood 16 here in Huntsville, adding digital sound, stadium seating, and adjustable screen masking (and 2 new auditoriums at Hollywood 16). It seems it would be far cheaper than building an entirely new building. The other ugly thing about building a new theatre is it leaves the old building, which usually ends up being vacant unless converted to something else or demolished. An old theatre multiplex isn't easily used for other purposes without significant modification.

When overbuilding is what got the companies in trouble to start with (which obsoleted existing theatres), why not just add 4 new auditoriums onto Madison Square 12 instead of building a new 16-plex 2 miles away? Enlighten me.

Posted by Bobby Henderson (Member # 840) on 10-23-2003, 06:20 PM:

quote:
Why would a theatre company rather build a new theatre than upgrade an existing one?

Lots of reasons. The most obvious one is any theater more than several years old very likely has walls too thin to keep the wider dynamics of digital sound from leaking room to room. At least with a new build you can beef up the walls and get the sound treatment done right from the start. Ceilings in an existing standard-sloped theater may be too low to accomodate a proper stadium seating conversion as well.

Here's another even more important factor: government regulations. If you do any kind of significant improvement to any kind of commercial building no matter how old it is you must comply with current regulation standards of OSHA, EPA and the American's with Disabilities Act. Lawton's old Central Junior High School was closed and turned into an adult learning center, along with getting a historical building designation. It was cheaper for the city to spend $13 million on a new junior high school a mile north.

Anyway, with all the issues of conversion and compliance to government regulations, you could easily spend more converting an old theater than building a new one with the same number of screens.

Posted by David Stambaugh (Member # 1102) on 10-23-2003, 06:42 PM:

There may be certain accounting advantages to going new-build as opposed to refurbishing or adding-on. You get all brand new equipment and other expensive capital assets that can be depreciated on an accelerated schedule. Helps short-term profitability look better than it would otherwise. At least I think that's how it works. Depreciation of a new building might factor in too. An old building has probably already been mostly written off (assuming they own it and aren't leasing).

Posted by John T. Hendrickson, Jr (Member # 849) on 10-23-2003, 07:55 PM:

Evans A. Criswell wrote:

"The question is -- is the addition of 34 new screens in Huntsville a smart move by these theatre companies?"

Of course not. You can go to the bank on one thing- What goes around, comes around. There was overbuilding in the past, and there will be overbuilding again. The big wigs who run the big chains can't resist the challange. It becomes a test of egos, not good business sense. It's all about who has the biggest member between his legs.

What mystifies me are all the so called savy investors out there who pour millions into the stocks of these outfits, only to see them go bankrupt, screw the shareholders, then re-emerge from bankruptcy to start the whole process all over again. Do the big boys get hurt? Nope. They bail out before the eleventh hour every time and leave others holding the bag.

Like Harry Truman said: "The only thing new in the world is the history you don't know."

Posted by Charles Everett (Member # 889) on 10-24-2003, 08:03 PM:

quote:
What mystifies me are all the so called savy investors out there who pour millions into the stocks of these outfits, only to see them go bankrupt, screw the shareholders, then re-emerge from bankruptcy to start the whole process all over again.

Two leveraged buyout firms lost $1 billion owning Regal Cinemas before Anschutz came in. Merrill Lynch lost a bundle owning United Artists Theatres before Anschutz acquired UA. In those cases it wasn't shareholder greed, it was Wall Street greed.

quote:
The big wigs who run the big chains can't resist the challange. It becomes a test of egos, not good business sense.

The way the economy is right now I don't see any big chain -- not AMC, not Loews, not even Regal -- going on a building spree.

When Regal held a conference call to discuss 3rd-quarter earnings, its chief financial officer said the company plans to keep its screen count at its current level. (The transcript is currently on the Regal website; click "Investor Relations" from the home page, then the link to the transcript.) By that Regal will only open, say, 4 or 5 theaters a year while shedding screens within the company. In New York City, Regal downsized the UA Battery Park in lower Manhattan earlier this year and unloaded a longtime UA site in Queens just this month.

AMC was going to walk away from the Bridgewater Commons 7 in 2 years when the lease was up. The mall's expansion plans mean AMC will be out next year. AMC is keeping the Essex Green 9; it's a stadium theater, well booked, in a good location and a moneymaker. Coincidentally, those 2 theaters were built by General Cinema.

Posted by Ron Yost (Member # 1850) on 10-25-2003, 12:06 AM:

It almost sounds like money laundering going on. Hmmmm. [Confused]

Ron Yost

Posted by John Carpenter (Member # 1488) on 10-25-2003, 10:00 AM:

I do not know without a doubt.. but according to Rave Cinemas (listed as opening in Huntsville), they do not ever open a theatre in an area that will have to share product... So I guess you will have to wait and see.

Posted by John T. Hendrickson, Jr (Member # 849) on 10-26-2003, 08:05 PM:

Charles Everett wrote:

The way the economy is right now I don't see any big chain -- not AMC, not Loews, not even Regal -- going on a building spree.

No Charles, not a "spree", but trust that they will continue to overexpand at every opportunity. They have to open new locations to show investors that they are "growing". And yes, they will build on others in an attempt to insure that growth. All the while, many of their current locations are grossing fewer dollars. In economic paralance, it's called "same store sales". If that figure is dropping, it's a red flag.

Posted by Martin Brooks (Member # 1269) on 10-27-2003, 11:49 AM:

I agree with Charles on this one, at least for the NYC area. There were a number of new theaters that were planned several years ago that have been cancelled. The most prominent is the Regal that was supposed to be part of the new Random House building at 1745 Broadway at 55th St.

And the only renovation that I know of is the conversion of the Waverly to the IFC.

For the first time in recent memory, there is not a current new theater build in the planning stages anywhere in the five boroughs of NYC (that I know of), even though as compared with many other regions, NYC is still underscreened: NYC has about 15,000 residents per screen, as compared with about 7800 per screen in Philadelphia and 6000 per screen in Boston. Considering that NYC is considered much more of a "movie town" than either Philadelphia or Boston, this stat is surprising.