Film-Tech Forum ARCHIVE: At what point does a theater owner give up on a location?

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Posted by David Stambaugh (Member # 1102) on 08-12-2009, 11:27 AM:

If you look at the movie theater history here in the Eugene market, old theaters fall like dominoes as new theaters open. I mean it's completely predictable. Some of this is due to modern innovations like stadium seating, which is understandable.

But here's what I don't get. Cinemark built a 17-screen theater here in 1999. Very nice, stadium seating, all digital sound. All the modern basic amenities. It was obviously wildly successful, drove several other smaller/older locations out of the market. Regal had Cinema World 8, renovated in 1995 but no stadium seating. Clearly their business was decimated and I'm sure they barely held on while Cinemark dominated the market.

So in 2007, Regal replaced the old 8-screen with a new 15-screener. Very nice but nothing particularly innovative about it compared to the Cinemark 17-screen. I would consider them as equals from a moviegoing experience standpoint. Yet clearly Cinemark 17 has hit on hard times now. The place is a ghost town in comparison. The outside signage is woefully neglected as is the entire exterior of the building, which needs painting. Movie theaters are supposed to be bright and inviting on the outside. This place looks so neglected on the outside it's as if it's slated to be shut down and they don't want to spend anything on it.

I might be misinterpreting, but that's the impression.

Is it always a given in this business that when a rival opens a new theater across town, that you are just gonna have to take it in the shorts and there's no fighting to keep your customers? I mean, it's like they're not even trying.

I don't get it.

Posted by Scott D. Neff (Member # 185) on 08-12-2009, 11:47 AM:

In some markets, especially one the size of Eugene that could very well be true. At least for awhile people tend to go check out the new and exciting shiny object. After awhile they may trickle back to the older location but no matter how nice the old location is, people still have their negative impressions of "all those loud kids texting" or "sticky floors" and those people may never come back because they haven't yet had that impression at Regal.

I also wouldn't be surprised if that in a college town a lot of the cash strapped students are enticed by Regal's Crown Club rewards of which Cinemark doesn't have anything similar. Further some people may choose to patronize the Regal because it's legally in Eugene and not in Springfield. All those politically minded students. [Roll Eyes]

Posted by Michael McGovern (Member # 4807) on 08-12-2009, 08:19 PM:

The biggest hurdle that many theaters face is the monthly rent on the property. If you have a good deal on your rent, or better yet, own the building you're in, then you're golden, but if you're stuck in a building that got a bad deal on the rent, and doesn't do the business to justify it, you're going to be in the red regardless of how much you sell at concession. This is often the case for theaters located within malls, which can often have monthly rental costs well into the six digits. I think the number I heard once for the old Hoyts Providence Place location in Rhode Island was 200,000+ a month, which is why no one wanted it after Hoyts went belly up, although I think it was finally acquired by National Amusements a few years ago.

Regal, AMC, and the rest will often run theaters that are budgeted to lose money, sometimes lots of it, because of lousy leases, but if the lease is long enough, they continue to operate because buying out the lease would just be too costly. In these situations, once the lease is up, they'll either renegotiate as a lower rate, or close the location. If the market demands it however, sometimes they'll switch to a month to month lease, and build a new location to eventually replace the old one. This is especially the case with older buildings that do good business, but are in disrepair.

A lot of times as well, the corporate chains will continue to operate unpopular or money losing locations because they don't want to close the location and have a competitor come in and reopen it again. When National Amusements closes a location, they just sit on the property it was located on until they can sell it to someone who wants to either tear the building down, or re-use it in some sort of non-theater capacity.

Posted by Claude S. Ayakawa (Member # 1401) on 08-12-2009, 09:16 PM:

Wallace Theatres opened a multiplex Theatre in a brand new combination retail/office building called Restaurant Row in downtown Honolulu in 1993 and named their theatres Restaurant Row because there were a lot of trendy restaurants on the ground floor with them. They were an instant hit and everybody flocked to them and they were riding high until Signature Theatres built a new 18 screen multiplex at the new Dole Cannery shopping complex that was converted from the old Dole Pineapple cannery buildings. The Dole Cannery now became the place to go for movies and Restaurant Row began struggling for business because they were technically terrible theatres with poor sound and projection and in my opinion staff people who could care less about their customers.. The Dole Cannery also lost some luster when Pacific Theatres opened their Ward Centre 16 theatres in the city. The Ward is still considered Honolulu's best movie theatres with excellent sound and projection with Dolby 3-D in one of the houses but the Dole Cannery is giving them some stiff competition especially after Regal took over the Dole Cannery houses from Signature Theatres . After regal took over the Dole, they were the first to install digital projection with a Real D 3-D system and converting one of their largest house with an digital IMAX projection system. With the opening of the Dole Cannery and the Ward Centre theatres, the Restauant Row theatres eventually stopped showing first run films and became a $1.00 cinema. It finally ceased operation about a week ago and the space will become a new medical facility soon.

-Claude

Posted by Monte L Fullmer (Member # 2797) on 08-12-2009, 10:31 PM:

Just like cars: people love to get them new, but after a few years, it's a trade-in time even if there isn't anything wrong with it.

Turning into a greedy, unsatisfied society.

-Monte

Posted by Robert E. Allen (Member # 1351) on 08-13-2009, 12:25 AM:

David:

I was an assistant for CineMark down here in Medford in 07 and visited the CineMark 17 in Eugene with my GM. Then the place was fabulous. The booth was hospital clean. The booth manager even created a tennis ball on the end of a broom handle to take scuff marks off the floor. The Eugene GM had been in the business forever and was at least as old as I am. (I left CineMark because I believe I was given an unfair progress report and because I didn't like the fact that CineMark is not a local theatre and the GM has no power to program his house.) I believe the latter is at the core of the what you perceive as demise of that house. Regal puts more effort into being "local" with free kids shows, etc. and their GMs seem to have more power. (I worked as an assistant for Regal in Poulsbo, Washington.)

But I believe also that both companies target the same limited demographic and when Regal opened their new house that fickle demo deserted CineMark for the new house. I believe too that the independents that fell did so because their operators just didn't know what they were doing and may have been targeting the same demo.

Then too stadium seating, even surround sound and other modern innovations will not draw customers to a theatre if what's on the screen stinks. And CineMark is one of those companies that allows their film buyers to book whatever Hollywood is promoting at the time. Also CineMark does no local promotions or tie-ins.

When the newness wears off at the Regal that fickle demo will waffle between houses until another one of the corporate big boys comes along a gives them something new (not really, just a newer version of the same ol' things) and both Regal and CineMark will suffer. Before you know it we will have empty multiplexes sitting all over Eugene. Honestly, if I had the bucks I pick up one of those dark single screeners and run it successfully as a EUGENE theatre and not "...the 17 screens we have in Eugene".

Posted by Christopher Crouch (Member # 3784) on 08-13-2009, 01:09 AM:

Occassionally, the neglect/"gave up" appearance is merely the result of budgetary cycles. Money has already been earmarked for new projects or other theatres in need, leaving the theatre in question "out in the cold" for a time.

Other times, I've noticed a "build it and walk away approach". An operator builds a theatre without any intentions of ever maintaining or updating it to a significant degree; planning on a "typical" modern cinema lifecycle from the start. I.E. Cash in during the theatre's peak years and just focus on limiting costs after it has moved beyond it's perceived window of relevance.

Posted by Joe Redifer (Member # 3) on 08-13-2009, 02:22 AM:

quote:
At what point does a theater owner give up on a location?

Usually about 2 to 3 months after the grand opening, by most accounts.

It only took a little over a year for United Artists to close the brand spanking new Park Meadows Starplex.

Posted by David Stambaugh (Member # 1102) on 08-13-2009, 10:00 AM:

Another factor I hadn't considered: This Cinemark is located in Gateway Mall, which is operated by General Growth Properties. GGP is going through bankruptcy right now. There are a lot of vacant storefronts in the mall. I guess if I ran the theater, I'd be cautious about throwing money at it until I knew for sure how the bankruptcy works out.

Never mind. [Big Grin]

Robert is correct: The booth is immaculate. The GM has been in the theater business for like 50 years and knows his stuff.

Posted by Lyle Romer (Member # 1266) on 08-13-2009, 11:06 AM:

Some of it has to do with the financial plan for each location. When they build the theater there is a 10, 15 or 20 year plan of financial performance and ROI. If the location has already hit it's ROI they might not project the ROI required to invest into bringing the theater "up to date" especially if the lease is up soon. That money may be better spent on a new build somwhere else or a major renovation of another location. Once the Regal entered the market, it lowered the max the location can gross because there is no way they could ever get 100% of the market share back.

Posted by Bill Gabel (Member # 1105) on 08-13-2009, 11:27 AM:

At what point does a theatre owner give up on a location? Well now for Mann Theatres in Southern California.
Mann Theatres is looking sell what is left on their lease to the Chinese Theatre in Hollywood. (ground lease expires 2023) And they are not renewing their leasing on the Village and Bruin Theatres in Westwood. (leases expire in March 2010)

Their just closed the Festival Theatre in Westwood. And Beverly Center plex which Rave Theatres will reopen soon.

The rest of their locations are up for sell.

Posted by John T. Hendrickson, Jr (Member # 849) on 08-13-2009, 04:04 PM:

Locations are given up when:

1. You have too many screens chasing too few patrons in a given geographical area. This is called overbuilding, and the industry went wild in the 90's and continued until recently due to the downturn in the economy. Something has to give, so it is usually the older locations that fall first.

2. Building on top of someone else. I've seen this in our area as well. One operator puts up a theater only to have someone else come in and try to steal some of the market. Then both locations struggle until one of them goes belly up.

3. Agree with Christopher Crouch's "build it and walk away approach". Just run it into the ground until patrons recognize it for the dump that it becomes and then go elsewhere.

4. Rent, as Michael Mc Govern so adeptly explained. Landlords put locations out of business faster than for perhaps any other reason. They negotiate a sweetheart deal for themselves and continue to collect until the tennant walks away.

5. Poor business practices by absentee owners, or corporate higher-ups who are not paying attention to what is going on in the trenches, so to speak. I have always believed that this is a hands on business. When the cat's away, the mice play- HARD. Inattention will get you robbed blind very fast.

Posted by Mike Blakesley (Member # 26) on 08-13-2009, 04:48 PM:

#3 and #5 seem to describe Carmike's business philosophy in Montana. They now have three abandoned locations in Billings, Montana which are just gathering dust -- one since 1997. I don't know if they own the buildings or not, but there are a total of 16 auditoriums just sitting there.

Posted by Mike Croaro (Member # 3123) on 08-20-2009, 08:05 PM:

Folks Folks:

Such an interesting topic.......yet it dies so quickly..... [Confused]

Mike