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The megaplex equation

Realizing moviegoers are lured predictably by amenities that enhance the viewing experience, theater operators adjust.

August 27, 2004|Margaret Webb Pressler | Washington Post

There's something special about a night at the movies -- it's all about friends, American pop culture and escape. And it's accessible to just about everyone.

So much for the warm and fuzzy. The next time you sit down in a soft, rocking movie seat with built-in cup holder and removable armrests, appreciating your clear line of sight thanks to the tiered stadium seating, consider this: You are just part of a complicated number-crunching formula.

There has been much turmoil in the movie theater business in the last few years, with thousands of older screens going dark, even more screens opening up, bankruptcy filings by nearly every major theater chain, followed by consolidation and buyouts.

But what theater operators have come away with is a much better understanding of how to run a movie theater -- and it's about the math, not the magic.

Forget the exotic movie palaces from the early days of cinema, when the theater was grand and ornate, elevating the stature of the film itself. Forget, even, the neighborhood place with one screen, where the weekend's excitement depended on what title the owner placed on the marquee. Today's movie theater operators have figured out, with incredible accuracy, where a theater needs to be, which amenities it needs to have, how many tickets it must sell, how many screens it requires and how long it has to hang on to the latest release.

And now that they've figured all this out, the big chains are beginning to build again: A thousand new screens have opened nationwide in the last year, after five years of stagnation, according to the National Assn. of Theatre Owners, a trade group based in Washington, D.C.

"We are kind of at the halftime of the re-screening of America," said David Brain, chief executive of Entertainment Properties Trust, a Kansas real estate investment company with a $1.1-billion portfolio of movie theaters.

Since 1997, about a third of the nation's movie theaters have been replaced by megaplexes, generally those with more than 14 screens per location and unobstructed stadium seating, Brain said. But he estimated another third would convert to this format over the next seven to 10 years. That means another wave of wipeouts among smaller theaters with just a handful of screens, which, for all their comparative inadequacies, continue to anchor neighborhoods, especially in urban areas.

"There could be a town, could be an area, where there's a six-plex and you just can't build a 16-plex," Brain said. "But by and large, they will go away."

Older theaters with fewer screens can easily be hurt by glitzy new megaplexes for a variety of reasons, the most obvious being that they simply offer the audience a better viewing experience. The older sloped-floor theaters, built on a slight incline from front to back, don't prevent someone small, especially a child, from having the view blocked by someone taller. And even the newest sloped-floor theaters are likely to have less cushy seating and sound systems that can't compare to the latest large-format complexes.

These kinds of physical attributes have gained importance among the moviegoing public, largely because of the way movies are distributed today. It used to be that when a new movie came out it would be shown in, perhaps, 1,500 theaters and hang around for six weeks. But with 36,250 screens nationwide now, up from 26,000 a decade ago, a blockbuster movie today can open on 3,000 or more screens and may last just two or three weeks. Because moviegoers have so many choices of where to see a new film, they're quite likely to pick the comfiest seats, the best sound and the clearest view.

"People will travel further to go to stadium seating," said Tal Newhart, president of Theatresforsale.com, a mergers-and-acquisitions firm that deals strictly with movie houses. "That indicates to me that they are looking for the experience through the doors. It's not just what's on the screen."

The economics of a megaplex is "compelling," Newhart said. With 16, 18 or 24 screens, the traffic in and out is constant and the popcorn sales never stop -- yet the staffing costs are only incrementally greater than for an eight- or 10-screen theater. These complexes are also attractive to groups going out together, such as families that might want to break up to see different films, then reconvene afterward. And bigger complexes have enough screens to offer most current releases as well as some second-run movies on smaller screens -- another marketing advantage.

But the numbers still have to work. "It's not casual math," Brain said. "It's determined by density of population, transportation infrastructure, the presence of competition."

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