The Movie House Massacre

Swelling monsterplexes. Bankrupt chains. Cutthroat competition. A glut of screens leaves the national and local movie-theater business reeling.

In 1963 the industry changed again when a Kansas City, Missouri, company called AMC Entertainment Inc. introduced the first multiscreen theater. The idea was to give theater patrons more choice: Instead of seeing only whatever film Warner Bros. happened to have released that month, audiences could now choose from six different films playing simultaneously. There was an economic benefit for theater operators, as well. Economies of scale dictated that centrally located multiplexes could be more easily stocked and staffed than those scattered, single-screen theaters. Within a few years, the latter variety was losing business to the ascendant multiplex. Some local theaters, such as the Parkway, turned into discount or adult movie houses; others simply closed. AMC, meanwhile, hung its fortune on the new standard, eventually becoming the industry's King Kong.

Driven by a bullish film economy, multiplexes with four to six screens per theater began to sprout in suburban shopping malls and small towns, sometimes within a few miles of competitors. The logic was simple: Land in the suburbs was cheap, and malls, which were also sprouting like weeds, were searching for stable anchor tenants. The theaters were equally simple: concrete cubes, mostly, with flag-sized screens and no more attention to comfort than a dentist's waiting room (e.g., the recently closed Shelard Park cineplex). They were, in other words, a relatively low-risk venture for theater chains. But in their eagerness to expand, major theater operators often committed to long-term leases on those cheap, available locations rather than buying the properties outright. It was a ruinous mistake.

By the Nineties, the economics of the movie business were again in flux. Deregulated Hollywood was more profitable than ever, and theater chains responded in kind, adding dozens of new theaters. Between 1995 and 1999, industry analysts estimate, the number of movie screens in the U.S. increased almost 35 percent, for a current total of more than 36,400 nationwide. Wall Street also got in on the game: A number of exhibition companies were bought by investment groups whose demand for high profits dictated rapid expansion. Meanwhile, demand for new movies was leveling off. Attendance increased only 18 percent during the same period. And movie theaters themselves were evolving. Starting with AMC's Grand in Dallas, the megaplex was born.

In contrast to older "sloped-floor" multiplex theaters, which generally had fewer than 10 screens, this new breed boasted 12 to 16 screens, with staggered schedules and added accouterments, such as larger chairs, raked "stadium-style" seating for better sightlines, and sophisticated sound systems. Carmike was especially aggressive locally: The chain now owns two of the largest suburban megaplexes in the Twin Cities, Mounds View's Wynnsong 15 and Apple Valley's Carmike 15.

The capital outlay was impressive: Each new megaplex costs the chains between $12 million and $20 million. And, in building these new supervenues, the chains often drew business from nearby, now-outmoded multiplexes. They were, in effect, cannibalizing themselves in the rush to swallow their competition. "It was like the airline industry," observes Bill Irvine, owner of the Parkway Theatre in Minneapolis. "They were trying to crowd each other out."

According to McCulloch, "Plitt was trying to crush Loews, who was trying to crush United Artists, who was trying to crush Carmike." The effect of all this crushing, though, was to oversaturate certain areas, especially prosperous suburbs, while leaving other areas--where neighborhood movie houses had once reigned--underserved. "They cut off their noses to spite their faces," McCulloch says.

A case in point is the Southtown Theater, once located south of I-494 in Bloomington. When the local Mann family built the Southtown in the 1960s, it was the height of luxury: a cavernous 1,200-seat auditorium swaddled in plush carpeting and art moderne ambiance. After General Cinema bought the theater in the 1980s, the chain tried to keep pace with the multiplex trend by subdividing the theater into two auditoriums. And then, in the 1990s, GC essentially killed its own theater by building state-of-the-art megaplexes at Centennial Lakes and the Mall of America. The mall's theater remains one of the 20 most profitable in the country; the Southtown shut its doors in 1995.

According to Irvine, the building boom left the chains financially exposed. "Everybody wants a Mercedes," he explains by way of analogy. "Some people should be driving a Chevrolet. Some of us should just buy a new pair of shoes every six months."

 

Mike Muller, president of local Muller Family Theatres, started selling popcorn in his grandfather's Monticello movie house more than 50 years ago, and has, in the course of the intervening half-century, seen the business ebb and flow. The multiplex bust, he contends, is largely the result of egotism on the part of national chains. "They'd come in, look at the other guy, and say, 'I'll close you up. I'll build right next to you.'"

Muller explains that his own chain, which includes four small-town theaters and megaplexes in Lakeville and White Bear Lake, has survived by staying one step ahead of each building frenzy. Muller's 18-screen Lakeville theater, for instance, which opened in 1998, was one of the first local venues to offer stadium seating. (All of the chain's theaters, excepting the original Monticello house, have now been similarly retrofitted.) Yet the industry's current woes, Muller adds, represent more than the result of aggressive business tactics.

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