The Movie House Massacre

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

"I blame the film companies to a large degree," he says, noting that before the boom there was an unwritten rule among theaters that only one venue in a five-mile "zone" would play a given movie. Star Wars, for instance, might play at only one or two theaters in a given five-mile radius. Supply was cooperatively curtailed to increase demand.

Unlike the Hollywood studios that produce movies, Muller explains, the theaters that show them have always been relatively narrow-margin propositions. Indeed, the fortunes of exhibitors rise and fall less on the number of people who pay for admission than the number of people who buy popcorn (which costs approximately 10 cents per pound, and brings a 5,100 percent profit). In the late Nineties, the economics of film distribution began to turn against theater operators. Film rental costs, the money paid to distributors by exhibitors to show a given film, climbed steadily. Soon many of the major theater chains were deeply indebted to the film studios that had once owned them outright.

In a long-accepted practice--which, according to McCulloch, started with the release of the blockbuster Gone With the Wind--the studios also took a larger cut of the box-office take during the opening weeks of a film run. Generally, contracts are now staggered so that the lion's share of revenue for the first four or five weeks goes back to the studio. The theater begins to turn a profit only when a movie runs for more than six weeks--a point at which the theater's take increases greatly.

Jeremy Eaton

Yet films that in the past might have remained in theaters for months are now moving quickly to VHS and DVD. With the profusion of screens showing the same movie, no eager fan need wait in line to see a show on the opening weekend--not to mention wait till week three of a movie's release. The shorter runs that have resulted from this pattern have led to a decline in the share of ticket sales that go to the theaters.

"It used to be that a film like Gladiator would last an entire summer," Irvine explains. "Now nothing lasts. There's no staying power in the films." (This same phenomenon has had the added effect of virtually starving the discount-theater business.)

And with profit margins already prosciutto-thin, blockbuster-obsessed Hollywood film companies keep finding new ways to financially kneecap struggling theaters. In the case of Star Wars: Episode I--The Phantom Menace, which grossed $400 million for George Lucas and 20th Century Fox, the filmmaker stipulated that exhibitors had to play the movie throughout the summer of 1999, and only in theaters equipped with the latest digital sound systems--which in older multiplexes, might be the venue's only showcase screen. (While this demand was extreme, it is suggestive of the contractual demands now routinely made for predicted blockbusters.) The goal was ostensibly to maintain the technical integrity of the film. And, intuitively, such a cash cow should have delighted theater owners.

The effect, however, was disastrous. Because wide release meant that Episode I was playing on screens at virtually every movie theater in the country, anyone who cared to see it could easily do so in the opening week. What theaters were left with was The Phantom Menace playing to empty theaters through the prime months of the summer. "It was playing on so many theaters that every man, woman, and child in town could see it," Muller explains. "If I had to do it again, I'd probably pass on the picture altogether." Somewhere between 1977's Star Wars and 1999's Star Wars: Episode I, it has seemingly become nearly impossible for movie theaters to stay in the black.

Theaters not beholden to national industry trends--Muller's chain and locally owned Mann Theatres, which is the major exhibitor in the Twin Cities with nearly 70 screens--may weather the tempest without undue strain. The difference is in modus operandi: Mann and Muller, both privately held companies, have neither the debt load nor the voracious demand for profits that drives national chains. Mike Muller, for one, contends that his theaters are "holding their own." (His Lakeville megaplex seems to be doing better than that: Since its 1998 opening, two nearby competitors in Burnsville have shut their doors.)

Michael Williams, director of publicity for Los Angeles-based Landmark Theatres, also maintains that both of his chain's Uptown Minneapolis venues are flourishing. "We're actually growing when [major chains] are saying, 'No more,'" he says. "Our business is in it for a completely different reason. We have a loyal clientele who don't want to fight with thousands of teenagers at the mall. They'd rather go to Lagoon. It's a different atmosphere."

According to Williams, the bankruptcy of Landmark's corporate parent has nothing to do with the art-house chain's performance. It was Silver Cinemas' other major holding, a national discount-theater chain, that got the company into trouble. He adds, though, that the year just past has been slow for everyone in the industry, largely because Hollywood produced nothing like Star Wars: Episode I or Titanic to buoy theater chains through the critical summer months. For Landmark, it was a year without a Blair Witch Project or Run Lola Run. (Though How the Grinch Stole Christmas and Crouching Tiger, Hidden Dragon may herald better days for mainstream and mini-major exhibitors, respectively.)

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