The Movie House Massacre

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

"I won't lie to you," Williams says. "It's been a rough year everywhere. People just aren't running out to see new movies." Though the box-office doldrums may prove only temporary, it was enough to send overextended theater chains spiraling in the general direction of ruin.


But is the situation really so bleak? The short answer is no. "Financially the chains are fine," contends John Grubb, a local film publicist with Grubb-Cleland. "Let me put it this way: We're still getting paid."

Jeremy Eaton

The long answer, according to Grubb, is that the spate of bankruptcies is actually part of an industrywide shell game. By declaring Chapter 11, theaters are able to defer some of their debt, as well as squeeze out from beneath leases on cineplexes now rendered obsolete by the megaplex evolution. For the chains, it is simply more efficient to close down older theaters than retrofit them with stadium seating and the latest projection and sound fixtures.

"The question is, Does Joe Public want to see a movie at a theater that's been retrofitted or a new one?" Grubb says. "The chains could retrofit, but it costs a ton of money and they have to shut down anyway.

"The question chains are asking now is: Are these theaters doing business? Regal thought they could put a theater in a beat-down part of town and people were going to come. I mean, in Dallas they went in and put a theater by the railroad tracks in the middle of nowhere and expected it to be successful."

While Grubb expects that nationally the chains will have to trim as many as 10,000 screens, the collateral damage may not be as heavy in the Twin Cities because multiplex overbuilding was not as heavy here. "This is something that's happening nationally. Luckily, fewer mistakes were made here. The reality for the average moviegoer is, it's a win-win situation: You can see any movie you want to see, anytime you want to see it, and you can see it anywhere."

Jim McComb, a Minneapolis real estate analyst who studied the feasibility of a new downtown cineplex for the Block E project, also contends that the crash is less severe than it seems. Yet he is circumspect on the prospects for the industry. "Somebody was giving them a lot of money to expand," he says. "The change in the early Nineties was that Wall Street buyout groups came in and started raising capital to build. They thought they were going to make a killing. So far, they've just shot themselves in the foot. Whether it will lead to gangrene, we don't know yet."

McComb explains that the major problem with the boom is that the expansion went forward with little regard for local demographics: Theaters built state-of-the-art megaplexes whether there were audiences to fill them or not. Until recently, for instance, there were more than 58 screens within 10 miles of Maplewood. Even if every area resident went to the movies every day, the chains could hardly hope to fill that many seats.

"The people running these chains are some of the smartest and most astute in the world," McComb contends. "But they made a bad mistake, and they and their investors lost a lot of money. I guess that's life in the world of high finance. That's sort of a cavalier approach to it, but one thing I always say is: Whenever Wall Street thinks it's reinvented itself, you'd better stand back so you don't get hurt in the crash."

McComb compares the situation to the explosion of retail space in the early Nineties, when malls opened across the country in close proximity to one another (the overdevelopment of retail space in downtown Minneapolis during the late 1980s is an instructive example). Eventually, less profitable malls--St. Anthony Main in downtown Minneapolis, for instance--languished, while established retail outlets consolidated. "We had 30 percent more space than we needed nationwide," McComb says. "All of a sudden, shopping centers started getting bulldozed."

For national theater chains, though, bankruptcy is more a restructuring tool than a death knell. Chapter 11, observers agree, gives the theater chains a loophole: While protecting revenues from creditors, the chains can invest capital in larger, newer megaplexes. All of which means, according to Grubb, that while smaller theaters will certainly close in the Twin Cities, new megaplexes may well spring from their ashes. Already, planned local luxury theaters with bells and whistles like concierge service and private boxes may signal a new trend: gilded lilies growing from the industry's compost.

Indeed, McComb contends that there is room for theater expansion locally, and especially in the downtown Minneapolis core. Because industry analysts estimate that it takes approximately 10,000 people to support one movie screen, he argues, there is actually a deficit of 31 screens in Minneapolis. (While African-American viewers make up an estimated quarter of all movie audiences, black neighborhoods have been mostly neglected by theater chains. The potential for growth in Phillips or the North Side might be suggested by Magic Johnson's successful partnership with the Loews chain in predominantly black areas of Los Angeles, New York City, Atlanta, Houston, and Cleveland. All have gross sales that place them among the top 50 theaters nationwide.) Currently, the only downtown theater is Reading Cinemas' rather shabby five-screen St. Anthony Main venue, which, according to at least one insider, remains viable despite the surrounding shopping area's decadelong atrophy.

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