Showtime for Theater Owners

Americans escaped to the movies more often this year than at any time since the Eisenhower administration, giving the nation’s theater operators a much needed surge in business as they continue on the road to financial recovery.

By some estimates, admissions could climb more than 10% over last year’s record levels, with folks flocking to theaters more than 1.5 billion times.

When the holiday season wraps with such major fare as “The Lord of the Rings: The Two Towers,” “Chicago” and “Catch Me If You Can,” attendance is expected to hit levels not seen since 1959. Back then, admissions totaled 1.488 billion.

Jack Valenti, president of the Motion Picture Assn. of America, said that although the population is larger today, this year’s surge is “stunning” because of the choices technology now provides, including VCRs, cable television, satellite dishes and the Internet.

Those outlets “didn’t exist 42 years ago,” Valenti said. “Movies were the prime form of entertainment.” He noted that 1946 was the high-water mark for moviegoing at 4 billion admissions. The low was 1971, with 820 million.

Although Hollywood has released an enticing and diverse mix of hits this year -- from the budget-straining “Spider-Man” to the low-priced “My Big Fat Greek Wedding” -- there may be an undercurrent pushing consumers into theater seats: the lingering effects of 9/11.

“The real world is probably more terrifying than Americans have ever known,” said Armond Aserinsky, a Philadelphia-based clinical psychologist who uses movies as a tool to treat patients and train colleagues. “It’s the same kind of desire for escape we also saw during the Depression in the ‘30s.”

Whatever’s driving the trend, no one is complaining. Studio revenues this year are expected to top $9 billion for the first time, and exhibitors are anticipating a future without the need for bankruptcy protection.

“If you’re looking for a year to come out of reorganization, it doesn’t get any better than this,” said Larry Gerbrandt, chief content officer for Kagen World Media.

The theater business has spent 18 months trying to right itself after a multiplex building binge in the mid- to late 1990s forced a dozen movie circuits into Bankruptcy Court. This move allowed exhibitors to shed unprofitable old theaters, exit high-cost leases and get out from under heavy debt loads.

This year, the last of the bunch -- Regal Cinemas, Carmike Cinemas Inc. and Loews Cineplex -- emerged from bankruptcy protection as various investment groups bought theaters at deep discounts.

The biggest of the deals belonged to Denver-based billionaire Philip Anschutz, whose assets include Staples Center and the L.A. Kings hockey team.

He went on a buying spree that transformed the theater landscape, merging three major circuits that had filed for bankruptcy protection -- Regal, United Artists Theatre Co. and Edwards Theatre Co. A month later, he took them public. Parent company Regal Entertainment Group is now the world’s largest theater chain, with more than 5,660 screens.

Exhibitors are hopeful that this and other consolidations may finally give them more clout with the Hollywood studios, possibly leading to a reduction in the “film rental” that theaters pay distributors to play their movies. The studios, which control how box office revenue is split with theaters, typically keep about 55% of the receipts today.

The surge in ticket sales also is important for exhibitors because of the vast sums moviegoers spend at concession counters.

“Not only are people buying more tickets to our movies, they’re buying more popcorn, candy and sodas,” said John Fithian, president of the National Assn. of Theater Owners.

Unlike having to split box office proceeds with distributors, theaters get to pocket the profits they make on food and drinks. Concession sales comprise an estimated 35% to 40% of theater profits.

Still, as Mike Campbell, chief executive of Regal’s theater operations group, cautioned: “Concessions make or break us, but we wouldn’t sell anything unless the film product brings customers into the theater.”

Ronald Krueger II, president of St. Louis-based Wehrenberg Theatres, said business was brisk in part because of the “larger number of family-friendly films that struck a chord with audiences.” Among them: the animated hits “Ice Age” and “Lilo & Stitch” and the live-action movie “Scooby-Doo.”

At the same time, there were a number of successful adult-oriented art-house movies such as “My Big Fat Greek Wedding,” “Y Tu Mama Tambien” and “The Good Girl.”

Some exhibitors say this year’s box office run also may reflect a shift by some studios to release big-title movies during months typically considered “off-season.”

“There were some brave souls this year,” said Raymond W. Syufy, chief executive of San Rafael, Calif.-based Century Theatres Inc., who applauded the studios for not hoarding their movies for the summer and winter holidays.

Twentieth Century Fox, for example, debuted “Ice Age” in March. Walt Disney Co. opened “Sweet Home Alabama” in September; DreamWorks and Universal Pictures released their respective pictures, “The Ring” and “Red Dragon,” in October.

What’s more, exhibitors suggest that the ease with which consumers can now buy tickets online or by phone probably is contributing to the spike in admissions.

Art Levitt, chief of online movie ticket seller Fandango Inc., said advanced sales for “The Two Towers” exceeded those sold by the company for the entire opening weekend of last year’s “Lord of the Rings.”

Although exhibitors tip their hats to distributors for providing movies people want to see, they say they also deserve some credit for the upswing by improving the moviegoing experience with updated megaplexes featuring stadium seating and state-of-the-art picture and sound presentations.

The management of Milwaukee-based Marcus Theatres Corp. goes one step further.

“We give after-movie mints.... And our ushers even clean the snow from windshields,” said Bruce Olson, president of the 67-year-old chain.

Regal’s Campbell pointed out that during the last four or five years, “exhibitors have invested a huge amount of capital -- as much as $4 billion or $5 billion -- in new theaters.” Meanwhile, they also have jettisoned their underperforming movie houses.

Yet it’s crucial, industry observers say, that the construction and refurbishing plans be executed cautiously. Despite the boost the theater business has received of late, Fithian of the exhibitors association is warning members not to repeat the mistakes of the past by embarking on another building frenzy.

“They have to be rational,” he said.