Making Movie Magic
Recent trends in theatre exhibition and development — and where the industry is headed in the future.
Katie Foxworth

Regal Cinemas The Loop 16 recently opened at The Loop at Kissimmee in Kissimmee, Florida. The Loop is a project of Boston-based The Wilder Companies.

Expanding Consolidation

The motion picture exhibition industry continues to grow bigger and bigger; yet the number of names keeps shrinking. This phenomenon is a favorite buzzword in the industry called consolidation. The practice is designed to help the selling theatre chain, but the new operator can also help older theatres to operate better and more efficiently. Thus, in the end, it is the buying theatre that often reaps the most benefits.

On January 26, 2006, AMC Entertainment Inc. completed its merger with Loews Cineplex Entertainment Corporation. The merged company, known as AMC Entertainment Inc., continues to be headquartered in Kansas City, Missouri. Today, AMC has interests in approximately 415 theatres worldwide.

In mid-December 2005, AMC opened AMC Century City 15 along Santa Monica Boulevard in Los Angeles.

According to Brown, the industry’s current consolidation trend is expected to continue. “If you went back to 1999 and looked at the percentage of screens, about five exhibitors had 31 percent of them. Today, [those same five exhibitors are] at approximately 45 percent.”

As of February 2006, Regal Entertainment Group is the Number 1 operator with 555 theatres and more than 6,200 screens (approximately 18 percent of all the screens in the U.S.). Now that AMC and Loews have merged, the combined AMC ranks a close second with more than 415 theatres and 5,700 screens.

Regal has acquired and integrated 15 theatre circuits since 1995. And, according to Russ Nunley, Regal’s vice president of marketing and communications, the company has improved the new theatres’ profitability by consolidating operating functions and key supplier contracts. Regal has also realized some benefits for its own company. “By consolidating circuits, Regal has benefited from reduced corporate and operational expenses for managerial overhead,” Nunley says. “We have generally achieved immediate cost savings.”

Development Decisions

CinéArts 6 in Evanston, Illinois.

“The development of the lifestyle center concept has brought the movie theatre into the spotlight,” Nunley says. “Theatres are recognized as magnets for increasing visits to a development. Therefore, many other retailers and restaurants are eager to be placed close by.”

At Regal, Nunley says, development efforts are concentrated in the top 100 Designated Market Areas. The trade area for new theatres usually includes a minimum population of 150,000 with significant population growth potential and a median household income of $45,000 or more. New Regal locations also must include abundant parking and easy access to the region’s major arteries.

Similarly, AMC focuses on the major metropolitan areas as well. According to Brown, AMC zeroes in on markets with strong population growth and A-caliber developments; the projects should also contain complementary retail, entertainment and restaurant co-tenants. “A person leaves their home to be entertained, and we want them to have as full of an experience as possible,” Brown says. “We recognize that they’re going to be getting in a car, in most cases hiring a babysitter, and going out for several hours — a part of which will be what we do for them. So we want those other things to be there as well.”

AMC Century City 15 is part of Westfield’s redevelopment and expansion project located on Santa Monica Boulevard in Los Angeles.

And developers welcome them with open arms. “It’s a location-based traffic generator that is really product-driven,” says Jay Shapiro, president and founder of Cambridge, Massachusetts-based JMS Advisory, a theatre consulting firm founded in 1995. “Movie theatres are never the same place twice because product always changes. That means there’s that steady flow of pedestrian traffic to the center.”

Innovation & Technology

Sure, the movies themselves are always changing, and so is the technology behind them. Movie theatres are leading innovators in this category — whether it’s online ticketing, digital surround sound or pre-show advertising.

In December 2005, AMC opened a new flagship theatre in the heart of Los Angeles at Westfield’s Century City redevelopment and expansion project. Located a mile east of the 405 freeway on Santa Monica Boulevard between Century Park West and Avenue of the Stars, the new theatre complex includes 15 auditoriums with more than 3,000 seats; stadium seating with 18-inch risers; AMC’s trademark love-style seating; three concession stands with digital plasma screen menus; surround sound; wall-to-wall screens; automated box office kiosks; and an undulating second-story balcony that allows guests to see through the glass past Santa Monica Boulevard into the mountains.

Regal Cinemas Pinnacle Stadium 18, located at Colonial Properties’ Pinnacle at Turkey Creek project in Knoxville, Tennessee.

Ambiance isn’t the only thing growing more sophisticated. According to industry experts like Shapiro and Brown, the single biggest change in the next 5 years for movie theatres will be digital projection. “The best innovation is really in the programming area, which will be fueled by digital,” Brown says. “Right now we’re pretty much slaves to 35mm film stock, which is very physically cumbersome.”

Several years ago, AMC began wiring up the proper infrastructure for full-feature digital and, at the same time, most of its theatres are now equipped with digital capability that is suitable for pre-feature entertainment. The digital rollout is happening in small increments, but it’s well on its way to full-fledged digital projection in the very near future.

Internet ticket sales are also expected to pick up. “We’ve been the pioneer in Internet ticketing,” says AMC’s Brown. “We co-founded a company several years ago called MovieTickets.com, and now we’re involved with an acquisition of Fandango.”

Another area of innovation is expected to be marketing as pre-show advertising becomes more commonplace at screens nationwide. “Look at the revenue line of operating a cinema,” says Shapiro. “It consists of three categories: (1) the box office, (2) concessions and (3) other. Embedded in that ‘other’ category is onscreen advertising. It’s the fastest growing — by percent — revenue in the category.”

Leading the way in this arena is National CineMedia, a Centennial, Colorado-based venture between Regal Entertainment Group, AMC Entertainment and Cinemark USA. Currently, National CineMedia represents approximately 1,100 theatres and approximately 12,000 screens in 43 states (about 30 percent of the screens in the entire country). It focuses on the development of pre-feature entertainment; cinema and lobby advertising products; meeting and event services; and alternative forms of entertainment content. A big chunk of this has to do with pre-show digital advertising. National CineMedia’s advertising products reach more than 400 million moviegoers in 43 of the top 50 markets — and the ads make an even bigger impression on customers because they’re presented with digital image and sound on a big screen. National CineMedia also boosts theatres’ LEN (Lobby Entertainment Network) by reaching customers while they wait in line at the box office and concession stand and while they congregate in high-traffic areas of the lobby. Other promotional ideas include popcorn bag advertising, soft drink cups, danglers and banners, window clings, posters, restroom advertising, and in-lobby promotions and exhibits.

Independents Today

One of the greatest things about cinema is its ever-evolving creativity — usually at the hands of independent filmmakers with more vision than purse power. Here, bigger does not mean better, and advertising and promotions do not assault you at every turn. Small niche players who have begun making a noticeable splash in the market include Century Theatres’ CinéArts concept, Sundance Cinemas and Maya Cinemas.

“There are emerging niche markets, certainly over the last 5 to 7 years,” says Shapiro. “They’re merging art markets with the likes of Landmark and CinéArts, who continue to grow market shares.”

In the case of CinéArts, this formidable player on the independent/art film scene is associated with Century Theatres and currently has eight locations; it also has films playing at some of Century’s first-run theatres. Like many of the independent films it exhibits, CinéArts likes to keep its operations more focused on quality rather than quantity — which means it will develop future locations only when the conditions are just right.

“We will open as many [CinéArts locations] as it is prudent to do,” says Victor Castillo, COO of CinéArts and Century Theatres. “We don’t have a mandate to build “X” amount of screens. Our mandate is to build the best possible circuit. We’re very patient in our approach.”

It’s also a balancing act, Castillo says, between providing a haven for low-budget fringe movies that don’t even want to be part of the mainstream and, at the same time, exposing more patrons to independent cinema that is impossible to find at the local suburban megaplex — and, all the while, using the best and most innovative technology to date, such as stadium seating, THX certification, all digital sound format presentations and state-of-the-art projection.

“We certainly provide a place to start for our art and independent films,” Castillo says. “But the other thing that we have done really well is when they become more commercial, we don’t shy away from moving them over to our commercial houses. We feature art and independent films in our main theatres a little quicker than our first-run competitors because I think we’re a little more in tuned. We see that audiences are embracing the films.”

Castillo adds that the films shown are not the only difference between Century’s main first-run theatres and the CinéArts locations. “It’s definitely a different clientele — a much older clientele,” he says. “It’s a different environment. We offer different fare at our concession stand. Our Evanston [Illinois] location has a full bar, a piano that plays jazz in the evenings, and they serve light bistro-type meals. It’s a very unique experience.”

He adds that when CinéArts finds the right location, it plans to replicate the Evanston experience, but thus far, the perfect location hasn’t been found. Markets that interest CinéArts include metropolitan areas with highly educated baby boomer populations. Proximity to a university is even better. “We try to be near universities,” Castillo says. “Education is clearly a factor.”

Another company hoping to capitalize on the booming independent movie market is Sundance Cinemas, which was founded by actor Robert Redford and is committed to “supporting commerce, art and environment.” Paul Richardson, former CEO of Landmark Cinemas, now heads up Sundance Cinemas, whose goal is to present films by independent filmmakers who might otherwise not have a venue. And the appetite is certainly there: according to Richardson, the 2006 Sundance Film Festival received 7,000 entries for 200 slots. Like CinéArts, Sundance also aims to reach an older age group (55+) and intellectuals, as well as highly educated populations like college towns. The company’s first theatre will open in Madison, Wisconsin, home of the University of Wisconsin, in November of this year.

Another niche player is Maya Cinemas, which was founded by Hispanic filmmaker and producer Moctesuma Esparza based on his belief that a hidden market currently exists in Hispanic films. Yet, as history can attest, it wasn’t always this way. In the 1960s, Spanish-speaking films were a $500 million business in the U.S., and there were 700 screens showing Latino films. Today, that business has dwindled — yet there are 44 million Americans of Hispanic origin (one-third of which are supporting the Latino television and music market), but there is nothing for this market in movie theatres. Erstwhile, Mexican filmmaking is being reborn. Most Mexican films, up to now, have been shown as art house films; a movie like Y Tu MaMa Tambien is an example. Maya Cinemas wants to change that; the company is seeking markets where the population is at least 30 percent Hispanic, with Urban Retail Properties as its development partner. Recently, Maya Cinemas opened its first 14-plex in Salinas, California. The theatre features enhanced concessions, stadium seating, valet parking and other amenities.

— Additional research for this article provided by Randall Shearin.

REGAL’S RECENT OPENINGS Regal has opened at Atlantic Station in Atlanta. Regal Entertainment Group is the largest motion picture exhibitor in the world with more than 6,200 screens in 40 states. The Knoxville, Tennessee-based company has opened several significant locations in recent months. Here are the highlights: Regal Cinemas Atlantic Station Stadium 16 Where: Atlantic Station – Atlanta Project of: AIG Global Real Estate Investment Corp. and JDI Regal Cinemas Bridgeport Village Stadium 18 Where: Bridgeport Village – Portland, Oregon Project of: CenterCal Properties Regal Cinemas Gulf Coast Town Center Stadium 16 Where: Gulf Coast Town Center – Fort Myers, Florida Project of: CBL & Associates Properties Regal Cinemas Kendall Village Stadium 16 Where: Kendall Village – Miami-Dade County, Florida Project of: Berkowitz Development Regal Cinemas The Loop 16 Where: The Loop at Kissimmee – Kissimmee, Florida Project of: The Wilder Companies Regal Cinemas Pinnacle Stadium 18 Where: Pinnacle at Turkey Creek – Knoxville, Tennessee Project of: Colonial Properties Regal Cinemas Red Rock Stadium 16 Where: Red Rock Casino – Las Vegas Project of: Station Casinos Regal Cinemas Salisbury Stadium 16 Where: The Centre at Salisbury – Salisbury, Maryland Project of: The Macerich Company

HARKINS THEATRES’ UNPRECEDENTED ARIZONA EXPANSION Parke West in Peoria, Arizona, is another project Harkins Theatres has joined recently. Scottsdale, Arizona-based Harkins Theatres — Arizona’s largest and longest running theatre chain since 1933 — plans to build an unprecedented 10 new megaplexes throughout the greater Phoenix area. This new construction will bring Harkins’ total screen count to more than 400 screens in Arizona by spring 2008. Each of the new locations will feature Harkins’ signature amenities, including The Harkins Ultimate Rocker, high-back loveseats, wall-to-wall screens, state-of-the-art digital sound technology, a gourmet snack bar featuring an expanded hot foods menu, and ticketing via phone, Internet or onsite kiosks. Several locations will also include the Harkins PlayCenter for children ages 3 to 8. The new locations include: • Harkins SanTan Village 18 – Gilbert, Arizona (winter 2006) • Harkins Chandler Crossroads Towne Center 14 – Chandler, Arizona  (winter 2006) • Harkins Parke West 14 – Peoria, Arizona (fall 2006) • Harkins Tempe Marketplace 18 – Tempe, Arizona (spring 2007) • Harkins Phoenix Spectrum 14 – Phoenix (spring 2007) • Harkins Norterra 14 – Phoenix (spring 2007) • Harkins Signal Butte Marketplace 14 – Mesa, Arizona (fall 2007) • Harkins Casa Grande 14 – Casa Grande, Arizona (fall 2007) • Harkins Estrella Falls 14 – Goodyear, Arizona (winter 2007) • Harkins Prasada 14 – Surprise, Arizona (spring 2008) — Katie Foxworth

MAKE WAY FOR MONACO PICTURES The new Monaco Pictures has theatres that are more like luxury hotels than traditional cinemas. The Ritz Carlton of movie theatres has arrived. Monaco Pictures, a division of Los Angeles-based O&S Holdings, LLC, is a new theatre chain unlike any other — designed to have the quality, ambiance and feel of a luxury hotel. Amenities include over-sized luxury seating, sophisticated sound and projection technology, wall-to-wall plasma screens, reserved and open seating, and unique food and concession offerings such as signature popcorn, beer and wine, coffee, sushi and fresh salads. The theatres will also be available for private VIP parties and corporate functions. O&S Holdings, founded by cousins Gary Safady and Paul Orfalea in 1992, has added Monaco Pictures to Bridge Street Town Centre in McKinney, Texas. A fall 2006 groundbreaking is planned. — Katie Foxworth

CURRENT CINÉARTS LOCATIONS CinéArts’ Huntington Beach, California, location. Century Theatres and its new independent art and indie house company, CinéArts, currently has eight locations, seven of which are in California: • CinéArts 6 – Evanston, Illinois • CinéArts @ Sequoia – Mill Valley, California • CinéArts @ Palo Alto Square – Palo Alto, California • CinéArts @ Empire – San Francisco, California • CinéArts @ Marin – Sausalito, California • CinéArts @ Pleasant Hill – Pleasant Hill, California • CinéArts @ Santana Row – San Jose, California • CinéArts @ Hyatt – Burlingame, California Victor Castillo, COO, Century Theatres and CinéArts. Patrons can order gourmet coffees and teas, European chocolates and French pastries, in addition to traditional standbys like popcorn, candy and soda. Ticket prices are the same as regular first-run movies. “We don’t charge any more than we would for a first-run film,” says Victor Castillo, COO of CinéArts and Century Theatres. “It just caters to a different experience.” — Katie Foxworth