January-1999

Januan , 1999 23
necessarily the
case. Multiplexes
that are clean, well
maintained, technically
sound and
located in good
areas can become
obsolete overnight
as new niegaplexes
are built In times
past, exhibitors
would lo(^ at marbrts
and film zones
and make decisions
on building
new complexes
based on wh^er
or not the maik^
was adequately
screened with viable
theatres. In
today's environmafit,
thaie is little
hesitation to build
in markets that are.
by traditional standards,
adequately
screened. As a result
acquirers must
be comfortable that
theatres
being acquired
are viable,
''Megaplexes can
he wonderful
assets and models
of efficiency,,..
Megaplexes can
boost overall
attendance in
most markets
and create an
exciting and
enjoyable
moviegoing
experience....
[But] megaplexes
can siphon
moviegoers
from existing
theatres like a
huge vacuum
cleaner.''
long-term invest-
Tossans, from which
sufficient cash
flow will be generated
to service debt and generate accq)table
returns. It is the worst of times in exhibition!
Stadiimi
seating is the rage in the industry
today. Moviegoers are flocking to theatres
with stadium seating to experience
unobstructed sightlines and superior presentation.
In maik^s where stadium theatres are
constructed, we have witnessed overall increases
in attendance that can be attributed to
more convenience and a more pleasurable
moviegoing experience. It is the best of times
in theatre exhibition!
There are downsides to stadium seating. The
cost to construct stadium auditoriums is significantly
higher than with traditional sloped
floors, a fact that squeezes exhibitors' returns
on investment And, although the maJOTity of
patrons embrace stadium seating, a vocal minority
of senior citizens and handicapped patrons
are making known their exposition to
stadium seating. Although stadium seating
meets the requirements ofestablished building
codes and the ADA (Americans with Disabilities
Act), there is a growing movement to
make stadium seating more accessible. If this
is accomplished, it could result in even higher
initial investments by exhibitors for new theatres
or, even more onerously, it could involve
altaing stadium theatres already in operation.
It is the worst of times in theatre exhibition!
Film
production remains at near-record
levels. Studios are releasing films targeted
at all demogr^hic niches and releasing
them spiead mwe evenly thtou^out
the year. This is benefiting exhibiticHi through
increased attendance at times of the year that
have hist«ically
been viewed as "off-play
time." Woridwide boxoffice and other ancillary
revenue streams are fiinneling mcxe dollars
back to the studios, ftnther fiieling film
producti(» to fill our megaplexes. It is the best
of times in theatre exhibition!
Although film pxxiuction has increased in
recent years, production and marketing costs
have skyrocketed at an alarming rate. Even
with boxoffice growth at home and abroad and
revenue growth ftom video, cable, pay-perview
and the other windows, studios are experiencing
pressure on their operating returns and
margins. As a result exhibitors are under pressure
to rehnquish a bigger piece of the
boxoffice pie to the studios. In light ofour own
increasing investment in new theatre complexes,
we cannot afford to alter the revenue
splits that we have maintained histcxically. It
is the wMst of times in theatre exhibition!
TIhe 1990s have been boom times in the
financial maricets. Interest rates remain
low and investment capital, both equity
and debt, has been abundant. Exhibitors
have raised capital for new building through
public markets and private transactions.
Landlords and real estate developers have
also raised huge amounts of capital for
building new retail developments and renovating
and enhancing existing centers. It is
the best of times in theatre exhibition!
Is this abundance of capital potentially dangerous?
You bet it is! Every real estate developer
now wants a megaplex to
anchor or
enhance new and existing retail developments.
They aggressively pursue exhibitors to
achieve this with little regard to the implications
of potentially overscreening certain
areas. Older, inferior theatres do need to be
replaced with state-of-the-art cwnplexes; the
ccHisumer expects and demands it In addition,
as suburban areas continue to grow and populaticxi
bases shift, exhibitors must meet the
demand for convenient modem theatres. The
question remains, "How many screens do we
need and how many can we suj^rt?'
I
am a firm believer in the magic of fiiee
enteiprise and letting mark^ conditions
ultimately mle the day. I believe that when
our industry does emerge on the other side of
the rebuilding and ccmsoUdation taking place
today, it can be a healthier industry. However,
we can expect to experience a litde pain as we
run the gauntlet It can be the best of times in
theatre exhibition!
Hi
MichaelL Campbell, tobehonoredwUhthe
ShoWester award at ShoWest '99, ispresident,
chairman and CEO of Regal Cinemas, which
tops our Giants of Exhibition survey (see p.
24), thanks to the Knoxville, Term. -based circuit's
merger with Act III last August. Bailing
competing mergers. Regal looks to remain #7
come 2000, as the circuitforecasts it will operate
4, 700 screens by year-end 1999.