EYEING THE BIG PICTURE; IWERKS SEES THEATER BOOM AS BOON FOR GIANT SCREENS.

Byline: Dave McNary Daily News Staff Writer

Iwerks Entertainment, the troubled motion-simulator and giant-screen specialist, has started looking for ways to take advantage of the megaplex explosion in the movie-theater business.

Iwerks, which has been mired in red ink in recent quarters, announced recently at the National Association of Theater Owners' ShoWest convention in Las Vegas that it has started selling a lower-cost version of its giant-screen projection system. Customers can pay considerably less than the usual $700,000 they would normally expect to shell out for such a system - under $500,000 for some versions.

``It's still a quality system, but there aren't a lot of the bells and whistles that we normally have,'' explained Therese Andrade, vice president for institutional sales at Iwerks. ``We're expecting there to be a lot more demand for giant-screen films in the coming years.''

The move comes at a time when virtually all of the nation's theater construction is focused on ornate movie palaces with at least 16 screens or the remodeling of existing multiplexes. In either case, patrons now expect expensive stadium-seating configurations offering better sight lines, wall-to-wall screens, more leg room and state-of-the-art sound.

Iwerks believes its new technology - dubbed 8/70, meaning 8 perforations per 70-millimeter frame - makes sense in the current business climate since megaplex operators can differentiate themselves by offering giant-screen movies.

Spurred by the growth of Toronto-based IMAX Corp., several hundred U.S. theaters now show 45-minute movies, such as ``Everest,'' ``Into the Deep,'' ``Mission to Mir'' and ``Titanica,'' on eight-story-high giant screens.

``We've been getting a very positive reaction to this new system,'' Andrade said. ``I'd say we've been happily surprised. There are a lot of smaller markets that don't have any giant-screen systems at all.''

Burbank-based Iwerks has rolled out the new system at a time when it is facing shareholder dissent over its pending $17 million buyout of motion-simulator concern Showscan Entertainment, scheduled for a vote Tuesday.

Iwerks, which lost $4 million on sales of $14 million in the six months ended Dec. 31 due to the financial turmoil in Asia, insists the Showscan deal will boost results and enable it to compete more effectively with IMAX. But dissenters say Iwerks is paying too much and has not spelled out its strategy for a combined company.

Iwerks' stock, which touched 5-5/8 last July, has been mired around the $3-a-share level this year and closed down 1/16 at 3 1/16 on Tuesday.

Analyst Kevin Skislock of L.H. Friend, Weinress, Frankson & Presson said Iwerks has two challenges: finding a way to expand the market for motion-simulation rides and films; and dealing with the formidable foe it faces in the giant-screen arena in IMAX, which has more than 150 theaters installed worldwide and earned $20.3 million on sales of $97.5 million last year.

``IMAX has the brand-name franchise in giant-screen theaters,'' Skislock said. ``But there is certainly room for another player.''

IMAX, which signed deals to install 60 more systems valued at $132 million last year, will benefit from upcoming high-profile releases such as ``T-Rex'' and a 3-D ``Star Trek'' film, Skislock added. ``You're going to see the IMAX marquee change drastically to much more popular films over the next 12 to 18 months,'' he said.

Over the next several years, Skislock believes, public acceptance of the giant-screen format may lead to as many as 800 new screens.

CAPTION(S):

4 Drawings

DRAWING: (1--4--Color) ROLL IT:

Burbank-based Iwerks Entertainment has unveiled a more cost-effective system at a time when theater construction is focused on ornate movie palaces. Patrons now expect expensive stadium-seating configurations like cinedomes and large-format theaters designed by Iwerks.