Obsolete Screens.

EXHIBITORS GRAPPLE WITH CHALLENGE OF KEEPING OLD-STYLE THEATERS FILLED

Business is likely to be very good at the new AMC Theatre that just broke ground in Burbank.

And that's the bad news -- because the new 16-screen complex will be competing with two other cineplexes operated by the AMC Entertainment Inc. chain in Burbank.

And since the new venue will have more screens, along with stadium seating, digital sound and other creature comforts, it is likely to steal market share from those other complexes, which lack comparable amenities.

"There's been a big change in moviegoing habits around the country with the advent of the stadium-seat megaplex," said Rick King, spokesman for Kansas City-based AMC. "The customer is absolutely choosing the theaters with stadium seating, high screen counts, big pictures and digital sound."

As a result of these changes, AMC, like most other theater operators, is grappling with the question of what to do with its older theaters when its newest movie house opens in the fourth quarter of 2001.

Over the past five years, as new screens have come online, many of the older, under-performing venues have been shuttered. Still others have been renovated or transformed into discount houses or art film venues. But repositioning or renovating a theater is not easy.

"Some places it's worked, and some it hasn't," King said. "In most cases, if you renovate an eight-screen, slope-floor theater, at the end of the day, you've still got an eight-screen theater, and people generally prefer higher screen counts.".

Time was when moviegoers who wanted to take in a show broke out the newspaper and headed for the theater playing the film that caught their fancy. But these days consumers are more likely to make their selections based on which theater has the most screens and the most amenities, sometimes waiting until they arrive at the complex to decide on what movie to see.

That has forced a wholesale change in the way operators build theaters, driving costs sky-high at the same time. Screen counts of 15 and more, stadium seating, designs that sharply angle each succeeding row to give moviegoers an unobstructed view, love seats for snuggling, and digital surround sound have doubled the cost of construction to about $1 million per screen, according to industry estimates.

The result is a downward spiral in attendance at older theaters.

"Almost all the older, slope-floor theaters have experienced some decline (in attendance)," said King. "And in most cases, where the slope-floor theaters are in direct competition with stadium-seating theaters, the decline has been dramatic."

AMC, which has been among the most aggressive operators in building new theaters, last year closed 279 older screens nationwide, and more closures are planned for this year. In Burbank, the new theater complex will be located in a retail/entertainment center under construction next door to an existing, 14-screen multiplex that will be torn down once the newer version opens.

But the company plans to retain its two other units in Burbank One is an eight-screen cineplex in the Media Center mall that has an older, sloped design, and the other is Media Center North, which has stadium seating but only six screens.

AMC plans to consider a number of different strategies to revive interest in its older Burbank theater complexes. "Once we get our new complex built, we will be doing a lot of experimenting and testing to find out what formula works the best for that trade area," King said. He declined to elaborate.

But the addition of new, multi-screen theaters in other San Fernando Valley markets has already taken a toll on older theaters over the past year. Pacific Theatres Corp. shuttered its five-screen complex in the Sherman Oaks Galleria last year in preparation for a 16-screen theater due to open in the renovated mall at the end of this year. In March, Pacific also closed its Topanga Theatre in Woodland Hills, and United Artists Theatre Co. earlier this year closed its six-screen Woodland Hills cineplex. Both moves followed the opening of AMC's 16-screen megaplex in the Woodland Hills Promenade.

Some of those operators tried alternate marketing strategies for the houses before closing them. Pacific's Topanga Theater, for example, switched to a discount-house format, showing second-run films for $2.50 a ticket.

Second-run films, those that have previously opened in other theaters, once attracted audiences that didn't want to pay the full freight to see a newly released film. But in recent years, the window between the time a film opens and its release on home video and cable has shortened, and many consumers prefer to watch the film in the comfort of their own homes.

"There seem to be very few successful discount houses these days," said an industry observer. "With video availability being in the area of six months from first release, the time someone would have to wait to see the film on video and seeing it in a second-run house is a few months."

Still, AMC and others are hopeful they can come up with a formula to keep these smaller theaters profitable, largely because the cost of closing them is often steep. Many theater operators are tied into long-term lease obligations or carry debt on their older venues.

"They had to switch (to the newer theaters) when they hadn't yet written off the old theaters," said Bud Ovrom, city manager for Burbank. "Now they've got a big yoke around their necks over how to get rid of the old theaters and focus on the new theaters."