BUYING GUIDE.
1. "We're obsolete? No way!"Hard to believe, but movie theaters have been holding their own, despite intense competition from cable, the Internet and other media. After a 2005 slump, box office revenue increased over the past few years, and it's likely 2009 will have set a new record. But that growth is due largely to inflation; the number of tickets bought has stayed close to 1.4 billion since 2005, while the average ticket price has climbed from $6.41 to $7.46.
Looking for new ways to make money, theaters are exploring options like more in-house advertising and expanded concessions. But the biggest potential lies in digital technology and the flexibility it affords programming. For starters, events like live opera or college bowl games can draw 75 percent capacity on slow days, when theaters are usually "lucky to fill 10 percent of their seats," says Richard Herring, consultant for Davidson Theaters in Virginia. The trend is still young: Just a quarter of the more than 375 theaters using digital-projection company Cinedigm's technology, for example, are set up to show live events, but that number is growing quickly. Eventually, says Herring, as much as half a theater's revenue could come from this type of special programming.
2. "We get rich selling your eyes."
Theaters are drawing a bigger portion of their revenue these days from the on-screen advertising shown before the previews start. Revenue from these ads has been increasing by roughly 10 to 15 percent a year for the past several years, says Patrick Corcoran, spokesperson for the National Association of Theater Owners, and it's not going away anytime soon. That's because industry insiders rely on surveys like the one conducted in 2003 by marketing firm Arbitron that found two-thirds of audience members didn't mind them.
Some moviegoers do mind, of course-more than 3,400 of them cared enough to sign a recent online petition demanding Regal Cinemas stop showing ads before movies. "I'm wondering why ticket prices are going up, and we're being forced to watch these ads at the same time," says Jason Thompson, who started the petition after growing frustrated with sitting through a string of ads before showtime. "The preshow presentation has been a part of theater exhibition for many years," says Dick Westerling, senior VP of marketing and advertising at Regal. What's more, thanks to digital technology, the preshow has become "more upscale and attractive."
3. "If you're getting tired of blockbusters, you may be in luck."
Special-events programming isn't the only change digital technology may be ushering into your local cineplex. It also makes film distribution cheaper and easier, thus potentially opening up more opportunities for independent filmmakers to get their work screened. "It's like a big iPod," explains Cinedigm CEO Bud Mayo. Movies are shipped on hard drives or downloaded from a satellite, without the cost or inconvenience of transporting heavy film canisters, and the theater can cue them up with the click of a mouse. That means theater owners can set up their schedules by "trial and error," says Lauren Goffio, manager of the Pavilion Park Slope theater in Brooklyn, N.Y.
The trend toward digital could also mean a move away from blockbusters. Hollywood has been offering mass-market products while most industries are directing specialized products to smaller groups, says Rashi Glazer, professor of marketing at the University of California, Berkeley: "The one-size-fits-all approach is the past, it's not the future." And digital lowers "the barrier of entry," since distribution is no longer an expense to be reckoned with, says Corcoran.
4. "We really prefer you didn't come on opening night."
Contrary to the way Hollywood considers opening-weekend box office numbers the ultimate test of a movie's success, theaters themselves are far less worried about packing the house for new releases. That's because they pay a percentage of ticket sales as a fee to studios, and the cut is typically bigger earlier in a film's run.
How does it work? Studios negotiate separate agreements with each theater chain for each film, so the conditions vary. But generally speaking, theaters pay somewhere between 35 and 70 percent of box office receipts to the studio as a film-rental fee, says consultant Herring. In most cases, the studio takes the biggest cut in the first week, and the percentage drops from there. "If you have a movie like Titanic that lasts for months and months, that's what we all dream about," says Bruce Taffet, the owner of The Pearl Theatre at Avenue North, in Philadelphia. He says that by the third or fourth week of a given film's run, the exhibitor begins paying lower film-rental fees to the studio. Unfortunately for theater operators, "most movies don't last that long," Taffet says.
5. "We're all about the bells and whistles."
Noticed lately that the moviegoing experience has become a lot more, well, experiential? It's a result of theaters including more "premium experience" screenings in their lineup, including the use of IMAX and updated 3-D technology. And the trend seems to be accelerating. Regal Cinemas, for one, had 168 digital 3-D screens out of a total 6,782 screens nationwide by the end of 2008 and plans to up that number to 1,500 in the next few years. Meanwhile, about 175 Regal theaters have installed IMAX in the past six years, with more than half of those within the past year.
The lure is profit, naturally: After initial upgrades and outlays-such as special screens and IMAX's imaging process-theaters can charge $2 to $3 more for these tickets. And customers like it, says IMAX CEO Rich Gelfond; he cites 2009's Star Trek, for which IMAX made up 2 percent of total screens but 12 percent of box office over a two-week period. Similarly, 3-D screenings have won up to half the total audience for films like Pixar's Up. But Glazer chalks up the excitement to novelty, since "the films themselves don't particularly have anything to commend them compared to others."
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