Movie Theaters Flourish, Prove Experts Wrong Cable TV, Videos Help Open The Dam As Industry Sees Record Ticket Sales

The movie industry is riddled with angst these days. Costs are skyrocketing; there’s a glut of products; movies are under attack for mindless violence and mergers, management buyouts and executive defections are causing musical chairs at the top.

But apparently the anxiety has not filtered down to movie-theater owners. Even in the New York metropolitan area, home of some of the country’s most cramped and expensive real estate, every new project seems to include a movie theater.

The pundits who predicted that cable television would mortally wound the movie theater industry, and that videocassette recorders would kill it off, were as wrong as they could be. According to the National Association of Theater Owners in North Hollywood, Calif., nearly 1.3 billion movie tickets were sold last year, the most in 35 years. Movie theaters nationwide grossed nearly $5.4 billion, a record.

“Clearly, theaters still provide something you can’t get at home,” said David Firestein, a former AMC executive and now senior vice president of the Westchester-based Northwest-Atlantic Partners retail real estate brokerage.

Theaters also provide something that has been in short supply for much of this decade - tenants. “The real estate climate is really fueling growth,” said Howard Lichtman, Cineplex Odeon’s executive vice president of marketing. “We can get lease terms that make it truly viable to put up new theaters.”

The push to accommodate theaters makes sense.

“Theaters are a great way to maximize the rent you can get,” said Jeff T. Blau, vice president of The Related Companies. Faith H. Consolo, managing partner of the Garrick, Aug store leasing brokerage, explains why: “Movie theaters absorb tremendous amounts of basements, subbasements and other space that used to be viewed as undesirable,” she said.

So why were the pundits so wrong?

Probably a lot of reasons, but the main one, movie industry experts seem to agree, is that the forecasts of doom were predicated on a steady stream of movies flowing out of Hollywood. Instead, the studios have unleashed a tidal wave of product. And cable and video, rather than stanching the flood, are what opened the dam.

Studios no longer have to rely solely on box-office sales to recoup the cost of making and marketing a movie. Now they add in cable showings, and, of course, video rentals and sales. And the best way to breach those ancillary markets is to make a killing in a first-run movie theater.

Conversely, seeing things on video can spur people to go to a sequel. Jim Kozak, a spokesman for the Theater Owners group, notes that “Terminator 2” and “Die Hard 2” both made twice as much as the original films.

“Were the sequels really that much better, or did a lot of people discover the series by seeing the original on tape?” he said.

Since by now video stores and cable are available almost everywhere, the synergies have spurred theater development throughout the country. Kozak said that by the end of last year there were 26,689 screens extant, up from 22,921 five years before. And nearly all of the chains have announced robust expansion plans.