Banner
Home Forums Movie Theaters The Lobby Assessing market in new theater opportunity
Welcome, Guest
Username: Password: Remember me
  • Page:
  • 1

TOPIC: Assessing market in new theater opportunity

Assessing market in new theater opportunity 21 Jan 2010 13:57 #33180

  • siryan
  • siryan's Avatar
  • OFFLINE
  • Fresh Boarder
  • Posts: 3
  • Karma: 0
I am currently looking into a multiplex theater project in an ex-urban area with compelling demographics. This would be a ground-up project as no suitable theater space exists. I am familiar with the real estate industry but am new to the movie exhibition business. My questions specifically relate to the current market situation and the best way to meet demand. Any help is greatly appreciated!

Facts: The trade area is ex-urban (formerly rural, suburban development, no population center), with a population of 100K plus. The economy is military driven (R&D), with a median family income of $75K and a well-educated population. Local tastes are middle-market and conservative (i.e. little demand for independent movies). This is a high-growth / pro-growth area outside a major MSA.

Competition: 6 screen AMC theater, built in the late ‘80s, in deplorable condition, plus a 1 screen military theater (very limited access by locals). The nearest state of the art theaters are 45 minutes drive and options are limited due to local geography – the area is a peninsula. The AMC regularly sells out weekends despite the condition, although most locals I know no longer patronize this theater due to the bad neighborhood and poor experience. People will routinely drive 45 minutes one way to see a movie.

Potential Problems: In 2006, a major regional developer failed to sign a national circuit tenant for a new power center despite the fact that they were REQUIRED to do so by the planning authority. My guess is that their funding was contingent upon having a national credit-tenant only, so indie theaters wouldn’t work for them. My understanding is that the major circuits were overbuilt and cash poor at the time, so there were no takers on a new project in a tertiary market.

A new theater is the #1 priority of the development commission and tax abatements / TIF financing is on the table for a theater development.

My first question in about the competition: Can AMC use its market power to get exclusives on blockbusters from distributors? I am concerned that if I were locked out of these movies, I would miss a huge opportunity.

Also, would AMC prop up this theater if it were in danger of closing? In other words, if a new multiplex were correctly sized to capture all area demand, would they let a theater die? What would a suggested size be for this opportunity? I’m thinking 7+ screens, but this is contingent upon continued competition from AMC. If they fail, I’ll miss a huge opportunity.

Any commentary or advice is greatly appreciated, Thanks!
The administrator has disabled public write access.

Re:Assessing market in new theater opportunity 21 Jan 2010 14:35 #33181

  • BWT
  • BWT's Avatar
  • OFFLINE
  • Senior Boarder
  • Posts: 71
  • Thank you received: 1
  • Karma: 1
Depending on how far away the AMC location is, and the demographics of the area, you could possibly get an exclusive booking zone. This would be for the studios to decide ultimately given the box office data they have from your area.

Alternately, if you were to go ahead with the build-out and you were classified as a competitive zone by the distributors once you open, you would each get a share of the studio titles (e.g. from Paramount distribution, the AMC might get Iron Man 2, but you would get Shrek Forever After, etc.).

Also, a fair amount of states have laws forbidding anti-competitive film booking practices, such as giving all of the first-run major film titles to one theater over another in the same area.
The administrator has disabled public write access.

Re:Assessing market in new theater opportunity 21 Jan 2010 15:02 #33182

  • rufusjack
  • rufusjack's Avatar
  • OFFLINE
  • Platinum Boarder
  • Posts: 1488
  • Thank you received: 33
  • Karma: -7
That size is large enough for 2 theaters to get most major releases (2800+ locations). If possible, it would be better if you had 5 miles or more in between you. 10 miles would be great.

Most majors are not interested in committing new funds to 20 year old 6 screen theaters. My guess it is a cash cow and would be milked to its death.
The administrator has disabled public write access.

Re:Assessing market in new theater opportunity 21 Jan 2010 16:01 #33183

  • siryan
  • siryan's Avatar
  • OFFLINE
  • Fresh Boarder
  • Posts: 3
  • Karma: 0
Thanks Rufusjack and BWT for the input. I find it interesting that 5 or 10 miles distance between my theater and the existing AMC would matter much, considering area residents are willing to drive 45+ minutes or miles for a movie. 10 miles away would be possible, however.

I've also looked and found that there are anti-competitive film booking laws on the books - at least in a neighboring county. My guess is this county has never had to deal with the issue before.

Does anyone have any insights as to why a major circuit (other than AMC) would shy away from an area such as this, other than cash shortages back in '06? Or do major chains simply avoid expansion into more rural areas?
The administrator has disabled public write access.

Re:Assessing market in new theater opportunity 21 Jan 2010 17:03 #33184

  • BWT
  • BWT's Avatar
  • OFFLINE
  • Senior Boarder
  • Posts: 71
  • Thank you received: 1
  • Karma: 1
The distance of 5 or 10 miles is important not because of how far people are willing to drive, but more so because that is a normal sized booking zone from the film distributors' perspective. They will use their historical box office data to determine if they think theaters should be zoned for product exclusively/day&date or shared competitively.

Given that AMC announced that it was buying Kerasotes Theatres' 975 screens a couple of days ago, I don't think they have failed to put money into the location b/c of a lack of capital.

I'm with rufusjack in that if that 6-screen AMC location is just cash flowing like mad for them, why increase the amount of invested capital? From an investment standpoint, it's only likely to dilute the theater's present returns unless they believed that a complete refurbishment would drive such superior performance and returns as to pay back the incremental capital invested in the refurb plus an additional premium above the old hurdle rate.
Last Edit: 21 Jan 2010 18:16 by BWT.
The administrator has disabled public write access.

Re:Assessing market in new theater opportunity 21 Jan 2010 18:15 #33185

  • siryan
  • siryan's Avatar
  • OFFLINE
  • Fresh Boarder
  • Posts: 3
  • Karma: 0
Thanks BTW. I completely understand the AMC business case. They have said publicly that they have no plans to refurb that location. I was more thinking about another major chain, like Regal. But it's probably off their radar at this point.
The administrator has disabled public write access.
  • Page:
  • 1
Time to create page: 0.196 seconds
attraction attraction
attraction
attraction
attraction
attraction