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The Honolulu Advertiser

Posted on: Saturday, May 21, 2005

Megaplexes mark 10th birthday

By David Twiddy
Associated Press

OLATHE, Kan. — It's a Saturday night in suburban Kansas City, and Wayne Sutter and his family are waiting outside the AMC Studio 30 megaplex to see "XXX: State of the Union."

Megaplexes, including AMC Studio 30 in Olathe, Kan., are defined as having 14 or more screens. Screen count may be exceeding demand, especially when ticket-buying apparently has leveled off.

Orlin Wagner • Associated Press

The giant theater — its spotlighted facade can be seen on the highway a half-mile away — anchors a shopping center, attracting people with virtually every major new film release.

"It's nice to come here and have all the variety in one place," Sutter said.

His wife, Bridgette, said: "More than anything, that's all that's around where I live — the big theaters."

While it seems as if gigantic movie theaters have been with us forever, the megaplex theater — defined as having 14 or more screens and modern amenities like stadium-style seating — turned 10 years old this week.

AMC Entertainment Inc. opened the first, the Grand 24 in Dallas, on May 19, 1995, ushering in a new concept that used its scale to change how movies are shown. Ticket prices and audience expectations have gone up in the 10 years since, and megaplexes now face problems of their own.

The idea was to match the successful "big box" stores sprouting across suburbia, said Peter Brown, chief executive officer of Kansas City-based AMC, which operates 229 theaters, 77 percent of which are megaplexes.

"It might make some sense to think of the movie theater as a superstore of entertainment," said Brown.

Improved facilities and the ability to watch whatever movie they wanted when they wanted it brought people through the door and bulked up Hollywood's grosses. Over the last 10 years, the number of tickets has grown 19 percent to 1.53 billion last year and annual box office receipts have blossomed 76 percent to $9.53 billion, according to the National Association of Theater Owners.

Anthony DiClemente, an entertainment analyst for Lehman Brothers, said: "What was wrong with the multiplexes was you still had a situation, even with six or eight screens, where you couldn't show movies on more than one screen. That meant that on Friday and Saturday nights, you were still having sold-out shows. That was the impetus behind the megaplex: to satisfy demand at its peak."

The megaplex also has contributed to how the average ticket price has increased $2 over the past 10 years to $6.21. But National Association of Theater Owners president John Fithian said there many other factors to consider, including higher costs for renting films from studios.

The megaplex hasn't always been good to the theater industry that spawned it. After the Grand 24 opened, most major theater chains raced to build their own megaplexes or retrofit older theaters, racking up huge construction costs. Most of the industry's main players filed for bankruptcy in the late 1990s, leading to widespread consolidation.

Since peaking in 1999 at 37,131 screens, the number of screens was down to 36,012 last year as companies closed smaller, less profitable theaters slightly faster than they opened new ones. But there is a concern that the screen count is still too high, especially as ticket-buying has apparently leveled off. Last year, gross revenue stayed flat at $9.5 billion, while the number of tickets sold actually dipped 2.5 percent.

AMC and its main rival, Regal Entertainment Group, had flat revenues in 2004. Regal reported earnings of $90.8 million, down 51 percent from $185.4 million the year before. AMC, sold in December to an investment firm, reported losing $67.2 million through its first three fiscal quarters ending Dec. 30.

Among the problems faced by megaplexes is that their greatest strength — the ability to attract large crowds — means a majority of people interested in a movie see it in the first few weeks, leading studios to pull the film from circulation sooner. That cuts into theater revenues.

In addition, movies get out on DVD an average of 4 1/2 months after hitting the screen, a full two months earlier than in 1994 and almost a month earlier than just two years ago. That means people have more incentive to wait to see a movie at home.