While analysts and specialists duel over whether current video business trends are positive or negative, another segment of the movie trade is struggling with its own analogs of "copy depth" and "revenue sharing."
Last month GC Companies, Chestnut Hill, Mass., became the latest exhibitor to seek protection under Chapter 11 of the U.S. Bankruptcy Code, for its thousand-screen General Cinema Theatres chain.In a release, the company cited as a contributing factor "an over-saturation of the market created by a surge in the construction of multi-screen 'megaplexes' during the past several years."
In other words, copy-depth troubles.
"Current theatrical problems are comparable to those in home video," said video retailer Steve Eads, Bentonville, Ark., a former manager for Carmike Cinemas, Columbus, Ga., and a former buyer for Commonwealth Theatres, Kansas City, Mo. "The overbuilding of megaplexes of 15 screens or more has had the same result as copy-depth programs have had in home video -- namely a reduction in the 'legs' of titles."
"Now you get the demand taken care of in the first two or three weeks of release," said Craig Hill, video specialist, Harps Food Stores, Springdale, Ark. "You don't have anybody coming back."
Whether this can be advantageous in video is a debatable topic. Weighing in on the pro side, "supermarket retailers who can today satisfy their customers, rather than work the old dissatisfaction model, can operate successfully," said Mark Fisher, vice president of membership, Video Software Dealers Association, Encino, Calif.
Although the copy-depth situation is relatively new to both industries, a form of revenue sharing has prevailed theatrically for some time. "Theaters have long competed for product by bidding for it with percentages of their ticket sales," said Eads. "On major films these percentages can be quite high, with exhibitors relying on high-margin concession sales for profits."
Since revenue sharing works differently in home video, others foresee fewer problems there. "Even if video turns to a hits-only business in supermarkets," said Fisher, "a hits-only business in a revenue-sharing model that ends up at a 45% or 50% gross margin isn't awful."
But the impacts of these and other factors (like weaker product) have already been profound in the theatrical industry. The United Artists Theatre Circuit of Englewood, Colo., also filed for bankruptcy protection this year, announcing plans to sell or close 20% of its theaters by year-end.
Carmike Cinemas filed earlier this year as well. And the Edwards Theatre Circuit, Newport Beach, Calif., with 850 screens in three states, filed on Aug. 23.
Other chains experiencing financial difficulties include Regal Cinemas, Knoxville, Tenn., which began discussions with its bank lenders seeking relief from past obligations and Loews Cineplex Entertainment Corp., New York. Meanwhile AMC Entertainment, Kansas City, Mo., reported a company loss of nearly $13 million in their second-quarter 2000 financial report.
Indeed, all of the above public theater chains revealed losses in their most recent financial reports. (The privately held Edwards Theatres did not disclose profit figures.)
Analysts warn that only retrenchment and consolidation can bring health back to the industry -- which recent events may drive video distributors and retailers toward as well.