Topic: Denver, CO: More Screens, The Sequel
The Evil Sam Graham
From: Des Moines, IA
Registered: Jan 2004
posted February 07, 2005 09:23 PM
SOURCE: The Denver Post
More screens, the sequel
Multiplexes are coming to "lifestyle centers" near you, just 5 years after the industry went dark from overbuilding
By Kristi Arellano
Denver Post Staff Writer
Nearly 120 new movie screens are planned in and around the Denver market over the next two years.
They're key components of the new retail centers being developed in the city's growing suburbs.
Yet while that's good news for movie lovers and suburban dwellers, will it also be good for an industry that just five years ago went through a massive shakeout caused by overbuilding?
The answer won't be immediately apparent, but some experts warn that the new theaters - often subsidized by retail developers - are likely to steal business from older ones in the city's core.
"There may be some pain in the business if people aren't careful," warned Keith Thompson, a theater consultant and co-owner of Knoxville, Tenn.-based Phoenix Theatres LLC.
Movie theaters, like any other business, follow the customer. The new theater projects are proposed as anchor tenants in newly popular outdoor retail centers now being built along Interstate 25 and E-470. These so-called lifestyle centers combine shops, restaurants and entertainment spots in developments designed to fulfill the functions of old small-town Main Streets.
"All (the developers) want theaters because we bring traffic to the open-air shopping centers," said Cliff Godfrey, president of Colorado Cinema Group. "That makes other businesses want to come in and be close to the theaters."
"They draw restaurants and spread out traffic throughout the day or into the evening," added David Larson, partner with Legend Retail Group in Denver. He helped bring 16 new screens to a proposed neighborhood retail center at East 120th Avenue and Grant Street in Northglenn.
The Century Theatres project is scheduled to open this fall less than 4 miles south of a 12-screen AMC project that is expected to open in the fall of 2006 at 144th Avenue and Interstate 25 in Westminster.
Other theaters proposed or underway in the Denver area include:
# A 12-screen Colorado Cinemas opening March 11 in Brighton.
# A 12-screen Colorado Cinemas opening this fall in Castle Rock.
# An 18-screen Harkins Theatres opening this fall at Quebec Street and Interstate 70 in Denver.
# A 16-screen Colorado Cinemas opening in the spring of 2006 at E-470 and Smoky Hill Road in Aurora.
# A 16-screen Century Theatres opening in late 2006 at the 29th Street redevelopment in Boulder.
# A 14-screen Metro-Lux theater opening in October at The Shops at Centerra in Loveland.
If early signs are any indication, the combination can be successful. When the 14-screen AMC Theatres opened in the outdoor section of Broomfield's FlatIron Crossing mall in November 2001, for example, it caused a noticeable upswing in retail business.
"Traffic definitely jumped when the theaters opened," said Heather Drake, the mall's senior marketing manager. "Moviegoers are cross-shoppers. When they come to a movie, they're also eating in the restaurants, then walking across the way and going into Borders and buying a book - or sometimes the movie soundtrack."
FlatIron Crossing isn't the first to notice the connection.
"It's a national phenomenon at this point," Thompson said. "One of the ingredients for a successful lifestyle center, according to the groupthink that is the real estate industry, is a modern stadium movie theater - 14 screens or up."
As a result, developers are wooing theater operators into their properties with offers of discounted lease rates or other incentives.
"In my humble opinion, the industry has been a bit overheated," Thompson said.
It isn't the first time.
The movie industry went through a similar buildup in the late 1990s that came to an abrupt halt in 2000. While national audiences were increasing by only 13 percent, the number of theater screens serving them increased 32 percent between 1995 and 2000. Owners scrambled to replace traditional theaters with giant multiplexes that held stadium seating and, in the process, choked off each other's business.
More than a dozen national theater operators went bankrupt, including Regal Cinemas, Carmike Cinemas, Mann Theatres, Edwards Theatre Circuit, Loews Cineplex and Denver- based United Artists, and theaters closed throughout the country.
By mid-2001, for example, only 619 screens were lit in Colorado, down from 738 three years earlier.
Denver financier Phil Anschutz assumed a central role in the industry's reorganization. He spent less than $500 million to buy the cheap debt of United Artists, Regal and Edwards, gaining control of the companies when they filed for Chapter 11 protection.
His chain, named for the flagship Regal chain and one of the nation's largest, is based in Knoxville, Tenn. It operates 6,119 screens in 562 locations in 39 states.
David Brain, chief executive of Entertainment Properties Trust, believes the industry shakeup was a necessary part of what has become an industrywide conversion to stadium style multiplex theaters.
Those bankruptcies helped theater operators shed leases at older, underperforming theaters, said Brain. His Kansas City real estate investment company has a portfolio of more than $1.1 billion in movie theater and entertainment properties, including the Westminster Promenade and its 24-screen AMC theater.
"The megaplex revolution wasn't over - it was arrested," said Brain. "We're just coming back from intermission."
He estimates that theater projects need at least 10,000 residents within a 7-mile radius to support each screen in their project.
That explains why the new theater projects are moving to Denver's northern suburbs, where much of the metro area's future growth is expected. But as population growth in the Denver metro area flattens, will new screens just pull existing customers from other, older theaters?
Larson said he's certain that new developments will cause continuing shakeout in the theater industry. "The older theaters are going to have to die away if there's something built nearby," he said.
The situation may also be exacerbated by forces within the motion picture industry that are conspiring to change the stakes for theater owners.
Nationwide, movie attendance fell about 1.7 percent in 2004, to 1.51 billion, partly because movie lovers have so many more ways to pursue their passion. Metro Denver's residents are the nation's best movie audience, according to Scarborough research. More than 37 percent see at least one movie a month, but even that may change as home theaters become more common.
Hollywood now derives only 20 percent of its revenues from box-office receipts, with a hefty 60 percent coming from sales of its movies to cable television, rental stores and the general public.
Anschutz's Regal chain is expanding its theater base cautiously and has not launched a new theater in the Denver area since the December 2002 opening of the Colorado Mills 16 in Lakewood.
"We are interested in growing the company in a responsible manner," Regal CEO Mike Campbell said in a statement. "Our goal is to open eight to 10 new locations nationwide each year. We are looking into opportunities in the Denver market."
Theater operators with projects planned here maintain that they're also carefully selecting the sites for new projects to avoid overscreening.
Developer Forest City West said it is bringing theaters to sites that lack nearby theaters and expect to have enough residents to support them, sites such as The Orchards in Westminster and the Northfield project in Denver.
And Larson of Legend Retail Group suggests that not everything now in the planning stages will actually get built.
"It becomes an interesting game of who can get out of the ground first, who can open first and who can establish their zone," he said.
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