MOVIE THEATERS AND REAL ESTATE
"AN ECONOMIC AND MARKETING ANALYSIS OF CINEMAS"
by
BRIAN SCOTT REIN
B.S. Business Administration
University of California, Berkeley
(1987)
Submitted to the
Department of Urban Studies and Planning
and the
Center for Real Estate Development
in Partial Fulfillment of
the Requirements for the Degree of
Master of Science in Real Estate Development
at the
Massachusetts Institute of Technology
August 1988
Rein
Brian S.
1988
The author hereby grants to MIT permission to reproduce
and to distribute copies of this thesis document in whole
or in part.
Signature
of Author
Department
Certified
of Urban
_______
Brian Scott Rein
Studies and Planning
August 1, 1988
by .
Bernard Frieden
Professor of City Planning
Thesis Supervisor
G'
Accepted by-----------------------Michael Wheeler
Chairman
Interdepartmental Degree Program in Real Estate Development
MASSACHUSETTS INSTliUTE
Pr TV!WNOLOGy
SEP 2 0 1988
LIBRARIES
MOVIE THEATERS AND REAL ESTATE
"AN ECONOMIC AND MARKETING ANALYSIS OF CINEMAS"
by
BRIAN SCOTT REIN
Submitted to the
Department of Urban Studies and Planning
and the
Center for Real Estate Development
on August 1, 1988
in Partial Fulfillment of
the Requirements for the Degree of
Master of Science in Real Estate Development
ABSTRACT
This thesis is about movie theaters as part of larger
The
mixed use or retail real estate development projects.
intent is to.give real estate developers a global view of how
the movie theater industry has evolved, and to describe the
Books, magazine
elements of a successful cinema operation.
and newspaper articles, and trade journals were utilized to
In addition, interviews were
support this research.
conducted with real estate developers, cinema designers, and
movie theater operators to gain an understanding of current
industry practices.
The thesis begins with an overview of the movie theater
It then looks
industry and the film distribution process.
specifically at economic issues of revenues and profit
generation, and costs associated with developing and
operating a cinema complex.
The next section examines marketing issues including:
geographic location, demographic guidelines, and cinema
It also explores a relatively new concept in the
design.
exhibition environment, the restaurant/cinema combination.
The final chapter explains the process that a developer
Lease
goes through in bringing a cinema to his/her project.
structure and points of negotiation are discussed as well as
the benefits and problems associated with incorporating a
cinema into a real estate development project.
Thesis Supervisor: Bernard Frieden
Title: Professor of City Planning
2
Table of Contents
Abstract
_
_
Acknowledgements
Chapter One
Movie Theater Industry Overview-In the Beginning-------------------Construction/Demolition TrendsDrive-in Theaters
Who Goes to the Movies _ _
The Competitive Environment
Consolidation in the Industry
Legal Considerations
_- Why Integrate Vertically?
Effect on Exhibitors
Summary
Notes _
6
7
9
9
11
18
18
19
19
21
Chapter Two
The Film Distribution Process
History --------------------------Who Makes the Movies?
Competition for Films - - - - Legal Considerations
The Bidding Process Film Rental
Film Selection
Summary_
Notes
Chapter Three
Economic Considerations for Movie Theaters
Revenues
Box Office
Concession Stand_
Operating Costs
Cost Breakdown
Proforma _ _ _39
Theater Expansion --------------------New Construction vs. Remodel
Summary--------------------Notes-
23
23
24
25
25
27
28
29
29
30
31
31
3
_34
_36
Chapter Four
Marketing Considerations for Movie Theaters
Location
Macro View
Suburban vs. Urban LocationsMicro View
Design Elements
38
-
--
40
40
- - - 41
42
43
13
43
44
16
49
Multi-Plexing --------------------Parking
Auditorium
- - - Ticket Booth
Lobby - - ---------------------Concession Stand
Projection Booth
Summary_ _ _ _ _ _.-.------------------------Notes_ _ _ _ _56
Chapter Five
A New Concept for the Film Exhibition Environment_
Introduction
Marketing of a Cinema N' Drafthouse - - Location and Site Considerations
Food Service_
Other Uses
Economics of Cinema N' Drafthouse Operations
Start-up Costs - - --------------------The Bottom Line
Chapter Six
A Cinema in Your Next Project?
Locational Considerations
Downtown Locations
Suburban Locations
Benefits _ _ _
Problems and Risks
Community Groups
Management
-71
Real Estate Economics
Risks
The Process
Lease Structure
Conclusion
Notes
49
50
52
52
53
754
54
56
57
57
58
60
61
62
63
64
65
66
66
66
67
68
70
70
72
72
74
74
7
80
Bibliography
81
Interviews
82
Appendix A
National Decision Systems Demographic Report
84
Appendix B
Cinema N' Drafthouse Photographs
Appendix C
Developer/Tenant Construction Responsibilities
_
_
91
_
_
95
4
ACKNOWLEDGEMENTS
I would like to gratefully acknowledge
that consented to interviews
I would
for this
all of
the people
In particular
thesis.
like to thank Mr. Melvin Roebuck for his
into the cinema development process as well as
insights
the industry
contacts he provided for me.
A special
provided
thanks
to Joseph Callanan for
leads he
for the cinema design section.
Finally,
I would like to thank Professor Bernard
Frieden, my thesis advisor, for his guidance and
encouragement
through the thesis process.
5
Chapter One
Movie Theater Industry Overview
IN THE BEGINNING
The movie
late
in the
theater industry as we know
it today began
19th century when large screen moving pictures
were introduced
In a New York
in the United States.
vaudeville house in
public exhibition of
1896, audiences witnessed the first
large screen
Initially,
films.
films were utilized as fillers between
live acts at
vaudeville houses, but by 1905 these silent films
their own showcase.
Nickelodeons),
yet
were no more than a simple
their popularity was
earned
(termed
theaters,
These early
these
room and a screen,
such that by 1909 there were 8,000
of them operating in the United States.'
The next stage of cinema development occurred
when Thomas
Palace"
1913
Lamb opened the first million dollar "Movie
in New York.
This signaled the beginning of
three decades when film
Hollywood's Golden Age--
the
production and audiences
reached their zenith.
first
The
20
the construction of nearly 4,000
years of that
golden age saw
movie palaces
designed to accommodate
theatrical
in
both live stage born
entertainment and the relatively new two-
2
dimensional medium of film.
The period that followed
(1934-1948) saw
way of new theater construction, yet
one of the most
lucrative times
the beginning of World War
II,
this
little
the
turned out to be
for theater
exhibition.
patriotic Americans
6
in
At
began to
to watch Newsreels
flock to theaters
latest defeats and
information on the
Stars of full-length
victories of
the war.
to
films made personal appearances
promote war bond sales.
history of the
that broadcast official
In
1946,
the best year
industry, over four billion
in the
tickets were
sold. 3
CONSTRUCTION/DEMOLITION TRENDS
In the years following the war,
the movie theater
business went
into a period of decline.
theaters
from a high of $1.69
fell
million by
1963.
indoor screens
During
Admissions
billion
in
to movie
1946 to $942
this same period the total number of
declined 44%
from 17,811
this decline could be attributed to two
to 9,150.4
Much of
the
factors:
suburbanization of America which left many theaters without
audiences and the rise of television which gave movie-goers a
stay-at-home alternative.
Movie exhibitors responded
to the migration of
locating new theaters
their
According
in the suburbs.
audiences
by
to Morris
Englander of Hoyts Cinema Corporation in Boston:
The Smith family, founders of General Cinema
Corporation, recognized that the emergence of the
interstate highway system would have a profound
effect on their business.
As part
of
their strategy, in
movie theater in
Massachusetts.
cinema to be
"instant
1955 General Cinema opened a
the Shoppers World Mall
According to Englander,
located in a shopping mall
disaster".
The
in
this was
the
first
and it met with
problems cited were
7
Framingham,
that
in 1955
Framingham was a small community with a
limited audience and
to compound this problem, suburban theaters
were only able to show "second run"
films.
industry standard number of screens,
in the
due in part to an emerging trend
to Englander, General Cinema Corporation
was
in
1961 by opening the
had ended.
This was
industry to construct
Here again according
multiple screens at a single location.
concept
1961
theaters, as measured by
By 1964 the decline of movie
the
up until
pioneered this
first multi-screen
it
cinema;
located in the North Shore Shopping Center, Peabody,
In
Massachusetts.
1970
there were
1987
the
1964 there were 9,200
10,000,
increased by over
(Figure 1).
Figure 1
# of Screens in U.S.
Thousands
26
0
1Q71
1973
1976
1977
-
Total Screens3
--*
arive-in aorens
1979
1981
1Q83
Indoor Screens
Souroe; Motion Pioture A..o. of Amerias
8
1986
by
From 1971 to
an increase of 8.7%.
number of indoor screens has
to a total of 21,048.
indoor screens,
1987
100%
DRIVE-IN THEATERS
During this same period from 1971
to 1987 the number of
from 3,720
drive-in screens has decreased by 32.6%
Bruce Austin in his book, Current
(Figure 1).
Film:
Audiences,
Economics, and Law,
are the
Research in
cites several
First
for the decline of the drive-in theaters.
to 2,507.
reasons
and foremost
There are few desirable
real estate economics.
locations that could be considered affordable for new driveins,
In addition, strict zoning
11-20 acres.
they require
regulations have made sites scarce.
Owners
of existing
drive-ins have found that they can make far more money by
selling out
Weather
to shopping mall or
In cooler climates drive-ins shut
is also a factor.
down in the winter months;
fixed costs
taxes continue thereby making
In warmer climates,
difficult
like real estate
difficult to turn a profit.
it
lack of
the
industrial park developers.
air conditioning makes
theaters.
to compete with indoor
it
Also cited were
drive-ins no longer serve as hangouts,
lifestyle changes,
young people today seem to prefer malls or video arcades.
addition,
changing attitudes towards sex
popularization of
as well as the
the van have ended the days when
the drive-
in functioned as a "passion pit".
WHO GOES TO THE MOVIES?
At the same time as
screens began
to
the
total number of movie
increase, admissions also began
Box office receipts
in
1964
theater
to rise.
totaled $913 million, by
9
In
1970
they had grown to $1.16 billion a 28.2%
to
1987
the
industry saw a 263%
increase
increase.
From 1971
from $1.17
During this
billion
same
to almost $4.3 billion.
(Figure 2).
period, patrons
the gate increased only 32.7%,
820 million
through
to 1.09 billion.
from
Thus higher ticket prices could
account
for much of the increase of dollars
office.
(Figure 2).
at the box
Figure 2
Movie Theater Attendance
(in millions)
6000
4000O-
2000
..
1000
ii
..
0
1071 1873 1Q76 1077 1970 1081 1083 1086 1987
=
Souroee
According
Patrons thru Gate
Box office
S
Motion Plature Assoc. of America
to a study conducted for the Motion Picture
Association of America by Opinion Research Association of
America,
the
ma.jority
by movie-goers
breaks down
under
(86%)
the
of
age of
movie
40.
their findings.
10
admissions
The
was
following
generated
table
Percent of Total Yearly Admissions
Age:
1986
1985
1984
12-15 yrs.
16-20
21-24
25-29
30-39
40-49
50-59
60&over
14%
21
17
14
20
8
3
4
100%
14%
21
18
14
18
7
4
4
100%
13%
23
18
13
18
8
4
3
100%
A closer
look at this
% of Pop
7%
9
9
11
20
13
11
20
100%
group from
that the age
data indicates
only 36%
12-29 years accounts for 67% of the admissions but
of the
On
1986 population.
the other end of
the spectrum
those 40 years and older represent 44% of the population, but
only 15%
of
study also indicated
This
theater admissions.
that single people go to the movies at almost double
of married people and
that movie-going
the rate
increases with higher
levels of education.
From
to 1987
1986
a surprising change
these age distributions.
Attendance by movie-goers
age group 40 years and over rose by 56%.
from this age
support
this
Hollywood producers are well aware;
one was
targeted at
The greying
trend in
the
future as
of 1987's top
10 hits,
the youth market.
THE COMPETITIVE ENVIRONMENT
The
competitive environment
business can be
divided into
the
Apparently people
of movie-going.,
are rediscovering the pleasures
not
in
tantalized by rented videos and
group have been
of our population will
took place in
for
the movie
two basic areas:
11
theater
the
competition
theater),
that
and
is internal
to the
industry
that which is external
(theater vs.
(home video,
pay TV,
etc.).
To begin our discussion on the external
environment we can look at
were
for 76% of studio revenues while videocassettes
to theaters represented only
By 1986, rentals
about 1%.
of
40%
in
that have occurred
film rentals from theaters
In 1980,
movie studio revenues.
accounted
the changes
competitive
revenues while videocassettes had grown to
39%.
(Figure 3).
Figure 3
Movie Studio Revenues
Movie Studio Revenues
1980
1988
auntufraom
The*% re
eontaifrorm Tnere 76%
3Or~
.~t worK
In
TV
1987,
& Syr'olo
%
Pay TV 5%
for the first
time videocassette sales
outstripped box office revenues
in the U.S.
Motion Picture Association of America
L987
to
and rentals
(Figure 4).
(MPAA) reports
The
that
in
there were 110 million pre-recorded videocassettes sold
U.S.
dealers.
This
represented a 31%
12
increase
over
1986.
Figure 4
DOMESTIC MOVIE REVENUES
(in billions)
S
6
4
3
2
1
0
1081
1088
1982
1084
=Box Office
1086
1086
1087
M VCR Sale/Rental
8ouroe: Metion Plature As"o. of America
Figure 5
VCR Households
Millions
6O0
11
40
301
*1
201
'1
10-
0
1980
1081
1982
=
souroe:
1083
1984
1086
# of VCR Households
Motion Pioture Assoo of Amerlos
13
1088
1087
This growth rate had peaked in 1985 at
tapes.
52 million
1987,
By
136.4% with sales of
rate stood at
VCR penetration
the
of American TV households, a total of 45.8 million
51.7%
(Figure 5).
units.
reflect a maturing of the
These figures
VCR industry according to Frederic Hirsch,
for the MPAA.
Home Video
there are those in
As
Vice President of
the home video market matures,
the industry that believe that videos have
stimulated theater attendance.
Bill Mechanic, Senior Vice
President of Walt Disney's video division states
that:
"People's enthusiasm has been awakened by the
People who saw Bette Midler in
video experience.
(last years] 'Ruthless People' on videocassette may
be going to theaters to see her this year in
'Outrageous Fortune.'"
Home video may be bringing some people back to the theater,
but
the fact
remains
that a smaller percentage of the
entertainment dollar is being spent
consumer entertainment
theater.
share
of
much of
By
In 1981, 45%
there.
dollars were spent
1986, despite dollar growth
in
of
the movie
to $4
billion,
the
total movie consumer entertainment dropped 25%,
this decline could be
attributed to the 56%
in home electronics purchases which
include VCRs. 6
When talking to theater operators about
competitive
environment, they speak
alternative
to theater-going.
in
terms
the external'
of any
Paul Del Rossi,
General Cinemas Theater division, stated that:
14
increase
President of
We define our competition in a very broad context,
including restaurants, motor homes, the 49ers, John
McEnroe, singles bars, golf courses, bowling
alleys, stadiums, amusement parks, fitness
centers... the list goes on.
There may be some dispute on
theater
that
spent
industry, but
it
the effects of home video on the
is a
fact recognized by the
a share of the entertainment dollars
at
that used to be
the theater are now being spent elsewhere.
The competitive environment internal
theater business ranges
Limited Market
major
industry
Theaters
to the movie
from marketing problems of
to the
the
grand expansion plans
of the
chains.
At one end of the spectrum we have
Theaters
(LMTs),
that will not
the Limited Market
which by definition are located in markets
support a "major" multiplex theater.
problems with a LMT
audience pool
are the small
The main
and the
inability to secure films during the first month after
release
The
to economic constraints.
due
smallness of the LMTs also offers some distinct
As Richard Herring, a
competitive advantages as well.
theater owner from Wytheville, Virginia stated:
I detect a trend in our society toward a desire for
(The
service and a disenchantment with bigness.
airlines have gotten terrible press for "packing
the herds in the ships.")
In addition,
and control
LMTs that
have survived have learned how to
costs, something that
chain
to accomplish.
asset
that
LMTs enjoy.
Management
is difficult
flexibility is
cut
for a major
also an
Herring points out that promotions
15
with
his
Some of
local businesses can be mutually beneficial.
ideas
include working out a deal with a local
to provide couples with "An
for one price.
for Two"
Evening Out
Another is
--
restaurant
Dinner and a Movie
to have local business
support free all-day children's shows at Christmas;
downtown businesses benefit
to pay for the free movies.
to theater operations
the
large draw and are willing
by the
The more personalized approach
is the LMTs primary advantage
according to Herring.
the other end of the spectrum we have the ma.jor
On
theater circuit
chains
The
(Figure 6).
in
top ten chains
the country as of September 1987 controlled about 40%
of the
nations screens. 7
Figure 6
Total
Headquarters
Screens
East Meadow, NY
1,999
American Multi-Cinema
Kansas City, MO
1,438
General Cinema
Chestnut
Circuit
United
Com.
Artists
Cineplex Odeon
(USA)
Los
Hill, MA
Angeles, CA
Carmike
Columbus, GA
Mann Theaters
Los
Commonwealth
National
Theaters
Amusements
Tom Moyer
Theaters
1,008
661
Angeles, CA
451
Kansas City, MO
443
Dedham, MA
381
TX
325
Dallas,
Cinemark
1, 303
Portland, OR
312
level,
At this
the competition between chains
presence and upgrading the quality of
is
for market
the exhibition
environment.
The major theater chains are in the middle of a building
boom.
Since
the number of indoor screens has grown by
Paul Del Rossi of General Cinema stated:
over 40%.
very bright
asset
1982
future in
this
industry, we plan
base over the next five years."
"We see a
to double our
Similar strategies to
gain market presence can be heard from many of the top
companies.
Renovation of existing theaters
for many in
theaters
the industry.
is also a top priority
Conversion of large single screen
into multi-plex theaters and enhancement of the
theater experience
according to some.
is key to the
future of the business
In a 1987 Wall Street Journal article,
Garth Drabinsky, President of Cineplex Odeon Corporation
claimed:
Movie exhibition in North America has suffered over
the last 25 years because the people who have run
the industry, for the most part, have been more
concerned with estate planning than reinvesting in
the businesses that made them their fortunes.
Drabinsky believes
theaters are
owners must
that
there are
parts of the U.S.
where
in significant disrepair and that Movie-theater
spend $500
million over
years on refurbishment costs
Drabinsky's commitment
the next
three
in order to remain
to
to
competitive.
this strategy comes in
17
four
the
form of theaters featuring lobbies with Italian marble,
plush carpets,
original murals on pastel walls,
space-age sound and
scientifically contoured seats,
projection, and lots of neon.
improvements
These types of
can often cost up to $450 thousand per screen.
1986,
million to modernize the Fairfax Cinema
after spending $1.3
in
In May
Los Angeles weekly revenues were averaging $40,000.
Before
the renovations, weekly revenues averaged $7,000.
CONSOLIDATION IN THE INDUSTRY
Mr.
Drabinsky has
also been widely credited with igniting a
stampede by movie studios to buy theater chains when he sold
a 50%
interest
million
including:
Plitt,
studios have taken place over
Septum, Essaness,
RKO,
the
three years
last
vertical
theater-owners to fear that this
will squeeze them out
and
leading
integration
of the business.
Considerations
These acquisitions
follow a period from
laws.
Paramount
The famous
et al.),
1948 Paramount Case
the U.S.
Supreme Court
major Hollywood Corporations were to
and mortar holdings--the movie
United States.
18
long
1986
(U.S. v.
held that eight
divest of
theaters
The corporations
1948 to
violation of anti-
when such practices were considered in
trust
The $156
Several other major acquisitions by the movie
Sterling.
Legal
1986.
in proceeds were used by Cineplex in part to buy five
smaller chains
some
in
of Cineplex to MCA Inc.
their brick
themselves--in the
fought financial
of production, distribution and exhibition of films
control
dismantled.
was
8
In order to discourage stringent enforcement
of the
their
Court's 1948 decision, studios have generally limited
They also claim
ownership of exhibition enterprises to 50%.
to operate their production, distribution, and exhibition
In addition, they
independently of each other.
interests
have retained managers
experienced in exhibition
to continue
9
to run these chains.
Why Integrate Vertically?
The movie studios are interested in vertical integration
for a variety of reasons.
50
additional
They can retain control of an
to 60 percent
of the box office receipts and
50 to 80 percent.
patterns and
In addition, they can control
This strategy also allows
new product planning and marketing expertise
future production and distribution plans.
to accelerate the
Effect
theaters
them to develop
in
regard to
It also allows
recycling of box office cash flows.
these acquisitions and new construction of
has had some interesting effects on
the bright side, whereas
were releasing some
months
the
on Exhibitors
All of
On
the release
strategic marketing of films as well as
price of tickets.
them
run
the candy concessions where operating margins can
operate
in
films to
only a short
time
the video market
the theaters, this window is
19
the
industry.
ago studios
after only
two
now 8 to 12 months.
This allows
films
independent sub-run
theaters to have access to
In addition,
before they reach the home video market.
consumers
less willing to wait
are
favorite stars,
than to wait
a year to see their
so they are more likely to go
for the video release.
The increase
in time
is due
first run and home video release
frame between
the theater
to
to the
studios greater interest in box office performance of their
pictures since
they now have an ownership position in
the
exhibition business.
As more
theaters are built, the per screen average
admissions and box office receipts are
This
on a downward trend.
has forced many small undercapitalized operators out of
business and
fueled a sense of market saturation among
major exhibitors.
summarized in
Figure 7.
National
Cineplex Odeon, and American Multi-Cinema
opportunities
the
The negative effects of these trends are
Some of the "majors" including:
in Great
Amusements,
have seen expansion
The British market is
Britain.
showing signs of recovery after reaching a post
1984,
for
and with only one
West Germany prospects
war
low in
third as many screens as France or
for modern new theaters seem good. 1 0
20
Figure 7
Per Screen Averages
U.S. Market
Thousands
260
200
160
100
60
01
1080
1081
1082
108a
Box Offtics Receipts
1084
1086
1086
Admissions
Sour.o. MPAA
SUMMARY
Many
in
the
industry predict that
the major exhibitors
will continue to expand through both acquisitions and
construction, with the ultimate goal of greater market
and control of
the
industry.
21
new
share
NOTES
1.Alfred L. Bernheim, the Business of Theater: An Economic
History of American Theater 1750-1932 (New York:Ben.jamin
Bloom, 1964), p. 8 6 .
2.Joseph M. Valerio, and Daniel Friedman, Movie Palaces:
Renaissance and Reuse, New York, Academy for Educational
Development, 1982.
3.Steven J. Sansweet, "With Ticket Sales Off, Some Movie
Exhibitors Project a Bleak Future," The Wall Street
Journal,vol.CXCVIII,no. 35 (New York:August 19, 1981), pp.1,
19.
4.U.S. Department of Commerce, Social and Economics
Administration Bureau of Economic Analysis, Survey of Current
Business.
5.Time March 7, 1988 p. 7 2
6.W.S. Chaplain, Encyclopedia of Exhibition, National
Association of Theater Owners, 1987, New York, p. 126.
7.Encyclopedia of Exhibition, National Association of Theater
Owners, 1987.
8.Joseph M.
Renaissance
Valerio and daniel Friedman, Movie Palaces:
and Reuse, New York, 1982, p. 3 5 .
9.Michael W. Patrick, Trends in Exhibition, Encyclopedia of
Exhibition, NATO, 1987, p.108.
10.Richard A. Melcher, It's New--It's colossal--It Even Has
Free Parking, Business Week, July 4,198 8 ,p.50
22
Chapter Two
The Film Distribution Process
Film distributors serve as a conduit for films between
the producers and the exhibitors.
Since major distributors
have controlled the terms of most major films
an adversarial
relationship has developed between exhibitors
and distributors.
operations
over the years,
As major exhibitors
and gain more power in the
expand their
industry, they are
in a
better position to negotiate with the distributors.
HISTORY
The first
wanted
film exhibitors had to buy the
to show.
This proved to be a very
as once a film had lost
value
its
to the exhibitor.
films they
inefficient system
audience appeal,
it
had little
Direct buying of films was
replaced
in 1902 by a film exchange system in San Francisco.
system allowed exhibitors to
sales
price.
By
1907 there were
serving the country.
film producers since
thousands
rent films
125
for 1/4 of
to 150
This
the normal
film exchanges
The exchange system was welcomed by
they no
longer had to deal with
of exhibitors. 1
Film exchanges continued to grow, by 1929 there were 444
film exchanges across the country.
By 1947
the total
had
dropped to 107 and the market was dominated by eight major
national
distributors.
These
eight controlled not
only
distribution, but production and exhibition as well.
Although they owned only 3,137 of the nations
this
represented 70 percent
of the first
23
18,076 screens,
run theaters
in the
92
largest cities,
and 60 percent of first run
theaters
in
smaller cities. 2
In
1949 the Justice Department,
violations,
forced the major
alleging anti-trust
film companies to
production/distribution or exhibition.
in
They chose to remain
the production/distribution business and
brick and mortar holdings.
liquidate their
Since the major film companies no
longer had an assured market
production.
choose between
for their films
The lack of films
as well
they cut back
as the
impacts of
audiences substituting TV viewing for movie-going were major
factors
in
the decline of the
Film production began
to
theater business.
increase
in 1963
and continued
through the mid-1970's when higher production costs
contributed to fewer films being produced.
This encouraged
chains of theaters to grow in strength while
found
it difficult
impossible
to
to secure any
films
get the few blockbusters
independents
to exhibit
and nearly
that were being
produced.3
WHO MAKES
THE MOVIES
Seven major film companies,
Brothers, Paramount,
(Universal, Warner
20th Century Fox,
MGM/UA, and Buena
Vista),
held an 88.3% market share of box office admissions
between
1972 and
11.7%
share.
1982.
Independents
accounted for only an
The top ten distributors
the table below with their respective
24
for
1986 are shown
box office shares.
on
Rank
1
2
Distributor
Paramount
Warner Bros.
3
4
Disney
Columbia
#
of Films
19
21
Mkt Share
22.2%
11.0%
12
17
10.1%
9.5%
5
Universal
16
8.5%
6
7
8
Fox
Tri-Star
Orion
21
18
14
8.1%
7.1%
7.0%
9
10
MGM/UA
Cannon
15
18
4.4%
2.7%
Total
Since
ten or
fewer films at any one time are responsible
for 60 to 70 percent
face
of box office receipts,
intense competition
in securing films
fact is well known by the distributors
the power
90.6%
theater owners
to exhibit.
and thus gives
to demand greater advances and guarantees,
This
them
longer
and a higher percentage of the box office.
runs,
COMPETITION FOR FILMS
Theater owners secure films
bidding process
to exhibit
or by negotiating with
either through a
the distributor.
The
bidding process has given way to direct negotiations
especially in states that
have enacted anti-blind bidding
laws.
Legal Considerations
The National Association of Theater Owners
in
1979,
90
to
100 percent of
bidding for a film means that
for a film before he/she has
send a
claimed
films were blind bid.
an exhibitor will
seen
it.
Blind
submit a bid
A distributor will
letter to an exhibitor describing the story line,
25
that
actors,
producers,
actual release.
limited
etc.,
sometimes a year in
advance of
Exhibitors must prepare a bid based on this
information.
As of
1987, 24 states,
Puerto Rico, and
Prince Georges County, Maryland have enacted laws prohibiting
blind bidding for films.
In these areas distributors will
either preview a film to buyers
or negotiate directly with
the theater owner.
Theater owners felt
unfair system.
that blind bidding for films was an
They wanted to pick the films
to their audiences, and they didn't
advances and guaranteeing runs
they exhibited
like paying the large
for unproven films.
To
address these problems the theater owners developed a system
of their own.
It was
where theater owners
called "product splitting".
This
is
in a given area would meet and divide up
the films and agree who would bid for a particular picture.
Bids would be made only after
a picture had been allocated to
a particular exhibitor and only by
that exhibitor.
This practice was very successful
in keeping advance
guarantees
to a minimum for major exhibitors.
companies:
Capitol Service Corp.,
Corp.,
Circuit
Marcus Theater Corp.,
implemented a product
an obvious or
ruled
"per se"
in
Theater Service
splitting plan in
they paid only $140,000
Federal courts
theater
and United Artists Theater
in which they had paid a total
In 1981
Marcus
Four
of $1,820,300
in
1983
a year
in guarantees.
guarantees.
that
form of illegal
26
1977,
product
splitting was
market allocation and
price fixing.
The practice continued until the Justice
Department began assessing
convicted of product
fines
to chains that were
splitting.
In January of 1987,
Multi-Cinema pleaded guilty and was
American
fined $750,000;
in
October of that same year, United Artists Theaters Circuit
was
fined a total of $1,750,000
splitting cases.
According
in a pair of product
to General Cinema President, Paul
Del Rossi:
Product splitting went on openly in the 1960s and
1970s, the Justice Department did not enforce the
laws.
In April of 1977 the major chains were
informed that enforcement of the laws would begin
and those in violation of product splitting laws
would be prosecuted.
Test cases came in the early
1980s, convictions were handed down, and fines
were paid.
Product splitting is illegal and is no
longer practiced.
The Bidding Process
The bidding process begins with the distributor
a
letter to theater owners
specific
in a given area detailing that
almost always
each exhibitor make an offer.
In addition,
the distributor
information regarding theater expenses
from the film rental split.
for a theater is $1,200,
run as high as
letters
$20,000.4
but
in cities
Bids will
since these
asks
for
are
like New York
also request
at which
it can
a holdover
the exhibitor
to play the picture beyond the contracted
27
a
Average weekly overhead
figure, or a minimum box office gross
continue
These
request a non-returnable guarantee, and state
minimum playing time.
will
a
film will be available for a play date and
requesting that
deducted
sending
playing
time.
engagement
For example, if in
the gross
exceeds the holdover figure,
will play an additional week.
pulls
the final week of an
In
the event that
the picture
an exhibitor
a picture before the contracted playing time expires,
he/she must normally pay 75
percent of the
for the duration of the contract.
This
be minimal because if the picture was
last week's
gross
figure would probably
successful,
the
exhibitor would still be showing it.
Film Rental
Film rentals, whether negotiated directly with a
distributor or done on a bid basis are commonly based on box
office receipts.
The normal split for a major picture will
be 90 percent of the box
office to the distributor
10 percent
to the exhibitor during the first week of the run.
subsequent weeks,
exhibitor.
this
percentage will
change
sometimes
a floor
is
is normally
although
inserted whereby the theater owner may
pay the greater of 90 percent
percent
in favor of the
The division of box office receipts
figured after a deduction of house expenses;
In
of net
box office,
or 70
of gross box office.
A typical example of a 90/10
split deal
Weekly Gross
House Expenses
Net
$25,000
4,000
$21,000
90%
$18,900
of Net
Any expenses shared by
would be:
or 75.6%
of Gross
the exhibitor and the distributor,
like advertising, would be split
28
according to actual
percentage of the gross,
in this case 75.6 percent
by the distributor, 24.4 percent
by the
to be paid
exhibitor.
Film Selection
Film buyers have the difficult
films
that
analysis
the
public will
like.
job of trying
to pick
Large chains use computer
to try to determine how a particular picture will do
in certain theaters but according to Paul
Del Rossi,
"film
buying is still more art than science."
Film buyers analyze
the track record of those
their bids based on a "gut
involved in
comparable pictures to be released at
of picture, how badly the picture
ego necessitates
feel",
the production,
the same time,
the type
is needed, whether one's
having a big picture to show, the size of
the promised advertising campaign, the cash available
guarantees
for
and who else may be bidding on the picture. 5
All theaters are not equal
distributors.
in
the eyes
of film
Location, number and quality of
the seats,
its
grossing history, sound and projection equipment, age,
whether
is an
it
is a single or multi-screen house, and whether
independent or circuit house are all
factors
it
in
selecting the "best bid".
SUMMARY
The evolution of the film distribution
great
impact
on
the movie
studios which control
theater business.
production
and
seem comfortable making deals with
29
distribution
system has
The major
of
had a
film
films
the major circuits.
This
in
turn has
left
the independent
to secure good deals on films.
buy large stakes
operators with less power
As the
studios continue to
in ma.jor exhibitors, the movie
be increasingly controlled by
industry will
a few large corporations.
NOTES
1.Kurt W. Marek, Archaeology of the Cinema, New York:Harcourt
Brace and World, 1965, p. 19.
2.Ibid 14
3.Mary Donahue, American Film Distribution: The Changing
Marketplace, UMI Research Press, Ann Arbor, Michigan, 1987.
4.Howard Wilansky, Marketing and Distribution, May 18,
5.Ibid 1
.30
1983.
Chapter Three
"Economic Considerations for Movie Theaters"
the surface movie theater economics seems
On
simple enough concept:
maintain and/or
business climate it
to achieve.
is difficult
will discuss economic
this a simple
intensely competitive
in an
enough concept to conceive, but
increase sales,
True,
costs, and stay competitive.
control
like a
This chapter
issues of revenue, costs,
growth,
performance, and management.
REVENUES
Revenues
industry come primarily
in the movie theater
from box office and concession stand sales.
earnings have been volatile over the last
although on a downward trend.
1984 and
between
1986
during
fell by 33%
to 42.5%, while
the same period
1).
(Figure
These declines
attendance
in profitability were occurred while
and box office revenues were on their way up.
It
author's opinion that much of the decline in
is this
profitability could be attributed to
programs
during
few years,
gross profits
of sales
from 56.5%
tax profits fell over 97%
after
industry,
A report compiled by Morton
indicates that
Research Corporation
As an
the ambitious expansion
that many of the major operators were undertaking
this
period.
The overall
increases
revenues were simply being spread out
example, General Cinema Theaters,
31
in attendance and
over more screens.
in their continuing
For
in
expansion program added 117 new screens
1986 bringing
Figure 1
Profit Statement
Percent
(% of Sales)
Industry Average
7060-
6040-
302010-
0
8.6
42.8
1088
1084
1086
After Tax Profit
Gross Profit
SoUm., Morftn Rmwnr
their
total to
10se
ReO.et lS7
1,254 screens
in 340
locations. 1
their action, operating earnings and profits
Because of
suffered.
General Cinema Theaters
(1,000's)
Revenue
Operating Earnings
Margin
Paul
Del Rossi,
1986
1985
1984
$349,432
$25,755
7.4%
$341,383
$29,094
8.5%
$350,659
$37,610
10.7%
President of General Cinema Theaters,
explained:
The key elements in having a successful, high
grossing cinema are a good location, a cinema
design appropriate for that market location, a wel
trained staff, and a good supply of films from
Hollywood.
According to figures published by the Motion Picture
Association of America and analyzed by this
32
author, there
seems
to be a very strong correlation
and box office revenues
film releases
(87.7%) between new
(Figure 2).
Figure 2
Film Releases &
Box Office Revenues
200
100-4
1082
1084
1098
-New
Release.
1086
-+-
1086
BO Reciepte
+10
1087
MDil
*@Uf@@u
MPAA
Box Office
Although average ticket
steadily over the years,
prices have been
increasing
increases have not kept up with the
pace of inflation during the 1970 and 80's
(Figure 3).
box office receipts account for 80% of revenues,
contribute to only 20% of profits. 2
While
they
Part of this imbalance
can be attributed to the film distribution system where
distributors take a large percentage of the gate during the
first weeks of a film's run.
inherent inefficiencies
In addition,
there are some
in the exhibition business.
For
example, According to Morris Englander of Hoyts Cinema:
33
The movie exhibition business is one of peaks and
Roughly 20% of our business is done on
valleys.
Friday, mostly in the evening; about 33% is done on
Saturday, about half of this after 7:00pm; 20% is
done on Sunday, half in the afternoon and half in
the evening.
Figure 3
Average
Admission Price
Dollars
61I
4
..............
..................
........
. ................
. .......................................................
.... ..... .....
3 . ....................................................
2
76 76 77 78 79 80 81
82 88 84 86 86 87
E
Actual S/Admission
Inflation Adjusted
COUree MPAA
This
infers
only
2.5
one can
still
that
of a cinemas business occurs during
(lays of the week.
cut costs during the
remain
fill more
open.
There
are only
other 4.5
so many
days of
A challenge facing the
areas
that
the week and
industry is how
to
seats during these non-peak periods.
Concession
Stands
Refreshment
but account
large
73%
sales contribute to 20%
for 80%
mark-ups
This
of profits.
obtainable on
of tot'al revenues
is due primarily to the
food and beverage
items.
example, average mark-ups on soft drinks, candy,
34
For
and hot
dogs
are 65%, while the gross mark-up on a $2.75
539%.3
transaction is $2.93,
The average
tub of popcorn
is
with a gross
profit margin of 80%.4
The National Association of Concessionaires
that movie
theater refreshment
year business.
receive $224
Thus,
sales
(NAC) claims
are an $850
million per
the average six-plex theater would
thousand in concession sales per
year.
Of this
80% of sales and profits come from popcorn and drinks,
from candy, hot dogs,
comes
nachos,
and
ice cream.
in
It seems as though theater owners are not
many theater owners have initiated
Recognizing
this fact,
programs to
increase concession sales.
than half of
NAC studies
to the concession
stand.
setting up mobile concession
increased sales by
10%.
ticket
buyer doesn't
stands which
Another
An express
have
will
get
up to
Theater owners responded by
to wait
in some cases
system is
where a theater-goer purchases one
popcorn, and a drink.
have
theater-goers visit the
concession stand and that once seated only 5%
go
the
in the concession business.
exhibition business but
shown that less
20%
the
ticket for
line
have
"Snack Pass,"
admission,
is set up so that
in the
this
regular concession
line.
Since concessions play such an
profitability of cinemas
offerings could
important part
one would think
Paul
increase sales.
35
that
in
the
expanding
Del Iossi
stated:
the
We are constantly testing new products that could
In most
expand sales and add to profitability.
cases, however, adding new items makes our
concession stands less efficient by slowing
customer service, as well as less profitable,
since the new products typically are high-cost
and yield smaller margins.
traditional
Palo
These
soft drink, popcorn, and candy concession.
the
like
would include the restaurant/cinema combinations
Cinema N'
the
in the business that have gone far beyond
There are some
and the New Varsity theater
Drafthouse theaters,
in
Alto, California where the menu includes pizza, pasta,
and fancy burgers, with beer or wine to wash
down.
it
OPERATING COSTS
to survive in an increasingly competitive
In order
learn to cut costs.
marketplace, cinema owners have had to
200%
to 300%
an employee
that experiences
In a business
this has been no easy task. 5
per year
owners have decreased their reliance on
items,
computerized
ticketing and management
1980
there were
total screens,
increased to 23,555,
investing in
and
17,590
theater employees and
128,511
fallen
Theater
information systems.
or 7.306 employees per screen.
theater employment had
a 40%
labor by
mainly multi-plex theaters
more capital
In
turnover rate of
to
1987
103,489 while screens
or 4.394 employees
decline in employees per screen
36
By
per screen. 6
(Figure 4).
This is
Figure 4
Theater Employment
Thousands
160-
....... ............. ..
80.................
1
--
-
Ibe
cen
1076
1077
~
-Eml-mn
0
1471
16973
--
1081
1079
Total Screens
+
1983
1086
19a7
Employment
Sourol. Motion Ploture A8aoo. of Amorios
Computer systems
have helped to streamline operations
from the box office and concession stand to helping the film
buyer
determine how much to bid for a new film.
its IBM 4400
Cinema uses
theater
locations.
General
from 350
to gather and analyze data
Every morning each of the six Regional
Managers receives a report of the previous day's activity.
These
reports allow
them to determine which size auditorium a
film should play in, what inventory needs
flags
this
theaters where
type of
decisions,
payroll
is
running
to be ordered, and
too high.
Access
to
timely data helps management make quick
a practice
that usually has a positive impact on
the bottom line in this business.
37
Cost Breakdown
for the
Operating costs as a percentage of sales
industry between
1977 and
15%;
and payroll
increase
insurance has
20%;
supplies
for the Assistant
per hour for the projectionist,
and minimum wage
He also stated although there
for the concession people.
been no
of costs
according to Paul Del Rossi
for payroll
$400 per week for a Manager, $325
Manager, $10
Hoyts
15%.
The breakdown
is:
for 50%
maintenance about
utilities,
rent,
in Figure 5.
film rentals account
Cinema estimates that
on average;
1984 are shown
in claims, General Cinema Theater's
increased steadily by 15% per year over the
last five years.
Figure 5
Operating Costs
As a % of Sales
Industry Average 1977-84
Cot of OperatIone AS%
Offler Come 2%
qent 75
Non-Fee Taxes 4L
niterest
Otmer 20%
3%
Deore/DepletI/AMOrt
4
UaRveue
Fng
sorso inftrnai Rwslue servio
at
Data
38
has
PROFORMA
Below is
a proforma for a 1,387 seat four screen theater
in Austin, Texas.
July
$5
19,
1986.
for the
These figures are based on
Ticket
On
of
for morning shows,
prices were $3.50
rest of the day.
receipts
this day there were a total
of 29 showings of the four movies.
PROFORMA
Arbor Cinema Four
Austin, Texas
TICKETS
Tickets
Revenue
Split
Aliens
Top Gun
Ruthless People
Legal Eagles
2,000
1,226
952
459
$9,744
5,448
4,215
2,057
90/10
90/10
60/40
60/40
TOTAL
4,637
$21,464
Profit after
expenses and
house allowance
$1,674
1,330
1,686
823
$5,513
CONCESSIONS
Expenses
Revenue
Popcorn
Drinks
Candy, etc.
$1,718
3,003
700
TOTAL
$5,421
Management, Debt
Food
Concessionaires
Rent
Janitorial
TOTAL
$323
872
550
550
60
$2,335
$3,066
$5,513
$8,579
32%
Concession Income
Ticket Income
Daily Income Before Taxes
Gross Margin
39
THEATER EXPANSION
the growth in the movie theater industry has
Much of
the major
resulted from the ambitious expansion plans of
circuits.
Because there are
fewer new malls being built
and existing ones cannot accommodate
large multi-plexes
Sumner Redstone,
many theater companies are now buying land.
the privately held National Amusements
President of
buildings and grounds, we prefer
land --
Inc.
most of the major chains which lease their
"Unlike
says,
--
as a hedge against the
picture business.
theaters and
to own our own
rather nebulous motion
"7
New Construction vs. Remodel
According to Paul Del Rossi- and Morris Englander, about
of theater construction
80%
is
today is
remodeling or renovation work.
5%
construction, about
Costs
for new buildings,
Five years ago 95%
6000 seat art
in Universal City, California which cost
This
million.
comes
to $2,750
A typical General
per square foot
million
or
An
18-screen,
$1,050
per seat
The difference is
about
Cinema theater would cost
interior
$16.5
per seat.
in shell construction,
auditorium for all
operation.
One
for new construction can vary widely.
theater
was new
remodeling.
operator, Cineplex Odeon, opened an 18-screen,
deco
20%
and $125
$45
thousand per
improvements required for turnkey
6000 seat
complex would cost $6.3
using General
Cinema's
that Cineplex Odeon
40
is
formula.
into "monument
building" while General
viewers with a clean,
Cinema
is content with providing
comfortable, state-of-the-art
exhibition environment.
associated with remodeling
When asked about savings
theaters, both Del Rossi
were
the same as for new construction, even under
conditions you might
shell
and Englander said that the costs
the best
be able to save on just a portion of the
costs.
SUMMARY
This chapter has detailed sources of revenue and
emphasized
the importance of the
profitability.
In addition,
concession stand in cinema
insights
it has given some
cinema operations and cost centers.
included to give the reader an
The proforma was
idea of the potential
profitability of a well managed cinema with access
quality films.
The section
show the up front
costs
into
on construction was
associated with
business.
41
entry
to top
included to
into this
NOTES
1.General Cinema Corporation, Annual
Report,
1987.
2.Insite, The Trade Journal for the Concession Industry,
1987, Nation Association of Concessionaires, p.12
3.Curtis Hartman, A Night at
the Movies,
INC.,October, 1986,
p. 106.
4.National
5.Insite,
Association of Concessionaires
1987
National Association of Concessionaires,1987
6.MPAA, Economic Outlook,
1987.
7.Lois Therrien, Sumner Redstone's Idea of a Good Time is
Hardnosed Bargaining, Business Week, October 20, 1986, p.78.
42
Chapter Four
"Marketing Considerations for Movie Theaters"
This
individual
chapter will
theaters,
deal with marketing considerations of
marketing theory emphasizes
mix:
Product, Place,
a movie
the "four P's"
Price, and Promotion.
theater the important
thought of
Contemporary
but in a broad context.
in terms of
elements of
locational
of
the marketing
In the context
of
the four P's can be
attributes and design
factors.
LOCATION
Locational
issues
of can
be divided into a macro
view--
geographic and demographic elements, and a micro view-should the
theater be attached
to a retail
complex or free-
standing.
Macro View
When a theater owner
things
is
looking for
a site one of
he/she will want
to know is:
Who is
the first
my audience?
is normally accomplished by analyzing a demographic
prepared by a market
Decision Systems
President
forecasting company such as
(Appendix A).
This
report
National
According to Paul Del
Rossi,
of General Cinema Theaters:
When looking at those demographic reports you have
to consider the region of the country, some areas
like Texas people will drive 20 miles to go to a
particular theater, in Boston it's hard to get
people to go across the street.
Del
Rossi
which had
the
generalized that
successful
locations were
those
a mix of young affluent workers and homeowners
38 to 42
year old range with two or three children.
43
in
He
also cited weather and ethnic background as
considerations.
In southern
theaters offer a cool
summer months.
important
Locations the air conditioned
retreat from
the hot weather of the
important when there
Ethnic background is
a large population of people that are
trying to
in El Paso,
English as a second language, as
is
learn
Texas.
Movies
draw people from these groups as an accepted method of
learning English and being entertained at the same time.
Morris Englander of Hoyts Cinemas, Boston, was more
specific when he stated:
In order for a location to support a major cinema
(8-10 screens), it must have a population of 100
thousand persons within a three mile radius.
Englander said that he considered the primary movie-going
audience to be between
median household
addition to
important
the ages
of 18 to 35 years
old with
incomes around $30,000 per year.
In
demographics, Englander said it was also
to do a competitive analysis
to determine
the
proximity and quality of other theaters.
Suburban vs.
Urban Locations
Cinemas have their
across the nation.
roots
These theaters were
single screen auditoriums,
rich
near movie-going audiences.
the
1960's,
there was a
cities to suburban
in the downtowns of cities
traditionally large
in architecture and
During
the
late
1950's
large migration of people
Locations.
Naturally cinemas
their audiences and abandoned many downtown
44
located
and into
from the
followed
locations.
Paul Del
Rossi
explained:
After the suburban migration took place in the mid
1960's and into the 1970's, many downtowns were
known as centers for business and education, not as
nice places to live.
More recently, many downtowns
have been undergoing a gentrification process that
is bringing audiences back to cities.
As this inmigration continues in cities like Buffalo,
Cleveland, and Washington, new theaters will be
built to accommodate these audiences.
Mike Stevens,
Development,
Vice President of Leasing with Forest City
stated:
With the exception of cities like Chicago, New
York, Boston, or San Francisco, downtown moviegoing audiences are not large enough to support a
major cinema operation.
The large single screen
operations characteristic of downtown locations
cannot compete with the modern multi-screen
theaters.
Stevens went on to say that
make a
theater deal
in many cases
it
is difficult
in a downtown location because the
to
real
estate economics will not support a cinema.
In
struggling markets, developers must offer to
share risks with
theater operators.
a 50%
These
risk sharing agreements may involve
developer participation or
revenues without a minimum rent
Both Stevens and Del
locations
live and shop,
parking.
lots
linkages
clause.
agreed that suburban
of retail
including
offering convenient access and
They also agreed that successful
locations were those close
with
Rossi
rent based exclusively on
offered the advantages of being near where movie--
going audiences
abundant
these
activity,
nearby
downtown
to movie-going audiences,
and convenient
parking.
45
transportation
Ln areas
Micro
View
Since the early days of suburban shopping malls, cinemas
have been incorporated to serve as a draw for
and particularly restaurants.
realized
that
these cinemas
At some point
other stores
developers
(which were paying
low rents)
were taking valuable frontage space that could be more
profitability
To address
leased to small
retail tenants
this problem, developers
(see Figure 1).
insisted on designs
minimized mall frontage while maximizing access
areas
(Figure 2).
More recently, according
that
to food court
to Morris
Englander:
The trend has been for theaters to move out of the
mall completely.
This is due primarily to the
scarcity of land and the fact that theaters cannot
pay top rents.
This has
resulted in more cinemas being constructed on pads
adjacent
to malls and construction of
multi-plex theaters unrelated to mall
In downtown
large
locations.
locations new construction
variations of
the successful
the suburbs.
In an effort
to
free-standing
has
multi-screen model
meet
followed
pioneered in
the competition, many of
the existing large single screen houses have subdivided their
space
to accommodate multiple screens.
46
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FOREST CITY DEVELOPMENT
DESIGN ELEMENTS
There are
quality of
well
a variety of design
the theater product
as the ability of the
issues that relate
to the
(exhibition environment),
theater to promote
(aesthetically pleasing design and functional
as
itself
layout).
Each
of these issues will be discussed and implications of design
decisions will be addressed.
Multi-Plexing
The most salient
the last
25 years
is
change of these design elements over
the abandonment of
theater layout and the rise of
the multi-screen theater.
obvious benefits of the Multi-plexing
layout are
economies of scale that can be achieved
projectionist can show ten
films available
the single screen
films),
The
the
(e.g. one
and the wider choice of
to consumers increases total
attendance to
a
theater.
Some of the more subtle elements of this
the flexibility
product.
allowed the theater operator
concern
in managing his
Most multi-plexes have different size auditoriums.
This allows the operator to vary the number
picture;
layout
good drawing films in
the small
ones.
of seats
for each
large auditoriums, bombs
In addition, multi-screen
theaters are more
likely to book a hit film, have greater flexibility with
length of a film's
power with
run,
and often have
film distributors
49
the
increased bargaining
than their single screen
competitors.
in
According to a survey conducted by Business
Analysis
of all theaters have six
1986, over 57%
in
Trend
or more
screens.
Parking
Parking
requirements
will
vary
cinemas and those which are part
from free-standing
The
of a retail complex.
main advantage of cinemas that are
incorporated into a retail
the availability of parking during non-peak retail
complex
is
times.
Normally retail centers will require four to five
parking spaces
area (GLA);
for every 1,000 square
feet of
gross
centers under 400,000 square feet would need
those over 600,000 would need five spaces.
four,
leasable
A 1981
Urban Land Institute study claims:
-A center with less than 100,000 square feet of GLA
requires a nominal three additional parking spaces
for every 100 cinema seats for cinemas occupying up
to 10 percent of the total center GLA.
-Centers having 100,000 to 200,000 square feet of
GLA can accommodate up to 450 cinema seats without
For every 160 seats
providing additional parking.
above the initial 450 seats, a nominal 3.0
additional spaces per 100 seats are required.
-A shopping center with over 200,000 square feet of
GLA can accommodate up to 750 seats without
For every 100
providing additional parking spaces.
seats above the initial 750 seats, a nominal three
1
additional spaces are required.
a free-standing
cinema parking
This study also states
that
space will accommodate
three to four patrons.
screen multi-plex with an industry average
screen
would
require
between
Thus,
229 seats
344 and 458 parking
50
a six
per
spaces.
Cinema architect Bill Riseman, Principal,
William
Riseman Associates, Inc. of Boston gave an aesthetic
viewpoint of cinema parking for free-standing theaters when
he explained:
The local zoning code will normally spell out how
many spaces are required for a cinema.
My concern
is where to Locate the parking, in the front or to
the rear of the cinema.
Parking in the front
of a complex offers
approach for patrons
coming from the
security for patrons
and their cars
a more gracious
lot.
is
In addition,
enhanced.
The problem
with this approach is that some planning committees
fault with
large parking lots
exposed to main highways.
Although parking in the rear compromises
Riseman believes that
of the complex
automobiles
find
safety somewhat,
the benefits associated with exposure
to potential patrons
are more important
that pass by
in
(Figure 3).
Figure 3
Parking
in
Front
Parking
in Rear
A
4e
TnL
L-
ac.
&VO SMgC
51
Auditorium
of multi-plex theaters
When asked about the layout
the
Riseman gave
following recommendations:
6 Plex
8 Plex
10 Plex
12 Plex
2 Large
2 Medium
2 Small
2 Large
2 Medium
4 Small
2 Large
2 Medium
6 Small
2 Large
4 Medium
6 Small
When varying small size auditoriums to large size auditoriums
The
the same width to length ratios should be used.
range
an auditorium that
in length.
feet
width
feet
Another important
is the flat
ratio
The optimal
range here
last row of
from the
row of seats should be
spacial
to these
at
least
guidelines
helps
to
from
flat
the
front
the screen.
insure that
qualities of a cinema are perceived by
a comfortable
the
flat width screen,
15 feet
90
should always
row of seats
The front
screen.
For example, a 30 foot
Adherence
is between
the auditorium should be between 75 to
maintain a distance equal to one-half width of
screen.
screen
A flat screen width of 30 feet would imply that
2.5 and 3.
the
to 90
50 feet wide should be between 75
is
length of room.
to
This would mean
1.8.
1.5 to
for this ratio is between
optimal
the
the patrons
environment to view a film.
Ticket Booth
Riseman believes
that ticket booth layout
heavily on whether a cinema complex
owner-occupied.
ticket booths
For
is
in
depends
leased
space or
leased space he recommends exterior
because of
the space savings
52
achieved by
as
stacking patrons outside.
The disadvantages
of this
system
are that patrons are exposed to adverse weather conditions
and additional
labor
is
required to keep customers out
of the
street.
interior
owner-occupied cinemas,
In
preferred because close proximity to
tends
ticket booths are
the refreshment
to increase food and beverage sales.
stand
In addition,
patrons are protected from traffic hazards and adverse
weather conditions.
Lobby
In cinema design,
Riseman
feels that the facade of the
one of the key marketing elements.
lobby
is
front
lobbies
that
glass
He prefers
allow the passing public to see the
excitement generated by crowds of movie-goers;
to him this
is
the best form of promotion a cinema can do.
The other advantages associated with this
the
lobby appears
when
approaching
larger,
by car,
a form of exterior
design are
cool.
that
there
and
lighting.
the
the
Iighting
The disadvantages
candy
premature fading of carpets and
may be difficult
impact
a greater visual
interior
that
serves
as
with this
lobby space may be difficult, to heat and
Also sunlight may melt
addition, certain
is
style are
if exposed and cause
interior wall colors.
interior lighting schemes, such as
to display effectively.
53
In
neon,
Concession Stand
Since concession stands are major profit centers
most movie
theaters,
different concession
believes
understanding the trade-offs
stand layouts
important.
is
of
Riseman
located so that
the refreshment stand should be
can be viewed from all
for
parts of the lobby.
This is
viewpoint;
for sales as well as from an operational
it
important
when
things are slow the concession attendant can watch the entire
area.
The two
types of standard
refreshment stand and the wall
to be more efficient
to
even though it
center piece
to approach it
tend
footage and are easier
island layout
to service and
can be confusing to
the refreshment
serves as a
for the lobby and when combined with the
glass
exterior
The wall stands
Riseman prefers the
feeling is that
His
stand.
requires more area, is harder
ventilate, and where
patrons.
are the
in use of square
service and ventilate.
island
layouts
wall
an
pleasing
aesthetically
space
results.
Projection Booth
The design decisions here
projection booths on
the first
floor mezzanine for projection
Riseman
claims that
square foot per seat
can mean
addition,
involve whether to locate
floor or construct
a second
equipment.
second floor booths have lower
ratios
up to 8% more seats
than first
in smaller
This
floor booths.
complexes.
In
the second floor design allows one projectionist
54
to
monitor all
projection stations
at
the same time and
projection equipment can be center aligned with each screen
(Figure 4).
Figure 4
Second Floor Layout
I'
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First Floor Layout
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55
SUMMARY
cinemas are very
Locational and design issues for
important
in crafting a successful marketing mix.
conceived design enhances
serves a major
location
the exhibition environment
role in promoting the complex.
lowers patrons' transportation costs.
theater complexes don't just
happen;
in today's
and
A centralized
Successful
a great deal
and refinement of the marketing mix is
for a cinema to prosper
A well
of study
necessary in order
competitive marketplace.
NOTES
l.Parking Requirements for Shopping Centers: Summary
Recommendations, The Urban Land Institute, 1981, pp.2,17
56
Chapter Five
A New Concept For the Film Exhibition Environment
INTRODUCTION
There has been a great
VCRs have had on the movie theater box office.
that
effects
on the negative
deal written
In response to this threat, some in the
industry have seen
an opportunity to carve out a market niche that
recreates
most of the benefits of VCR viewing while maintaining a
superior exhibition environment.
One such company is Cinema N'
The Cinema N'
of Atlanta, Georgia.
Inc.,
Drafthouse International,
concept was born in the late
(CND)
Drafthouse
1970s when founders Jim and
John Duffy noticed that many of
the 21-25 year olds around
Orlando, who worked at area attractions such as Disney
World, were
night-time entertainment, someplace
looking for
other than where they worked.
combination
cinema/restaurant
of home, plus
environment
The
that
(See Appendix
idea was
screen viewing
"CNDs are now at
and plans
for
taken out,
tables
in refurbished
half are
in,
theaters where the old seats
and a kitchen
found in retail
construction starts
further expansion
are
Leveled, lounge chairs and small
the floor is
are brought
23
About half of the
in the works" according to John Duffy.
are
the comforts
B).
across the country,
locations
a
to create
provided all
food service and a full
idea has been a success,
locations
are
Their
is
installed.
strip centers where
from an empty shell.
57
The
other
theater
Duffy claims
that
CNDs are
thought
of as good anchors
for specialty centers
part because like traditional theaters
non-peak hours
of retail
Unlike most theaters
in
they draw peopie at
operations.
today's major exhibition
in
intermediate run
markets, CNDs show "sub-run" or
films.
Where a major new release may command an upfront guarantee of
$100
to $200
thousand with a 90%
share at the box office, a
sub-run film may only require a $1,000 Guarantee with a 35 to
40 percent
share at
the gate.
at the gate while first
to $3
This
allows a CND to charge $2
run exhibitors must charge $5
The primary difference with the sub-run films
to $6.
they are available only after
completing the first
is that
runs,
usually two to six months after first release.
MARKETING OF A CINEMA N'DRAFTHOUSE
In contrast
to
traditional theaters, 40%
customers didn't know what movie was
decided to visit
the CND.
are finding
that CNDs
entertainment, without
playing when they
Duffy explained that
audiences are couples-oriented, but
women
that
of
about
had
32%
$25,000
from
their
increasingly single
offer a safe,
acceptable form of
the hassles of the singles' bar scene.
A demographic profile of CND audiences
about 65%
of CND
indicates that
the audience are between 18 to 44 years of age,
graduated from college and earn more than
per year
(Figure 1).
the southeastern U.S.,
Since this sample was
these findings
58
drawn
would indicate
Figure 1
Cinema N' Drafthouse
Cinema N' Drafthouse
Age Distribution
Education Distribution
18-34
39%
H.S. Graa
h. 29%
UnCer 18
Some coilege
38%
Over 85
2%
55-84
12%
35-44
25%
Post Graa
7%
COliege
45-54
28%
18%
Bouroe2 C
o-
International ino.
Souroe C1o- International Ino.
Cinema N' Drafthouse
Income Distribution
15-24K
5e% I
ader
-5K
-C%
K
O5ve
3525-34 K
18%
Sauros C'ND international Ino.
59
Gran
that
audience
the typical CND
is better educated and more
than average.
affluent
Location and Site Considerations
in
Most of CNDs current locations-are
Florida, Georgia, Texas,
Metropolitan Statistical
top 20 Standard
proven successful for current CND
They
the country.
Areas across
of demographic
have developed a set
The
and the District of Columbia.
targeting expansion into the
Duffys are
the states of
guidelines
that
have
locations.
Demographic Guidelines
1 Mile
3 Mile
5 Mile
Populations
Income Avg.
% Renters
8-10,000
25-30,000
75-80%
80-100,000
30,000
70%
200-250,000
30-35,000
50%+
Age
35
36
38
When
observations
center was
good
from Duffy were:
as
He
that the City, County,
addition to
a
respectable
that
or State may have.
a geographic analysis
CND performs
that selected sites will
This study includes
where they look at consumers'
it was
zoning or beverage
these general guidelines,
research to insure
anticipated.
income;
also noted
to be aware of any restrictive
requirements
there was
from the street and had well-lighted
parking for 175-200 cars.
extensive
to make sure the shopping
that the site was -in a
neighborhood, visible
In
some general
not a distressed property and that
tenant mix;
important
for sites,
initially looking
perform
a neighborhood analysis
spending patterns,
age,
and
of how a site's particular
60
location relates
and access
the city or county;
to
and how traffic
to and from the site may affect
detailed study of start-up and operational
flows
A
performance.
costs
is
also
performed.
Food Service
Food and drink are served before and during
Patrons also have the option
young waiters and waitresses.
at the bar and taking them back to
of ordering beverages
The CND menu
their table.
accommodate
regional
the film by
to
is constantly being refined
preferences but
the
table below gives
some idea of the fare available.
M E N U
BEER
MUNCHIES
.
Fruit and Cheese Platter (fo r Two)
Greek Salad. . . . . . . . .
House Chef Salad . . . . . .
Chicken Fingers. . . . . . .
Eggrolls (2) . . . . . . . .
Burritos (2) . . . . . . . .
Chili Burritos . . . . . . .
Basket of Tortilla Chips
(with Jalepeno Cheese)
Garlic Bread . . . . . . . .
Cheese Toast . . . . . . . .
Hot Dog. . . . . . . . . . .
(Extra items: chili, onions, cheese )
Popcorn. . . . . . . . . . .
Michelob Regular.
Michelob Light. . . .
Michelob Classic Dark
HOUSE WINES
Chablis
glass
carafe
Rose
glass
carafe
Burgundy
glass
carafe
SUBS
.
.
Sangria
1/4 lb. Hot Dog, Chile w/onions
topped w/cheddar cheese
Ham'n'Cheese . . . . . . . . . .
topped with Lettuce and Tomato
Super Italian. . . . . . . . . .
mug
caraf e
.
Wine
Cooler
mug
carafe
Drafthouse Dog
.
.
.
.
.
.
.
.
Ham, Salami and Provolone Cheese
61
.
Special Seasoning
....
Sausage Sub . . . . . . . .
Mouthwatering 1/4 lb. of Smoked
Polish Sausage with Hot Mustard
.. . . . .
Beefeater . . . . . . . .
Freshly sliced Roast Beef with
Provolone Cheese served with our
zesty sauce
BOTTLE WINE
Lambrusco
Bordeaux
Liebfraumlich
Chardonnay
N.Y. Champagne
PIZZA
Cheese . . . . .
Sausage. . . . .
Pepperoni. . . .
Mushrooms. . . .
Onion. . . . . .
Green Pepper . .
Olives . . . . .
Cinema's Special
All of the Above
Extra Items. . .
It
is this
Large
Small
Fresh Dough
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
..
.
.
..
.
..
.
.
.
.
.
..
..
.
.
..
.
.
.
. .
.. .
. .
..
. .
-. .
. .
..
. .
type of food and drink when combined with a
superior exhibition environment
that
.
-.
.
.
.
. .
.
. .
that
creates a social setting
the VCR cannot compete with.
OTHER USES
The
allows
typical CND
the space to be utilized
uses during
the dlay.
with satellite
onto
does not. have matinee
the movie screen,
markets have
found CNDs
locations are equipped
the ability
to project TV
corporations and businesses
to be
This
for a variety of additional
Since most CND
antennas and
showings.
desirable
locations
images
in major
for
presentations,
meetings that
include teleconferencing, sales
and parties.
In addition, weekend sporting events
increased the
daytime draw.
have
Although they are not allowed
charge admission to these TV broadcasts,
62
to
the mark-ups on the
food and drink make
been known to
CNDs have also
it a profitable venture.
sessions, and concerts.
jazz
host civic groups,
ECONOMICS OF CINEMA N'DRAFTHOUSE OPERATIONS
locations account
The daytime uses of the CND
30%
Daytime
of revenues according to Duffy.
range between $500 and $1,250
$1,000 plus
of revenue comes
1/3 from the box office,
from theater operations with about
1/3 from food, and 1/3 from beverage sales.
earns over $700
rental charges
per day with an average of
The remaining 70%
food costs.
for about
thousand in gross
The average CND
sales each year, with some
locations exceeding $1 million per year.
require a 7,000 square
single screen CND will
A typical
foot space and will seat about 325 patrons.
location will
require
12,000 square
feet and
A double screen
per seat while
configurations allow for about 22 square feet
theater would require
a traditional multi-plex
These
seat 500.
15.
trend
The
is shifting away from single screen theaters and towards
and quads according
doubles
Cinema
Drafthouses have
N'
through Thursday;
volume
is done,
a third
to 35 customers.
earn an
a
traditional
service
two showings nightly Monday
Friday through Sunday when
late show is
Duffy estimates that
25
to Duffy.
average of $4
theaters
is
of
added.
one employee
Good service
two thirds
is required for
important
every
to CND as they
to $6 per patron on concessions while
make a (ollar or
is also a motivator
to employees
63
less.
Quality
as much of
their
income
is dependent on the
tips
they receive
from satisfied
customers.
START-UP COSTS
Duffy stated that "current
that
would be suitable for
space
in
retail strip
for five
a CND could be leased
These
six dollars per foot per year".
obtainable because of the level of
centers
to
low rates were
that a
improvements
typical CND makes as well as their attractiveness
as an
anchor according to Duffy.
The
with
following table
indicates
other costs
associated
the start-up of a Cinema N' Drafthouse.
Estimated Start-up Costs
7,000 sf
12,000 sf
Single
Screen
Double
Screen
$108,000
$160,000
$17,000
$27,000
Furniture and Fixtures
Chairs, Tables, Bars,
Wall Treatments.
$35,000
$55,000
Projection Equipment
35mm Projection, 33mm Slide,
Vi'deo Pro ject-ion.
$3 3 , 0 00
$ LI3 , 0 0 0
Signage
(Assumes existing marquee)
Letters, Indoor- Signs.
$6,000
$7,000
Building Improvements
Plans, Permits, Demolition,
Drywall, Millwork, Ceilings,
Lighting, Flooring,Plumbing,
Electrical, HVAC, toilets,
Doors, Sprinklers, Painting,
Glass.
,Kitchen and Beverage Equipment
Refrigeration, Ovens, Popcorn
Machine, Ice Maker, Sinks,
Cash Registers, Glass and
Kitchenware, Cleaning and
Misc. Supplies.
64
$25, 000
$25,000
Advertisement and Promotion
$9,000
$14,000
Insurance
$5,000
$7,500
Beverages and Food Inventory
$8,000
$7,500
Administrative Expenses
Legal, Accounting, Wages,
Starting Bank.
$4,000
$4,000
Total
$250,000
$350,000
Franchise Fees,
Deposits,
Licenses
THE BOTTOM LINE
The
typical couple will spend $15
food, drink, and
Duffy claims
markets,
film about the same
this
15.6%
translates
as a traditional
into profits
in median markets, and
regular cinema net
for an evening at
of 13.3%
17.3%
profits are between 5%
to 15%.
can be $50
double that
or the high priced
to $100
thousand per
traditional
year
for a twin.
65
for
theater.
in small
in major markets.
bottom line for providing an alternative to the
combination
a CND
This means
A
the
19 inch TV/VCR
exhibition environment
for a single screen CND,
land
Chapter Six
"A Cinema in Your Next Project?"
This chapter will examine
of a cinema in or adjacent
issues
relating
to
inclusion
to a retail shopping area or as
part of a mixed use project.
Locational considerations,
benefits, and the problems and risks associated with cinema
In addition,
development will be discussed.
the procedure
for securing a cinema operator, lease structures and the
negotiation process will be reviewed.
LOCATIONAL CONSIDERATIONS
When Planning Authorities are considering zoning changes
that would allow for cinema development,
take into
they must
account both the positive and negative elements that cinemas
will bring to
their communities.
Downtown Locations
In downtown
cinema will
This will
that
locations the primary benefit
help to bring people into
create demand for services
would otherwise not be needed.
the
that a
city at night.
and thus produce
jobs
Downtown revitalization
is a priority for many City Planning officials
country, cinemas can be
is
across
a valuable aid in achieving
the
this
goal.
City Planners must
recognize the
successful downtown cinema
industrial
outskirts of
location.
elements of a
A cinema
the city will not
revitalizing the downtown.
In order
located in
achieve the goal
the
of
to be successful a
cinema needs to be located near supporting facilities such as
66
locational
This
restaurants and retail establishments.
relationship will be mutually beneficial as customers will
cross
Another
patronize these business establishments.
for downtown cinema
important element
availability non-premium parking.
locations
is
the
This could be parking
structures that are used primarily by office workers during
the day and available evenings
for cinema
In addition, some thought
patrons at reduced rates.
be
and weekends
locations
given to public transportation linkages as
to transit
of movie-goers
locations would allow a large
to walk rather
than rely on other
This
forms of transportation to get to the theater.
locational strategy implies
that cinemas located near
The problem with this
neighborhoods would be encouraged.
strategy is
theater,
cars.
although many people could walk
that
there will still be
Neighborhood
those that will drive their
traffic as well as
residents will
Suburban
to
over flow parking.
likely prefer to venture
to see a movie than to have more cars
farther
on their streets.
Locations
Similar strategies would apply for suburban
Planners should
under
to the
This will bring pressure on neighborhood streets
handle additional
close
the demand for parking.
stops could reduce
Desirable downtown cinema
percentage
should
utilized
give strong consideration
parking
as
facilities
will arrive mostly by car.
Locations
67
to
suburban
Locations.
sites
that
have
movie-goers
near suburban business
districts or
retail shopping centers will normally have
are also
These areas
largest.
businesses
likely to have supporting
allow people to spend an
and restaurants that will
entire evening
cinema audiences are
the evenings when
parking available in
in the area.
In order
to minimize traffic
problems both on the site and in the community, multiple
entrances and exits
addition, cinemas should be
and exits
to
In
to the site should be available.
located near freeway entrances
accommodate traffic generated by out
of town
movie-goers.
BENEFITS
From the developers viewpoint,
the reason most often
cited for including a cinema in a retail or mixed use project
is
their drawing power.
during off peak periods
people to a project
utilize
but
(eg.
at this
weekend evenings).
time not only helps
resources such as parking, utilities,
also allows
and restaurants.
often
Much of the cinemas business
is
located adjacent
no mistake
that
to food courts
The combination of a food court
"viable center of activity"
success of
Bringing
to more fully
and security:
people to window shop and patronize
It
todavs mixed use
that
is done
retailers
multi-plexes are
in retail
compLexes.
and a cinema can create the
is so
projects.
important
to
the
of Forest City Development commented:
Mike Stevens
A multi--plex cinema will function as an anchor only
if a retail complex is considered the second or
Normally a
third best in a particular market area.
cinema deal doesn't stand on it's own in economic
terms, but the synergy created by having a large
number of elements to draw shoppers to a retail
complex is one of the "keys to success"; cinemas
are one of these major elements.
failure to
Stevens also indicated that
a strategic mistake.
major retail project could be
street would,
resulting in
fear
His
the
one, a competitor down
if you didn't include
was that
include a cinema in a
lost business and a decline
in
competitiveness.
Another benefit
as part of a project
associated with having a movie
This means that
years plus
options),
25,000
square feet),
Finally, we can
benefits.
In
the major operators are "credit
is that
tenants".
for
long leases
the
At
Development
the Boston
University
as
recognizing
drawing
in
theaters
look at
Park
terms
area,
metropolitan
of community
USA Cinemas
it's auditoriums
Cambridge,
in
item.
for
daytime
Forest City
arrangement with the
Institute of Technology.
in
There are opportunities
theaters
(average of
are a relatively stable cash flow
is considering a similar
Massachusetts
(typically 10
large amounts of space
allows Boston University to use
lectures.
theater
Developers
well.
the
valuable
customers
role
to ageing
the restoration of older
and Ci Ly Planners
that
movi-e
business
districts.
restoration projects help downtown areas
69
palaces
to
are
can
ptav
in
These
remain open after
dark, helping to
support the developers
helps as a draw, but
only
Restoring an old theater not
in the area.
interests
and the community's
may give the developer an additional
bargaining chip when negotiating with community groups.
PROBLEMS AND RISKS
The problems a developer will have
economics,
dealing with community groups and zoning boards,
The risks involve organizational
and management.
and financial
associated with theater operations
inherent
include
to address
problems
risks
the motion picture industry.
in
Community Groups
The environmentally minded community groups will
normally challenge cinema construction on
They argue
that
that
it
their neighborhoods.
increased traffic will clog their streets,
parking will
overflow into
patrons will
litter, and
their neighborhoods,
theater
of operation combined
late hours
theater-goers will
with noisy
in
the "quality of life"
will affect
the grounds
destroy the neighborhood
ambience.
deal with these
The developer must be ready to
complaints if he hopes
to have a project,
let
alone a cinema.
Many of the community complaints can be addressed through
sensible design and management.
Parking should accommodate
peak period
the
via major
crowds and access
to
roads whenever possible.
starting times
should be staggered
70
parking
lot
In addition,
-hould be
movie
to avoid traffic
problems,
both in
the parking
lines.
Litter is
lot
mostly a problem
on neighborhood streets.
trailers
theater
help
Also locating
trash
can
the auditorium, lobby, and by the exits
in
to control
not
espousing the virtues of a clean
and a clean community.
receptacles
inside the auditorium,
theater operators can run
Still,
film clips),
(short
and concession
and at the ticket
trash problems.
Management
Management problems associated with cinemas concern
flow and control of the
the
Ticket booths and
theater customers.
to block
customer stacking areas should be designed so as not
In addition,
access to other stores and building entrances.
entrances and exits should allow patrons optional access to
parking areas
without
This
the developer to close the mall,
configuration allows
on security and
going into the mall.
utility costs,
while allowing continued
late at night..
theater operations
The cinema's drawing power can be a problem as
Koetter, Kim and Associates,
benefit.
for University Park
although locating
in Cambridge, MA,
well as
Boston consultants
that
recognized
the cinema and food court
at the
front of
the 27 acre project would create the desired "viable
of activity",
the risk was
negative
presence
University
Park
that there was
f1or
the overall
environment.
To
71
of
intentions
address
center
a strong
it would become a "teen hangout"
probability that
saving
this
-
a very
the
problem,
they
a
recommended that
frontage on the main project
project with
Street),
at
than
rather
access road (Sidney
the project with
the front of
the developer give careful consideration to
the number of theaters, the types of films
retail uses
type of
they
In addition,
frontage on Massachusetts Avenue.
recommended that
interior of the
located in the
the cinema be
included in
shown, and the
the complex with reference to
problem.
this potential
Real Estate Economics
The economics
of a cinema deal may not make sense,
particularly on small sites.
will
requ.ire
from 25,000
retailers.
to other
normal
square feet
to 50,000
tenant will
retail
base rent,
According to Mike Stevens,
pay about
a cinema operator will
Another
the overall
consideration that
project
$25
cinemas
will
so that
the
per
could effect
to some extent,
is that
The challenge
is
higher
"a
to $17."
the
economics of
the exterior
negative" from a
for designers
to
locate
large blank windowless exterior walls
not front
important public spaces.
The risks
associated
Risks
somewhat
flow to
different
with cinema development
than those
of other projects.
the developer from cinema operations
72
rn
foot a year in
average $15
facade of cinemas can be considered "a
design perspective.
of space.
leased at
retail complexes this space could be
smaller
rates
Todays multi-plex operations
aire
The cash
is normally
Since the ability for
based on a percentage of sales.
amount
is strongly
to attract customers
cinemas
and quality of films coming
related to the
from Hollywood, a
the
prolonged writers or producers strike could effect
returns on cinema properties.
developers
Another risk
is that some cinema operators are not
afraid to try to outdo
In
market share.
the competition
to gain
this case the developer may have a nice
cinema operation but
another operator may see potential
the same market
developing a super--cinema in
in
one with
area;
state-of-the-art sound and projection
lavish lobbies,
equipment, and
in order
This would create a very
lower prices.
difficult competitive situation that would result
cash flow and little or no appreciation
in reduced
in the value of
the
cinema operation.
Additionally, cinemas are known
slip and
fall
these cases
Finally,
themselves
in
their
park ing.
there are risks
Other
other
the dark
tenants may
in
leasing to theater
complain
that cinema patrons
They may say
customers have to compete with movie-goers
The
tenants
in
theaters.
block their entrances and create a nuisance.
that
involved
Developers may become
where people injure
auditoriums of
operators.
lawsuits.
to have high rates of
developer may
to
his
proJect
find
for
73
it
difficul
t
for
to attract.
these reasons.
THE PROCESS
a cinema as part of a project
The process of developing
like a very simple procedure on the surface.
seems
Once a
determines through his/her own market studies
developer
he/she will call
a cinema would be a desirable element,
find out about
or the chain will
major chain;
that
a
the
Since there is a
developer's
plans and make the call.
shortage of
good sites and most of the older downtown
have already been remodeled, major cinema operators
theaters
locations.
are eager to evaluate potential new
is how the process begins, but
This
Vice President of Real Estate
Fishman,
it becomes
from there
decisions
according to Mike
for General Cinema,
a very complex process, with many
to be made and many points to be negotiated.
Lease Structure
Once
this call
normally submit
At this
point
has been made,
an economic proposal
the operator will
marketing study
in order
and to serve as
an
will
to
developer will
to
conduct
the
theater operator.
their own extensive
feasibility
determine economic
base for
information
the negotiations
that
follow.
In most mixed use or large
retail projects
will build the structural elements
walls,
utility
stub-outs,
the operator will come
cases
the
and
in and
the developer will
including:
excavated
finish out
choose to "land
74
floor.
the
developer
the roof,
At
this point
the space.
lease" a pad
In some
adjacent
to
in this case the theater operator
the complex,
Appendix C details
may build the entire structure.
responsibilities for a
developer/tenant construction
typical
cinema deal.
size and location have been determined,
Once theater
minimum
is
area, a function of
largely determined by the market
Land Institute's
The Urban
supply and demand.
in super
per year;
foot,
and
common area charges,
in
the total charges
at
almost $21.1
around $13.50.
top rents were
were a median of $10.24
According to
Development claims that
When
and insurance were added
property taxes,
and topped out
report cinemas had the
this
foot of GLA
($61.74),
Stevens of Forest City
Mike
than any other tenant.
todays
market commands
rents of $12
plus occupancy charges.
to $20
In addition to minimum rent,
percentage rent.
range,
This normally
and may or may not
most deals
falls
in the
include
other words the theater operator pays
to protect
allowing
him/fher
cinema.
Paul
Del
the developer
to share
Rossi
in
from
75
10
percent
the greater of
figure.
inflation as
t he prof i ts
of General
include a
also
of
concession sales.
minimum rent figure or the percentage rent
helps
rents
regional shopping centers were $6.98 per
lowest median sales volume per square
sales
"The Dollars
states that median
1987"
and Cents of Shopping Centers
for cinemas
This minimum rent
terms must be negotiated.
rental
Cinema
the
This
well
as
of a successful
stated
that about
In
theaters
70 percent
of their
additional
percentage rent.
An area that cinema operators
with are common area charges
claimed that
than
the base
He
on common area maintenance
to negotiate for a
restriction" on food vendors within 100
food courts cut
is simulated
General Cinema data for
1986.
is
in the table below using
$25,755,000
1986 Earnings
1,254
Number of Screens
$20,538
Earnings per Screen
Concession Share
as
The
concession sales when a cinema
located by a food court
20%
to 200 feet
into concession sales by 20 percent.
impacts of lost
potential
Rossi
area charges can run higher
He also stated that he likes
charges.
Del
recommended that cinema operators
bargain for sensible stops
"use
are particularly concerned
retail complexes.
in
in some cases common
rent.
and pay
exceed minimum rent
(80%)
Reduction in Earnings
$16,430
Per Screen
$3,286
Per Screen
Assume Eight Screen Complex
22,400 Square Feet GLA
Total
Loss of Annual Earnings
$26,288
or
Lease Deal Without Food Court
(Base rent per foot/year)
$12
Adjusted Lease Deal
With 20% loss in earnings due
to location by food court.
(Base rent per foot/year)
$10.83
76
$1.17/sf
In addition, General Cinema likes
dark"
space, and have a "go
sublet their
that a certain percentage of the mall
From the developers
they would want a
that
prevent
to
in the event
clause
leased.
is not
viewpoint Mike
Stevens expressed
"use clause" to prevent any other use
they would insert
In addition,
than a cinema.
the right
to retain
a clause
pornographic films from being exhibited.
to
Another
problem Stevens explained:
Most major retail complexes have a marketing fund
that all of the merchants pay their pro rata share.
Most cinema operators feel that their daily
advertising and drawing power exempt them from
having to contribute more than a token amount to
these funds each year.
In some cases the
cinemas may agree to special showings
to
help draw senior citizens and other targeted groups to the
retail complex instead
to the merchants
of contributing their pro rata share
fund.
CONCLUSION
The movie
at a high
rate
movie-goers
out
for the
last
has been
several
market
years,
only marginally.
yet
the number
Spreading
of
profits
share, but since developers rely on cash
from a single cinema location
of a project
building new screens
screens may be good for major operators who are
building market
rent
industry
has increased
over more
flows
theater
financially, careful
feasibility studies,
voLume
to support
that
thought should be
forecasts,
portion
given
to
and minimum
terms.
Developers would be wise
to develop a relationship with
77
a major
As the
operator.
circuits will
dominate the film distribution pipelines
making
to obtain
first-
independent
reasonable rental
run films at
in
to consolidate, major
industry continues
it difficult for small
In
independent
cinema chain as opposed to a small
areas where there
the multi-plex market,
operators
rates.
is already substantial
competition
the developer of a smaller
retail
strip center may want to consider a restaurant/cinema
a market
This type of operation could fill
combination.
niche and serve as
in smaller centers.
an anchor
the challenges
have to confront
Theater operators will
in the quality of home entertainment
that advances
systems present.
Those exhibitors who hope
to remain
competitive will strive to maintain high standards
operation of
As movie audiences age
exhibition technology.
more
health-conscious, operators will
Movie-goers
concession offerings.
to prefer
fruit juices,
candy and soft
of
rates
their
[ikety
to
of cinema devetopinent
or not.
Recent
that many modern multi-plex cinemas
yet one cannot expect
cinema construction
Melvin
rethink
future are
to include one in a project
gone out of business,
of
the
and become
drinks.
history has not shown
have
to
have
latest
mineral water, and bran muffins
In some markets the simple part
may be deciding
in the
as utilizing the
as well
their theaters
video
Roebuck of Forest
to last
forever.
City Development
78
current
believes
that
"slam-dunk" decision.
in downtown
locations
retail projects or
However, in smaller
far more
is
the decision making process
One must consider if the benefits of having
complex.
cinema as part of a project out-weigh the potential
In downtown
locations
the context of
risks.
the community which he/she proposes to locate
cinema economics?
to support
a
the developer must carefully analyze
a cinema as part of a project.
cinema available?
well
is a
including a cinema
in any regional shopping center,
Is there an audience nearby
Are the
resources to support
a
(e.g. parking, transportation linkages,
lighted streets,
retail stores
and restaurants).
As cities across the country continue to draw people
back
to urban
neighborhoods and
residential
upgrading their downtowns,
invest
in
they will become desired locations
for mixed use projects that will include cinemas.
Developers must use a sensible thought process
in
locating,
designing, and managing the operations
of a cinema
if lie/she
aspires to have a successful project.
Cultivating
a relationship with a major cinema operator and successfully
negotiating an economically sound real estate (teal is
that
the many challenges
cinema
It
many
theaters
a developer will
face
one of
in bringing a
to a project.
is hoped that
this paper has helped to clarify the
issues associated with successfully developing movie
in
todays
diverse marketplaces.
79
Notes
1.The Urban Land
Centers,1987.
Institute,
The Dollars and Cents of Shopping
80
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81
Interviews
General Cinema Corporation, Chestnut [ill,
Del Rossi, Paul.
MA. Interview July 8, [988.
Cinema N' Drafthouse International
Duffy, John J.
Interview July 5, 1988.
Atlanta, GA.
Hoyts Cinema Corporation,
Englander, Morris.
Interview July 1, 1988.
Inc.,
Boston, MA.
General Cinema Corporation, Chestnut Hill,
Fishman, Michael.
Interview July 21, 1988.
MA.
New England Development Company, Newton,
Jacobsen, Jeffery.
MA. Interview June 27, 1988.
William Riseman and Associates,
Riseman, William.
MA. Interview July 1, 1988.
Boston,
Forest City Enterprises, Cambridge, MA.
Roebuck, Melvin.
Interview July 1, 1988.
Forest
Stevens, Michael E.
Interview July 7, 1988.
City Enterprises,
82
Cleveland, OH.
APPENDICES
83
Appendix A
National Desision Systems
Demographic Report
84
ACCT#:
30233
.10./13/87
U P D A T E S
&
P R 0 J E C T IO
D E C I S IO
N
S Y S T E MS
F U L L
D A T A
R E P 0 R T
619-942-7000
PREPARED FOR FDREST CITY ENTERPRISES
SITE #:
'S O .
C E N S U S
N A TI O N A L
P O P - F A C T S
ENTIRE COUNTY
ST ARK CO,
OH
CORD:
0. 000
N S
16S9S7
0. 000
TOTALS
DESCRIPTION
POPULAT ION
1992 PROJECTION
1987 ESTIMATE
36a,701
373,355
1980 CENSUS
378,823
1970 CENSUS
GROWTH 70-80
372,210
1. 78%
HOUSEHOLDS
1992 PROJECTION
142,673
139,585
1987 ESTIMATE
1980 CENSJS
1970 CENSJS
134, ')94
114,690
16. 92%
GROWTH 70-80
POPULATION BY RACE & SPANISH OR IGIN
378,823
WHITE
BLACK
AMERICAN INDIAN
ASIAN & PACIFIC ISLANDER
OTHER RACES
SPANISH ORIGIN - NEW CATEGORY
92.
6.
0.
0.
97%
36%
14%
28%
0. 2 5%
0. 39%
OCCUPIED UNITS
OWNER OCCUPIED
RENTER OCCUP IED
1980 PERSONS PER HOUEHOLD
134,094
T2 14%
27. 867.
YEAR ROUJLD t)tNITS AT ADDRESS
SINGLE UNITS
2 TO 9 UNITS
10+ U.NITS
MOBILE HCPE OR TRAILER
SINGLE/M.LTIPLE LIIT RATIO
142, a1a
81.7%
1947 ESTIMATED
139, 585
2. 77
.12 11%
4. OE.%
2.06%
5. 0.5
Dl-USEiLDS BY INCDME
$75.000 OR MORE
$0.
D000 TO $74, 999
$35. 000 TO i49, 999
$25., Oo TO $34, 999
$15, 000 TO $24, 999
$7, 50[) TO $14. 999
UNDER $7,500
2 93%
a 34%
17. 74%
21. 07%
21. 42%
15. 61%
12 69%
F+ INCOME
19S7 ESTIMATED
AVERAGE
1997 ESTIMATED
1987 ESTIMATED
EDIAN HH INCOME
PER CAP ITA INCOME
85
$27, 2S
52. , 132
$10, 439
ACCT#: 30233
'0,
CE NSUS
ON AL
I
NA T
-
F
LiPf
P
A
C
T
10/13/S7
UPDATES
S
-
&
N
D E C I S IO
F ULL
DATA
S Y S T E M S
REPOR
ENTIRE COUNTY
STARK CO, OH
CORD:
0. 000
a
MALE
FEMALE
- 4%
51. 86%
37S, 623
POPULAT ION BY AGE
7. 04%
7. 52%
LNDER 5 YEARS
5 TO 9 YEARS
10 TO 14 YEARS
15 TO 19 YEARS
20 TO 24 YEARS
P132%
9. 00%
a 51%
a 18%
25 TO 29 YEARS
30 TO 34 YEARS
7. 68%
11. 33%
10. 64%
35 TO 44 YEARS
45 TO 54 YEARS
5. 80%
4. 80%
55 TO 59 YEARS
60 TO 64 YEARS
6 69%
4. 49%
65 TO 74 YEARS
YEAR S
fvED IAN
AVERAGE
30. 90
AGE
AGE
34. 56f
196, 461
POPULATICN BY AGE
6. 62%
5 YEARS
YEARS
14 YEARS
19 YEARS
24 YEARS
2' YEARS
34 YEARS
44 YEARS
54 YEARS
59 YEARS
64 YEARS
7. 07%
7.
a
.
8.
7.
11.
5.
4.
7.
5.
YEARS
35. 86
AGE
378,,923
s6 871%
POPJL.A T ION BY HOIUSE-OLD TYPE
FAM I Y HOJSEHOLDS
NON FAMILY HOUSEHOLDS
GROUP QUAR TERS
91%
98%
30%
64%
29. 60
FEMALE MEDIAN AGE
FEMALE AVERAGE
79%
61%
45%
07%
61%
26%
to. 68%
65 TO 74 YEARS
75+
1689S7
376' 123
POPL.AT ION BY SEX
(-lDER
5 TO 9
10 TO
15 TO
20 TO
25 TO
30 TO
3 TO
45 TO
55 TO
60 TO
SITE #:
0. 000
TOTALS
DESCR IPTION
FEMALE
T
619-942-7000
PREPARED FOR FOREST CITY ENTERPRISES
75+
IONS
PROJECT
9. 22%
1. 91%
86
ACCT#:
C
30233
'S O.
E N S U S
N A L
N A T IO
P O P - F A C T S
U P D A T ES
ION
DfE C IS
-F
U L L
619-942-7000
&
P R O J E C T IO
S Y S T E M S
D A T A
R E P O R T
10/13/87
N S
PREP ARED FOR FOREST C ITY ENTERPRISES
SITE 44:
ENTIRE COUNTY
STARK CQ, OH
CORD:
0. 000
169S7
0. 000
DESCR IP TION
TOTALS
HISPANIC POPULATION BY RACE
WH1ITE
3,379
82 57%
a SX8
BLACK
AMERICAN INDIAN & ASIAN
1. 37%
7. 78%
OTHER RACE
378,8 23
HISPANIC POPULATION BY TYPE
NOT CF HISPANIC CRIGIN
9. 11%
0. 24%
0. 0.3%
EX ICAN
R IC AN
PUER T
CUBAN
OTHER SPpNISH
MAR ITAL STATS
0. 02%
0. !S.
PERSONS
292, 149
15+
04%
36%
06%
79%
6 75-%
23
61.
1.
7.
SINGLE
iAR R IED
SEP ARATED
WIDOWED
DIVORCED
MAR IT AL STATUS CF
154,252
EMALES 154-
SINGLE
20. 50%
MARRIED
tS 0%
SEPARATED
WI DOWD
DIVORCED
1. 22%
12 43%
7 7"3%
134, 094
20. 70%
31. 71%
PERSONS IN LNIT
1 PERSON UNITS
2 PERSON UNITS
3 PERSON UNITS
la
4 PERSON UNITS
5 PERSON UNITS
6+ PERSON UNITS
37,365
PERSONS IN RENTER UNITS
1
2
3
4
S
6+
06%
.t.a 43%
S. 23%
4. 87%
37. 6:;.1%
28 85%
15. 50%
10. 10%
4. 65%
3. 27%
PERSON UNITS
PERSON UNITS
PERSON UNITS
PERSON UNITS
PERSON UNITS
PERSON UNITS
87
ACCT#: 30233
.,'
C E N S U S
O N A L
N A TI
POP - F A C T S
10/13/87
NS
P R 0 J E C T IO
&
U P D A T E s
S Y S T E M S
N
D E C I S IO
F U L. L
D A T A
R E P O R T
619-942-7000
PREPARED FOR FOREST CITY ENTERPRISES
SITE
ENTIRE COUNTY
ST ARK C. OH
CORD:
134,094
7. 5 7
13. 12%
HOUSEHOLDS SY TYPE
SINGLE MA.E
SINGLE FEMALE
65. 29%
MlARR IED COUPLE
OTHER FAMILY - MP.E HEAD
OTHER FAMILY - FEMALE HEAD
NON FAMILY - MALE HEAD
NON FAMILY - FEMLE HEAD
2. 20%
9. 39%
1. 4q%
0. 93%
HOUSE-HOLDS WITH CHILDREN 0-1S
MARRIED COUPLE FA1ILY
OTHER FAMILY OTHER FAMILY -
S5, 039
32 11%
MALE HEAD
FEMALE HEAD
2.49%
14. 83%
NON FAMILY
0. S8%
1980 OWNER OCCUPIED PROPERTY VALUES
UNDER $25, 000
$25., 000 TO $39, 999
$40., ODO TO -$49, 999
$50., 000 TO -$79, 999
$80., 000 TO $99, 999
$100,000 TO $149,000
$150,000 TO $199,999
$200, 000+
POPULATION
URBAN
RURAL
31. 99%
3. 59%
0. 4%
0. 21%
$44, 600
PROPERTY VALLE
BY URBAN VS
84,932
17. 79%
24. 66%
16L 151%
RURAL
378,323
73 86%
2
14%
POPLLATION ENROLLED IN SCHOC.
NPJRSERY SCHOC..
KINDERGARTEN & ELEMENTARY
HIGH SCHOOL
98, 589
(1-6)
4. 70%
55. 77%
26. 97%
(9-12)
COLLEGE
POPU.LA-rION
1689S7
0. 000
TOTALS
DESCR IPTION
1980 MEDIAN
#:
0. 000
12. 56%
25+ BY EDUCATION LEVEL
ELEMENTARY (0-8)
SOME HIGH SCFOL (9-11)
HIGH SCHCL GRADLATE (12)
SOME COLLEGE (13-15)
COLLEGE GRADUATE (16+)
225, 842
15. 137%
.17. 45%
44. 73%
11. 30%
.11. 34%
88
ACCT#: 30233
'
O ,
C E N S U S
O N A L
N A TI
P 0 P - F A C T S
U P D A T E S
D E C I S IO
-
F
U L
L
10/13/87
N S
&
P R O J E C T IO
S Y S T E M S
N
D A r A
R E P O R T
619-942-7000
PREPARED FOR FOREST CITY ENTERPRISES
ENTIRE COUNTY
STARK C,
OH
CORD:
SITE 4:
0. 000
1689c-7
0. 000
TOTALS
DESCRIPTION
160, 135
POPL.ATION 16+ BY OCCUPATION
EXECUTIVE AND MANAGERIAL
PROFESSICNAL SPECIALTY
TECHNICAL SUPPORT
SALES
ADMINISTRAT IVE StPP ORT
SERVICE: PRIVATE HOUSEHOLD
SERVICE: OTHER
FARMING FORESTRY & FISHING
9.
11.
3
9.
.14.
0.
1.
10.
0.
PRECISION PRODUCTION & CRAFT
13 227.
MACHINE CPERATOR
TRANSPORTATIN & MATERIAL MOVING
LABORERS
13 77%
5. 877.
6. 24%
SERVICE:
PROTECTIVE
FEMALES 16+ WITH CHILDREN 0-18
WOR KING WITH CHILD UNDER 6
NOT WORKING WITH CHILD UNDER 6
WORKING WITH CHILD 6-18 ONLY
NOT WORKING WITH CHILD 6-18 CNLY
52, 505
.17. 327.
25. 45%.
32. 10%
25. 07%
134, 094
3473%
HOUSEHOLDS BY NUt'BER OF VEHICLES
1O VEHICLES
1 VEHICLE
2 VEHICLES
3+ VEHICLES
EST IMA TED TOTAL
09%
33%
09%
40%
95%
37%
16%
67%
84%
34. 66%
39. 24%
17. 37%
c"26,244
'VEHICLES
POPLLA-T ION BY TRAVEL. T IME TO WORK
153,741
3 65%
14. 00%
(.NDER 5 MINUTES
5 TO 9 MINUTES
10 TO 14 MINUTES
19. 33%
15 TO 19 MINUTES
20 TO 29 MINUTES
20. 40%
24. 53%
3.) TO 44 MINUTES
.13 35%
45 To 59 MINUTES
60+ MINUTES
2. 35%
2.39%
18. 25
AVERAGE
TRAVEL TIME
IN MINUTES
POPULA-rION BY TRANSPORTATION TO WORK
DR IVE ALONE
CAR POOL
PUBLIC TRANSPORTATI ON
WALKED ONLY
OTHER MEANS
WORKED AT HOME
15 ,01.1
77. 79%
15. 60%
89
1.3-7%
3 5.1%
0.57%
1. 17%
ACCT#:
10/13/37
30233
' S O ,
C E N S US
N A T 1 0 N A L
P O P - F A C TS
UP
D A T E S
D EC I SI
U L L
-F
P R O d
E C T
I O
N S
S Y S T E Ms
D A T A
R E P O R T
O N
619-942-7000
PREPARED FOR FOREST CITY EN4TERPRISES
SITE #:
ENTIRE COUNTY
STARK CO, OH
CORD:
.168987,
0. 000
TOTALS
DESCR IPTION
373, 355
1987 POPULATION BY SEX
48 19%
51. 81%
MALE
FEMALE
373, 355
7. 297.
& 77%
7. 00%
1987 POPULATION BY AGE
U-NDER S
0. 000
YEARS
5 TO 9 YEARS
10 TO 14 YEARS
15 TO 19 YEARS
7. 83%
7.
7.
El
13
9.
4.
5.
8.
5.
20 TO 24 YEARS
25 TO 29 YEARS
3D TO 34 YEARS
35 TO 44 YEARS
45 TO 54 YEARS
55 TO 59 YEARS
60 TO 64 YEARS
65 TO 74 YEARS
75+ YEARS
72%
67%
91%
92%
51%
86%
17%
16%
14%
AGE
33 22
1987 AVERAGE AGE
3& 00
1987 MEDIAN
1987 FEMALE POPLATION
19.' 4444
BY AGE
UJDER S YEARS
5 TO 9 YEARS
10 TO 14 YEARS
15 TO 19 YEARS
20 TO 24 YEARS
25 TO 29 YEARS
6. 87%
30 TO 34 YEARS
9. 05%
.13 82%
6. 38%
6.
7.
7.
7.
35 TO 44 YEARS
45 TO 54 YEARS
9. 60%
4. 95%
6. 38%
S5 TO .59 YEARS
60 TO 64 YEARS
65 TO 74 YEARS
75+ *EARS
1987 FEMALE
1987 FEMP.E
59%
32%
36%
44%
6. 86%
6. 39%
MEDIAN AGE
AVERAGE AGE
14. 44
37. 44
90
Appendix B
Cinema N' Drafthouse
Photographs
91
92
7
17
lbl
JilWPmP"4kL:awmmcoc-
qq
93
A4\
Appendix C
Division of Construction Responsibilities
Between Developer/Tenant
95
NEW ROCHELLE MALL CINEMA 12
OUTLINE OF DIVISION OF WORK
TO BE DONE BY LANDLORD
AND WORK TO BE DONE BY THEATRE TENANT
JUNE 24,1988
(DRAFT No. 2)
A.
DEMOLITION
LANDLORD
B.
SUBSTRUCTURE
LANDLORD
C.
STEEL STRUCTURE
LANDLORD
D.
FIRE PROOFING
LANDLORD
EXCEPT STEEL IN ROOF UNLESS
OTHERWISE REQUIRED BY CODE.
E.
EXTERIOR WALLS
LANDLORD
SEE ITEM 4.d THEATRE SHELL
PERCENTAGE COST COMMENTS
06-17-88.
F.
ROOF
LANDLORD
ROOFING MEMBRANE, INSULATION, AND
STEEL STRUCTURE
G.
STORE FRONT ENTRANCES
LANDLORD
H.
PILKINGTON GLASS WALL
LANDLORD
I.
EXTERIOR WALLLS
LANDLORD/
TENANT
EXTERIOR WALLS AND INSULATION
BY LAND LORD. INTERIOR DRYWALL
AND STUDS BY TENANT AS REQUIRED
BY CODE.
L.
INTERIOR PARTITIONS
TENANT
WITHIN DEMISING SPACE
M.
INTERIOR FINISHES
TENANT
INCLUDING BALCONY RAILINGS
(WITHIN DEMISING SPACE)
N.
FLOOR COVERINGS
TENANT
WITHIN DEMISING SPACE
0.
CEILINGS
TENANT
WITHIN DEMISING SPACE
P.
EXTERIOR DOORS
LANDLORD
INCLUDING ANY FIRE DOORS
AND
HARDWARE SATISFYING CODE LEADING
DIRECTLY INTO ANY INTERIOR MALL
AREAS
Q.
INTERIOR DOORS
TENANT
WITHIN TENANTS SPACE
96
DIVISION OF WORK
JUNE 17,1988
PAGE TWO
R.
SLOPED SLABS AT
AUDITORIUMS
LANDLORD
NON COMPOUND SLOPES AS REQUIRED
BY TENANT
S.
FLOOR SLABS
LANDLORD
ALL FLOOR SLABS AND STRUCTURAL
STEEL BETWEEN THEATRE AND UPPER
MALL LEVEL INCLUDING PLATFORM,
FLOOR FINISH AND RAILINGS AT
SPILLWAY LEADING TO FOOD COURT.
(THEATRE MEZZANINE SLAB AND
STRUCTURE BY TENANT)
T.
DISHING OF SLOPE
FLOORS
LANDLORD/
TENANT
LANDLORD WILL PROVIDE SLAB
DEPRESSION AND SIMPLE SLOPE;
LIGHTWEIGHT CONCRETE FILL VARYING
FROM A MINIMUM OF 3" TO FORM
COMPOUND CURVE SLOPE. CONCRETE
SHALL HAVE PROPER COMPRESSIVE
STRENGTH TO ACCOMMODATE ANCHORING
OF THEATRE SEATING.
U.
THEATRE MEZZANINE
LANDLORD
LANDLORD TO BUILD SLAB AND
STRUCTURAL FRAMING FOR THEATRE
MEZZANINE.
V.
ENCLOSED STAIRS
LANDLORD
STAIR ENCLOSURE (BOTH INTERIOR
AND EXTERIOR FINISH), STAIRS,
RAILS, AND DOORS AT LEASE LINE.
W.
ESCALATORS AND/OR
ORNAMENTAL
TENANT
THEATRE ENTRANCE AND THEATRE
SPILLWAY LEADING FOOD COURT.
(UNLESS IT IS DECIDED TO BE AN
ORNAMENTAL)
X.
ELEVATORS
LANDLORD/
TENANT
LANDLORD TO BUILD WALLS AROUND
THEATRE HANDICAP ELEVATOR (AND/OR
ELEVATORS AND STAIR SHAFTS FOR
OFFICE BUILDING).
SUPPLY
Y.
PLUMBING FIXTURES
TENANT
97
TENANT TO
HANDICAP ELEVATOR.
DIVISION OF WORK
JUNE 17,1988
PAGE THREE
EXACT SIZE OF WATER MAIN AND
NUMBER OF WATER MAINS TO BE
BROUGHT TO LEASE PARTITION AND
EXACT LOCATION AT LEASE PARTITION
TO BE DETERMINED TENANT'S
ARCHITECT. LANDLORD TO SUPPLY
SLEEVES IN SLABS.
EXACT SIZE AND EXACT NUMBER
OF LOCATIONS OF SEWER MAINS AT
LEASE PARTITION TO BE DETERMINED
BY TENANT'S ARCHITECTS.
Z.
WATER MAIN TO DEMISING LANDLORD
PARTITION
AA.
SEWER TO DEMISING
PARTITION
LANDLORD
BB.
ROOF DRAINAGE
LANDLORD
LOCATION OF PIPING RUNNING THRU
TENANT'S SPACE TO BE APPROVED BY
TENANT'S ARCHITECT.
CC.
SPRINKLER LINE/STAND
PIPE TO DEMISING
PARTITION
LANDLORD
AS REQUIRED BY CODE
DD.
SPRINKLER /STANDPIPE
(WITHIN LEASE SPACE)
TENANT
AS REQUIRED BY CODE
EE.
EXTERIOR AND INTERIOR
SIGNS
TENANT/
LANDLORD
TENANT TO SUPPLY SIGN DRAWING AND
SIGN LOCATIONS TO LANDLORD FOR
APPROVAL AND SHALL MEET ALL LOCAL
REQUIREMENTS. COST OF SIGNS AND
INSTALLATION OF SIGNS BY TENANT,
STRUCTURAL SUPPORTS~ BY LANDLORD
IF REQUIRED BY TENANT.
FF.
SIGN WIRING
LANDLORD
WIRING OUTSIDE LEASE SPACE AS
REQUIRED BY TENANT. TENANT SHALL
ASSUME COST OF ELECTRICAL
CONSUMPTION INCLUDING REMOTE
METERING IF REQUIRED.
GG.
TELEPHONE
TENANT
HH.
EXIT LIGHTS
TENANT
WITHIN TENANT'S SPACE
II.
ELECTRIC
LANDLORD/
TENANT
THIS SECTION NEEDS TO BE DISCUSS
AS TO LOCATION OF METER ROOM,
TRANSFORMER VAULT, SIZES AND TYPE
OF SERVICE IN ORDER TO DETERMINE
RESPONSIBILITIES.
98
DIVISION OF WORK
JUNE 17, 1988
PAGE FOUR
JJ.
LIGHTS/ELECTRICAL
SYSTEMS (WITHIN
DEMISING SPACE)
TENANT
KK.
PAINTING AND FINISHES
(WITHIN DEMISING
SPACE)
TENANT
LL.
HEATING/COOLING
TENANT
LANDLORD TO PROVIDE ROOF TOP
OPENINGS, DETAILS AND LOCATIONS
AS DESIGNED BY TENENT'S
ARCHITECT. SIZES OF OPENINGS TO
BE SUPPLIED BY TENENT'S
CONTRACTOR AS APPROVED BY TENANTS
ARCHITECT. TENANT TO PROVIDE ALL
OTHER RELATED ITEMS INCLUDING
ELECTRICAL AND GAS PIPING.MM.
ROOF PATCHING
LANDLORD
LANDLORD SHALL FLASH AND SEAL ALL
TENANT'S HVAC EQUIPMENT, GAS,
PLUMBING VENTS, POPCORN AND MOVIE
PROJECTOR EXHAUST, AND ELECTRICAL
PIPING AT INITIAL INSTALLATION;
THEREAFTER, LANDLORD SHALL
MAINTAIN ROOF IN GOOD REPAIR.
TENANT SHALL HAVE ACCESS TO ROOF
FOR REPAIRS OF TENANTS EQUIPMENT.
NN.
TRADE FIXTURES
TENANT
IT SHOULD BE NOTED THAT TENANT
WILL REQUIRE ACCESS TO SPACE
BENEATH IT'S LEASE SPACE TO RUN
SYRUP TANK LINES PLUMBING, AND
ELECTRICAL FOR THE REFRESHMENT
COUNTERS. SEATS TO BE BOLTED TO
FLOOR.
99
DIVISION OF WORK
JUNE 17, 1988
PAGE FIVE
00.
MISCELLANEOUS ITEMS
TENANT/
LANDLORD
ITEMS NOT SPECIFICALLY ADDRESS
ARE TO BE NEGOTIATED BETWEEN
LANDLORD AND TENANT. ANY
LANDLORD'S WORK, INCLUDING WORK
FOR OTHER TENANTS,
WHICH RUNS
THRU THEATRE'S DEMISING SPACE
(I.E.
ROOF DRAINS, ITEMS WHICH
PERTAIN TO OTHER TENANTS'
ELECTRIC, VENTS,
LANDLORD'S
COMMON AREA TYPE UTILITIES) SHALL
BE APPROVED BY TENANT'S
ARCHITECT.
PP.
EXTERNAL NOISE
OTHER TENANTS/
LANDLORD
ALL REQUIRED SOUND PROOFING FOR
ANY NOISE GENERATED BY OTHER
TENANTS,
DOCK.
QQ.
RESTAURANTS EXHAUST
LANDLORD,
AND/OR LOADING
OTHER TENANTS/
RESTAURANTS EXHAUST TO BE
LANDLORD
DESIGNED TO PREVENT ODORS
ENTERING THEATRE TENANT'S FRESH
AIR INTAKE.
100