Made for
the big screen
DENNIS ODA / DODA@STARBULLETIN.COM
While Consolidated's Ward 16 Theatres on Auahi Street are state-of-the-art, with stadium-type seating, about half of the company's Hawaii holdings, like the older Varsity Theatre on University Avenue, below, are traditional flat-floor theaters, which have lost favor with moviegoers.
Hawaii's movie exhibitors are on
the edge of their seats as prospective
buyers eye the venues being shopped
by Consolidated Theatres
Consolidated Amusement has been approached by a handful of potential suitors for its movie theaters, according to a source close to the initial stages of negotiations.
But selling its Hawaii holdings may be complicated by older properties that have not kept up with the latest in industry trends, said industry insiders.
Last month, Consolidated announced it was leaving the movie exhibition business in Hawaii, where it once enjoyed a monopoly. It has 109 screens in the islands, compared to 57 for Wallace Theatres and 40 for Signature Theatres.
"We are exploring the possibility of a sale and at this time have not put the theaters on the market," said Neil Haltrecht, president of Robertson Properties Group, the land development division of Consolidated parent company Pacific Theatres, based in Los Angeles.
"Consolidated has decided to go with the development trend," said Steve Sofos, president of Sofos Realty Co. His company was recently named to manage the 200,000-square-foot Keauhou Shopping Center in Kona, where Consolidated has a seven-screen theater.
"Most of the property they own, they are developing or selling," Sofos said.
Consolidated closed its Waikiki locations and is seeking new retail tenants for some of its space, but is planning to demolish the old Waikiki 3 Theatre early next year. There, it will build a retail-restaurant complex.
DENNIS ODA / DODA@STARBULLETIN.COM
Consolidated's former Marina Theatres is now an Outback Steakhouse on Ala Moana Boulevard.
In recent years the company has converted some of its theaters into retail space, such as the Checker Auto Parts store at the old Cinerama Theatre and Blockbuster Video at the old Kapiolani Theatre. Most of its other theaters are on leased land.
At the time the Waikiki theaters were closed, the company cited declining business.
Amy Wood, Pacific Theatres' director of marketing, now says, "Hawaii continues to be one of the strong movie-going markets in the country and Consolidated is pleased with the results of all of our theaters."
The movie exhibition business nowadays is all about theaters with stadium-seating, as opposed to the older, so-called flat-floor theaters, according to industry experts.
"With our recent additions over the last five years, our (Hawaii) circuit is approximately 50 percent stadium," said Wood, of Pacific Theatres.
Signature is 100 percent stadium in Hawaii, but 70 percent stadium overall. It has 32 locations in several states. Some of those have been updated for the new trend.
"We do a lot of retrofit, but sometimes we just can't," said Phil Harris, Signature president. In some cases a retrofit might cause "too large a diminution in seating capacity" to be worthwhile, he said.
Harris declined to comment on Consolidated's desire to exit the market.
Wallace has some stadium-seating venues, but an exact figure was unavailable as officials could not be reached.
"The trend for theaters is like 80- or 90-percent stadium," said Sofos, who does work with former Wallace Theatres owner Scott Wallace.
Wallace is president of Wallace Theatres Management Corp., an investment and holding company that neither owns nor operates movie theaters, but there is no noncompete clause to prevent him from re-entering the industry.
"It would be an interesting situation for Scott Wallace to acquire Consolidated, then compete against Wallace Theatres," Wallace said.
Industry analyst Wade Holden agrees that the trend is, the more stadium seating a theater company's so-called circuit has, the better.
"If there are any new theaters being built, that's what you're getting," he said. Holden, an analyst with California-based Kagan World Media, follows the large, publicly traded movie exhibitors.
Consolidated's sale exploration comes at a time when exhibitors are enjoying regrowth, thanks in part to blockbuster movies but also in part to stores like Blockbuster Video.
Home video and the burgeoning DVD rental market is where the studios make their money, Holden said. "If it wasn't for home video, we would not have 'Lord of the Rings.' Studios wouldn't be able to spend $100 million to make a movie because they're not going to make it back."
Home video is making the studios "oodles of cash," he said.
"To take it full circle, they're making so much they can spend more money to make movies, which then whets the viewers' appetites. They can't wait to see it."
"That's how theaters get a 'Spider Man' with a $115 million opening weekend and you get the 'Lord of the Rings' trilogy and the 'Matrix' trilogy," said Holden.
"Last year there was over $9 billion in ticket sales," a record, Holden said. Revenue may be a few hundred million off this year.
Given a choice between a flat-floor theater and a stadium-seating theater at the same price, most moviegoers would choose the stadium seating, Holden said, which is why many companies are building new, stadium-style movie houses and closing the older ones.
The growth follows a tumult of bankruptcies starting in 2000.
"Basically, what happened was too many theaters were built right on top of each other and the brand-new theaters with stadium seating and amenities left older theaters without enough foot traffic, stuck in long-term leases. The only way to break out was to declare bankruptcy," Holden said.
According to the Motion Picture Association of America, there were 19,589 domestic movie screens in 1984, Holden said. "In 1993 that jumped to 25,626 ... in 2000, which was at the peak right before the bankruptcies started there were 37,396. You're talking a seven-year period where the screen count grew by over 12,000," he said.
By the end of last year, the peak had contracted to 35,280 screens. In addition to Consolidated's closures, Wallace closed its three-screen Enchanted Lake Cinemas, adjacent to the still-open, newer Keolu Center Cinemas. Wallace also owns the twin-screened Kailua Theatres, which launched dollar-a-holler and cheaper screenings over the summer. The theater still made money as concession prices did not change.
It was during the 1994 to 2000 period of growth that the stadium-seating trend exploded, Holden said.
Despite Consolidated's relatively low percentage of stadium-seating venues, Sofos believes its bundle of Hawaii movie houses could be an attractive purchase for the right buyer.
"You could easily turn Kapolei, it wouldn't be cheap, to convert it into stadium seating," Sofos said.
Sofos and Signature's Harris disagree on whether Hawaii is saturated with screens.
Harris believes it is. "I would think so, if you apply any traditional analysis."
Sofos believes there is room in certain areas, "because Hawaii's only entertainment is movies." Concerts are few and far between, there are no professional sports teams and when the University of Hawaii's Stan Sheriff Center is filled with 5,000 fans, there are 900,000 other people in Hawaii who need somewhere to go, he said.
