Small exhibitors that used to bet on discounting long-running films struggle to retool their businesses in the hope studios will deliver more product as COVID-19 restrictions ease.
For decades, families eyeing an inexpensive night out in Southern California have been able to rely on Regency Theatres’ second-run locations (also known as Dollar Houses), which screened movies just before they hit home release for only a few dollars per person. That changed in early 2022, when the company’s locations in Pasadena and Norwalk quietly switched formats and now exclusively screen new releases, more than doubling ticket prices in the process.
The collapse of the second-run market is one more sign that owning an independent theater chain has become exponentially more challenging since the COVID-19 pandemic upended moviegoing habits two years ago. In addition to a reduction in product, exhibitors have had to grapple with attempts to shorten theatrical windows, including Warner Bros.’ decision to release its entire 2021 film slate day-and-date to stream on HBO Max.
As a result, there’s a diminishing need for a cottage industry that provides filmgoers a middle ground between paying full price for early weekends and waiting months to watch a film in the living room, exhibitors say.
“It’s surprising how quickly second-run has been decimated and habits have changed,” laments Regency Theatres president Lyndon Golin, whose company still operates discount theaters in Ventura and Moreno Valley, in addition to 21 first-run locations. “We were a communal experience that everyone could afford.”
While Wall Street’s interest in the theatrical business usually centers on how COVID-19 has upended major chains like AMC, Regal and Cinemark, which operate more than 500 houses each, it’s the smaller, indie theater chains running 50 or fewer locations that are arguably more vulnerable now.
Over the last two years, Pacific Theatres’ six locations and Arclight Cinemas’ eight spots all shuttered permanently, as both shared now-defunct parent company Decurion Corporation; Studio Movie Grill and Alamo Drafthouse Cinema filed for Chapter 11 bankruptcy protection; and L.A.-based Laemmle Theatres was forced to sell three properties amid recapitalization.
Laemmle president Greg Laemmle says the company, which has eight locations, foresees more theater closures in 2022 but maintains that he hasn’t lost faith in the viability of exhibition. “Some of that is a function of how we were building our circuit, which is based on a model of owning our own dirt. So that gave us a lot of long-term control — except when you can’t pay rent or the mortgage,” he notes with a laugh. “For a company of our size — we’re not AMC — we can’t go out and float something on a bond market.”
Reps for multiple chains have acknowledged the need to discard a previous policy of shunning a film that’s already available in the home. Although East Coast-based R/C Theatres declined to screen Bill & Ted Face the Music when it was released day-and-date on premium video-on-demand in August 2020, the chain has since relented and now screens home-available titles, but no longer at reduced prices.
“We said, ‘It’s available at home — we’re not going to charge a full-price ticket,’” says R/C film booker Samantha Cohen. “Then the day-and-date titles started to make up a lot more of what we were able to play. So are we going to price a brand-new movie at $5? That just doesn’t seem to make sense.”
Other pandemic-era pivots for smaller chains have responded to the need to skew younger and more commercial as older filmgoers are more reluctant to return to theaters, and have involved investing in digital marketing to reach at-home audiences, reducing screenings amid staffing shortages and offering more alternative programming, such as live UFC fights, to compensate for fewer film options.
“More than anything, we realized that we have to market ourselves better and not depend so much upon the studios,” says Cinelux CEO Paul Gunsky, whose company operates seven locations in Northern California. “We at least tripled, maybe even quadrupled, our followers, just because we became so much more active on social media.”
Adding to the challenges, mini chains continue to feel that the playing field with the deeper-pocketed competitors isn’t always level. Cohen cites an example from late last year, when R/C was denied early-access shows for Sing 2 because she was told that a bigger name across town needed a fair share. “I argued, ‘You’re really going to tell me that we can’t show this here because you want to give it to a national chain?’” she recalls. “We lost that argument.”
Exhibitors have done their best to find positives during the turmoil. Alamo — which emerged from Chapter 11 in June, three months after the filing — is now feeling bullish; in February, it announced that seven new theaters are on the way, featuring the premium food and drink offerings and repertory film screenings that are core to the brand.
The company is unique within the landscape in actually viewing the trend toward shortened windows as beneficial, due to the strict requirements distributors can impose on films still in regular release. “When you have the longer windows, you get locked up for screens’ number of days or weeks, and the shortened windows allow for us to play these movies, but also have screens and sessions available for alternative content,” reasons Alamo CEO Shelli Taylor.
Flexible screening guidelines have been a key focus for the Independent Cinema Alliance, a trade group advocating for its members’ combined 3,000 screens. Among its 2022 goals: working with distributors to establish more wiggle room for releasing flops. “Making really good decisions on your last two or three screens sometimes swings a needle between $1,000 or even $10,000 on a weekend,” says Rich Daughtridge, ICA president and president of Maryland-based Warehouse Cinemas, which opened the doors on both of its locations within the past two turbulent years.
One factor on the minds of every chain, big and small, is the need for more product. Nearly every theatrical executive who spoke with The Hollywood Reporter emphasized the boost theaters received from December’s Spider-Man: No Way Home, which jolted moviegoing at the peak of the omicron variant. That has only upped expectations for The Batman, which launched to $134 million stateside over the March 4 weekend. The fact that many eggs rest in Bruce Wayne’s basket was one reason AMC went so far as to unveil variable movie ticket pricing.
“Certainly, we didn’t see it coming,” says Brock Bagby, executive vp, chief content and development officer of Midwest-based B&B Theatres, about AMC’s price hike. B&B has added 10 locations in two years, lifting its total to 56, and offers pricing by format (e.g., a bigger screen), not by movie.
Some of its theaters offer six different price levels for a film, allowing guests to consider such amenities as panoramic format ScreenX, dining services and even theater rooms with a play area for children. As far as whether B&B would follow in AMC’s footsteps with variable pricing, Bagby says it could happen, and his team will evaluate its markets and gauge studio reactions. Levels of optimism for the remainder of the year vary among chains, with a general consensus that an influx of splashier titles, coinciding with an end to indoor mask mandates as COVID-19 levels drop, should bring stability to exhibition.
“Keep the little guy alive — let us live,” pleads R/C CEO and president Scott Cohen, offering a message to studios. “We’ll make you money. Give us the windows much better than you are [currently doing].”
His isn’t the only chain that would likely be in a very different spot were it not for the current window situation. Golin emphasizes that Regency’s discount-house model was once a mutually beneficial one for exhibitors and distributors alike. “At one time, the second-runs and dollar-break generated a respectable amount of revenue for movie theaters and film companies, giving films an extended life,” he says. Alas, that ship has sailed. “We are more ‘surviving’ than ‘thriving’ at this point.”
A version of this story first appeared in the March 9 issue of The Hollywood Reporter magazine. Click here to subscribe.