As little as 18 months ago, ”Cineplex Odeon” was a name without much resonance this side of the Great White North. The Toronto-based company owned a large number of movie theaters in Canada, and had only one conspicuous outpost, a 14-screen Los Angeles multiplex, in the U.S.
Today, Cineplex Odeon`s 1,502 screens make it the largest theater chain in North America, with holdings in 20 states from New York to California and six Canadian provinces. A major seat of the Cineplex empire is Chicago, where it now operates more than half of the area`s 268 first-run movie screens.
At the top of this empire is Garth H. Drabinsky, the 38-year-old president of the Cineplex Odeon Corporation. A man who attracts generous praise and controversy from competitors and colleagues, he is now one of the most powerful men in the movie business, and his sudden arrival in Chicago has catapulted the film distribution patterns here into a new era.
Amazingly, all this change comes from a man who began his work in movie distribution only eight years ago with a single shopping center theater.
The son of a Polish immigrant who ran a modest air-conditioning business in Toronto, the tough, talented Drabinsky has been described by a Toronto associate as ”a totally driven man, beyond the limits of anything I have ever run into.” Drabinsky-watchers (and there are many of them in his business)
note that he was left with a limp as a result of a childhood bout with polio, and they are quick to ascribe his ambition and drive to an attempt to settle an old score with the world.
A talent for public speaking, discovered during his teenage years, convinced Drabinsky that his future was in some form of show business entepreneurship. He took classes in law and commerce at the University of Toronto, finding time to produce both a weekly television show and a free circulation movie magazine. When those ventures floundered, Drabinsky concentrated on a successful entertainment law practice. On the side, he financed a Broadway play that closed in one night, and tried his luck in the late `70s in the heady world of Canadian film production, then booming as a result of favorable tax laws. In 1978, he formed Cineplex, taking as a partner veteran Canadian exhibitor Nat Taylor. The idea, which Taylor claimed as his own innovation, was to build complexes housing a large number of small auditoriums. With several films playing at once, the chances of having a hit would be increased, and the damage done by a box office dud would be minimalized.
The first Cineplex opened in 1979, and was not an immediate success. At the time, Canadian exhibition was dominated by two large chains, Famous Players (owned by Paramount) and Odeon, which divided the best films between themselves; newcomer Cineplex was not given the same access to top-rank product.
Using his legal training, Drabinsky drew up a document accusing the six major film distributors of unfair trade practices, and was able to win the sympathy of the Canadian equivalent of the U.S. Justice Department`s anti-trust division. The distributors settled out of court, agreeing to accept the blind bidding system that had long been the rule in the U.S.
Drabinsky`s success in breaking the stronghold of Famous Players and Odeon attracted the admiration, and eventually the capital, of Charles and Edgar Bronfman, Canada`s leading financiers. With the Bronfmans behind him, Drabinsky was able to move when the Odeon chain came up for sale, after the death of its president. Drabinsky acquired Odeon`s 297 screens for the fire sale price of about $16 million, and quickly set about restructuring the old company, cutting office staff by two thirds, imposing a 10 per cent pay cut, and revoking executive credit cards. By the end of 1984, the once-struggling Cineplex was reporting a profit of $9 million, enough to convince the Bronfmans that Drabinsky was worth backing again when Chicago`s Plitt Theaters chain came on the market.
The Plitt chain, built around the holdings of Chicago`s pioneering Balaban and Katz circuit, had grown by 1985 to include 209 theaters in 21 states. Drabinsky was able to acquire it for $65 million, paid by an investor group in which Cineplex held a 50 per cent interest.
Drabinsky`s rapid expansion also commanded the attention of the giant American entertainment conglomerate MCA (owners of Universal Pictures, among many other properties). With MCA president Sidney Sheinberg expressing admiration for Drabinsky`s ”very opportunistic, very aggressive, very contemporary kind of management,” the conglomerate came in for a 33 per cent interest in Cineplex in January 1986 (for $75 million) and in May increased its holding to 50 per cent equity interest (for an additional $76 million). MCA can exercise votes on only one-third of its stock, under Canadian law.
The cash infusion from MCA allowed Cineplex Odeon to acquire an additional 13 Chicago-area theaters, comprising 41 screens, from the locally owned Essaness Theater Corp. The price was reported at $13.45 million in cash. On Nov. 14, Cineplex moved to acquire the lease of the McClurg Court Theater on Ohio Street and ownership of the Edens Theaters in Northbrook. Though Drabinsky, interviewed by the Tribune, would not confirm the price, a figure of $5 million was reported by Variety. In recent months, Cineplex Odeon has also picked up RKO Century Warner Theaters of New York ($179 million), Neighborhood Theaters of Richmond, Virginia ($21 million) and the theaters of the Sterling Recreational Organization of Washington state ($45.5 million). The company has also diversified into production, distribution, film processing, and the manufacture of gourmet popcorn.
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Cineplex`s current Chicago-area holdings amount to 149 screens in 48 locations. The company`s share of Chicago-area first-run screens (defined here as theaters that advertise in Chicago newspapers) is 55.6 per cent, as shown in the accompanying chart. What the chart doesn`t show is the importance of Cineplex`s holdings, which include several of the highest-grossing suburban complexes as well as, with the acquisition of the McClurg, a virtual exclusivity on the Near North Side, the most profitable sector of the Chicago marketplace. (The downtown Fine Arts Theater, owned by the M&R Amusement Corp. of Skokie, does occasionally play first-run Hollywood films in competition with Cineplex`s Water Tower complex, though most of its offerings are foreign and independent productions). Nor does the chart reflect the 41 screens in 9 locations that Cineplex currently has under development, which include two theaters to be housed in the Bloomingdale`s development at 900 N. Michigan.
The Boston-based General Cinema Corp. has 49 screens in the area, though few of them are in prime locations; American Multi-Cinema, a national chain that operates from Kansas City, has two theater complexes in the Chicago suburbs with 12 screens total.
Although a few independently owned, first-run situations are still in operation (including Richard Stern`s Wilmette and Three Penny Cinemas), Cineplex`s only remaining substantial local competition is M&R. The company`s 52 screens in 14 locations include the Old Orchard and Norridge complexes, two of the most successful in the country.
In Chicago, where the movie business traditionally has been a family-run affair in which no one company controlled more than 25 percent of the market, Drabinsky`s arrival has touched off a flurry of fear and resentment. Disturbed by the threat Drabinsky`s dominance represents to their jobs and profits, many Chicago theater owners and film distributors accuse Drabinsky of using the same business practices he once fought, in Canada, to overturn. Cineplex, they say, has sought to eliminate com-petition and use its position to demand more favorable terms from the studios, charges that Drabinsky flatly denies.
”I have a philosophy in terms of running a business that is contrary to what has historically been the case,” says Drabinsky, in the habitual elevated language that is perhaps a hangover from his days as a high school debater. He suggests that he is simply trying to bring film exhibition up to the standards of efficiency and profitability that prevail in other industries. The financial reports bear him out: Cineplex continues to report record earnings and has, according to Forbes magazine, a return on shareholder`s equity that is, at 32 per cent in 1985, double the industry average.
As far as the immediate comfort of the filmgoer is concerned, no one can argue that Drabinsky doesn`t run a first-class operation. Unlike many of the national chains, whose identical, cracker-box theaters can seem cramped, cheap and drab, Cineplex believes in luxury, diversity, and technical superiority.
”The theaters are unbelievable to me,” says a prominent New York exhibitor. ”The man really does have taste.”
Drabinsky spends heavily on new construction–$2.75 million for a sixplex in an industry where the average is $1.75 million–investing in sophisticated projection and sound equipment (Drabinsky is the first Chicago exhibitor to introduce George Lucas` new THX sound system), marble interiors, and plush, custom-weave carpeting, and miles of glowing neon. In Canada, Cineplex has made a policy of commissioning original art works for its theater lobbies, and many of those lobbies feature cafes with elaborate drink and dessert menus.
Though only the newly opened Grove (in Downers Grove) and Ridge (in Arlington Heights) in the Chicago area have these amenities, Cineplex has promised a refurbishing of all the theaters acquired from Plitt and Essaness. (The chain`s two Loop houses, the Woods and the United Artists, had fallen into severe disrepair before the Cineplex takeover; though they are still less than palatial, they have been cleaned up to the point where catching a serious disease no longer seems a threat.)
Just as much of a plus, perhaps, is Drabinsky`s booking policy. By placing a large number of screens in each of his complexes (a new Los Angeles theater to be built on the Universal lot will have 18), Drabinsky can afford to keep small films on the marquee while interest builds. ”He keeps quality pictures in place until they find an audience,” says a New York industry figure. ”He`ll hang onto `Something Wild` instead of booking in the latest exploitation film.”
”Toronto has a film culture because of Garth Drabinsky,” adds Jay Scott, film critic of the Toronto Globe and Mail. ”For movies, he`s been wonderful. There are difficult films that would never have had a life in Toronto had it not been for the way his theaters are set up. At the Carlton (a 10-screen art house), he can let things run forever until they find an audience.” (Not that Drabinsky`s motives are wholly altruistic, as he himself would be the first to admit: the percentage of ticket sales that goes to a film`s distributor diminishes, week by week, as the film plays out; for an exhibitor, then, the most profitable weeks come at the end of a long run.)
Still, Drabinsky`s critics charge that his policies of domination and centralization will eventually mean a diminution of choice for the filmgoer.
”The alternatives are being eliminated,” says one film distributor (it`s a measure of Drabinsky`s power that few industry insiders were willing to be quoted by name for this article). ”The danger is sameness–the same policy in effect everywhere. If people are turned off by Cineplex, they`ll just stay home and watch their VCRs.”
Drabinsky did raise admission prices (to an average of $6 in the city and $5.50 in the suburbs) when he came into Chicago, though most industry people regard that move as inevitable (M&R, for the moment, is holding the line at $5 in its suburban theaters and $5.50 downtown); what Chicago`s film community finds more disturbing is Drabinsky`s elimination of reduced admission tickets and reduction of matinee performances. ”The older audiences who go to the afternoon shows at the suburban theaters will no longer be catered to,” the observer continues.
Perhaps no aspect of Drabinsky`s policy has raised as much local ire as his decision to close his local film-buying office. Bookings for Chicago theaters are now made from Cineplex`s Los Angeles office, though Drabinsky`s film buyer must still deal, by telephone, with the studios` representatives in Chicago. ”Like any other distributor,” says one local figure, ”I find it upsetting to see our aspect of the operation run by remote control.”
Is Cineplex out of touch with local audiences? Some observers point to the decline of the Biograph Theater as evidence that Drabinsky`s West Coast bookers don`t understand Chicago taste. The Biograph no longer seems to get the kind of adventurous, state-of-the-art films it did when it was locally operated, but instead serves as a showcase for drab literary adaptations and heavy-handed message movies–the kind of ”art film” that works on New York`s Upper East Side but not for the younger, more adventurous filmgoers in Chicago.
If the dominance of Cineplex poses any immediate disadvantage to Chicago filmgoers, it lies, perhaps, in the intimidating effect the chain`s overwhelming presence might have on potential competitors. Because
construction and operating costs are higher in Chicago than in most markets, the city has long been notorious as an ”underscreened” town–meaning that there are far fewer theaters than the size of the audience would warrant.
It`s a city with a great potential for expansion, and many of the industry figures interviewed for this article were looking forward to the announced entry of American Multi-Cinemas, the giant Kansas City-based chain, into the Chicago arena. Over the last few years, AMC has purchased six packages of land for development, most targeted against high-grossing Plitt houses.
But AMC president Ron D. Leslie recently told The Tribune: ”Our plans are on hold right now. We still own the dirt, but there`s been so much turmoil in the business that we just don`t know which way we are going to go.”
”That`s this week,” says Drabinsky, ”Next week it will be somebody else. There is sufficient competition in Chicago, and certainly there is the capacity for new theaters to be built in every zone in the marketplace.”
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Drabinsky`s presence in Chicago has raised the stakes in a game that, by comparison, was once penny-ante. And obviously, it`s difficult for a family business to compete in a game with players as well-heeled as MCA. In November and December, M&R was reported to be seeking out a corporate suitor for itself; two potential deals, according to Variety, have fallen through. Still, M&R president Richard Rosenfield is determined to keep his seat at the table: ”We`re here to stay, and we`re determined to remain an exciting and viable alternative to Mr. Drabinsky. He`s never been up against this kind of opposition in Canada, from first-class theaters with a first-class
presentation.”
But the expansion of Cineplex is only one aspect of a national trend that has seen the growth of such giant chains as AMC, General Cinema, and United Artists Communications, each with well over 1,000 theaters. Recently, such Hollywood studios as Paramount, Columbia and Cannon have moved into the exhibition business, encouraged by a Justice Department inclined to overlook the fine print of the consent decree of 1948, which originally separated studios from the theater chains they constructed in the `20s and `30s.
Spurred by competition from cable television and home video, as well as by the takeover frenzy that has seized many aspects of American business during the Reagan administration, the film exhibition industry has begun to respond to what Drabinsky terms ”the changing economics of scale.” What was once a local business has become–and it seems to have happened almost overnight–a national industry.
In a country where the corner drugstore is now a Walgreen`s and the local drive-in is, inevitably, a McDonald`s, there is every chance that the neighborhood movie theater will now be a Cineplex. Mom and Pop have moved, and they will be missed. But the movies will survive.
