With a summer devoid of blockbusters and ever-increasing construction of new theaters, the scene looks increasingly bleak at the Chicago area’s existing cinemas, analysts and industry insiders say.
While new theaters are sprouting rapidly in the area, box-office receipts are down, following a national trend. Ticket sales this year in Chicago have slipped 1 percent, to $169.4 million, while nationally they have fallen by the same percentage, to $5.4 billion.
“This summer it’s been a double whammy: There haven’t been any movies with legs, and there are more and more screens too close to each other,” said film industry consultant David Sikich, a partner with Chicago-based Iltis Sikich Associates.
But the decline in cinema revenue is doing nothing to dissuade movie-house developers. New megaplex theaters–those with several screens and amenities like stadium seating and larger screens–are stealing customers away from lower-tech theaters. And it’s far from clear there’s enough business to support both the existing cinemas and the newcomers.
Among local companies that have fallen victim to the surge of megaplexes is Chicago-based Meridian Entertainment Group Inc. The company hit the market two years ago and operates cinemas including Burnham Plaza, the Biograph and the Water Tower theaters. City officials closed four of the company’s theaters for two days last week for failing to pay nearly $300,000 in city taxes.
Over the past year, moviegoers gained new options such as General Cinemas City North, Landmark’s Century and Landmark’s Renaissance Place Cinema. General Cinemas also recently opened megaplex facilities in Warrenville and South Barrington. Two more are planned as part of new mixed-used developments in Streeterville near Michigan Avenue.
Each time a megaplex opens, an average of two or three multiplexes close, said consultant Barry Schain, president of Chicago-based Wabash Associates.
In some ways, the cinema squeeze afflicting the Chicago market mirrors national trends. Throughout the country, cinema operators are struggling amid a glut of supply and flat box-office receipts.
Such movie chains as Carmike Cinemas Inc., United Artists Theatre Co. and Edwards Theatres have filed for bankruptcy protection. Even Landmark Theatres Corp.’s parent company, Dallas-based Silver Cinemas Inc., earlier this year filed for protection from creditors. The parent company’s pending reorganization is unlikely to affect Landmark’s two new theaters in the Chicago area that specialize in arty movies and have shown strong early results.
Many experts predict a battle in Streeterville once AMC Theatres opens a 21-screen complex on Columbus Drive and Century Theatres opens a 16-screen theater across the street.
The AMC theater, part of the River East mixed-use development, is scheduled to open in fall 2001, while the Century theater will open the next summer as part of the Grand Pier mixed-use project.
“We think the market is large enough for both us because we’re in the Navy Pier corridor,” said developer Raymond Chin, president of R.M. Chin & Associates Inc., which is developing Grand Pier. “But we’re going into it with our eyes open.”
While AMC and Century fight it out, older nearby theaters such as the McClurg Court and 600 N. Michigan are also likely to lose some patrons.
Although newer theaters tend to pull patrons away from existing theaters, the high costs of construction, up to $1 million per screen, require that the new projects draw larger audiences in order to break even.
“If the new complexes aren’t in prime locations, or if they face strong competition from existing theaters, then there just isn’t enough business,” said developer David “Buzz” Ruttenberg, whose family has owned the Esquire theater since 1981 with the Supera family, longtime North Side real estate investors.
Even though the Esquire remains a solid performer, its owners are exploring the possible retail redevelopment of the Oak Street landmark.
The movie industry’s poor summer has only compounded a broad, national problem, said Ruttenberg, president of Chicago-based Belgravia Group Ltd. “Clearly there’s an oversupply, just like their were too many office buildings 10 years ago.”
Box-office sales this summer were down more than 5 percent, the first summer slump since 1991.
“The most obvious reason is that the mix of films didn’t attract as large an audience as it had in the past,” said Tom Borys, president of ACNielsen EDI, which tracks movie box-office receipts.
This summer’s highest-grossing movie, “Mission Impossible 2,” brought in a little more than $200 million at the box office, paling next to last year’s “Star Wars: Episode I–The Phantom Menace,” which raked in $422 million, and “Sixth Sense,” with $293 million.
“You need films like that to expand the business,” Borys said.
AMC Theatres spokesman Rick King agreed: “The summer movies were disappointing, but we’ve been disappointed before. The appeal of movies always seems to come back, and a new crop of movies comes out every season.”
Calling the “Star Wars” revenues an anomaly, Brian Callaghan, director of communications for General Cinemas, defended the summer movies and pointed to 11 that passed the $100 million mark.
“To say it’s a disappointment would be wrong,” he said. “The studios certainly delivered.”
Still, some in the movie business believe more tough times are ahead.
“Every theater chain in the country is bleeding,” Sikich said. “I’ve never seen it so bad.”
