Movie Theater Industry The purpose of this memo is to discuss the current film exhibition industry's operating environment and future growth prospects, as well as highlight the predominant players

Essay by cheathouse1High School, 12th gradeA-, March 2005

download word file, 7 pages 4.0

Downloaded 82 times

Although consumer spending has been soft, which has significantly impacted operations in virtually every segment of the economy, the theater industry has been the exception. 2001 and 2002 were banner years at the movies characterized by box-office records and soaring attendance levels. Moviegoers drove the total box-office take to an estimated $9.3MM , and attendance saw its highest level in four decades, bolstering the fortunes of an industry recently plagued by bankruptcies and theater closings. Many wall-street analysts believe the financial crisis that forced a dozen theater chains into bankruptcy since 1999 has nearly run its course, marked by the emergence from bankruptcy of Regal Entertainment Group, Loews Cineplex, and Carmike Cinemas, as well as the decommissioning of over 2,000 screens.

According to experts the theater industry overextended itself during the mid-1990s by building too many megaplexes. A crisis set in when fewer moviegoers visited older theaters, which the companies were still locked into renting.

This phenomenon forced a handful of chains into Chapter 11 bankruptcy protection, which allowed them to jettison money-losing leases and close smaller theaters. Although the surviving chains are no longer carrying the weight of many low performing theaters and attendance has been strong, industry executives recognize the need for size, and the growing need to diversify their sources of revenue.

Industry Consolidation

The movie business has changed dramatically since the Supreme Court's anti-trust Paramount Decree of 1948, prior to which every aspect of moviemaking from the film's production to its exhibition in theaters was controlled by the studio houses such as MGM and Warner Bros. Now the industry is divided into the movie studios, distributors (some of which are still controlled by studios), and movie exhibitioners. This structure creates an incentive for movie exhibitioners to increase their size in order to take advantage of...