Plitt Deal Gives Theater Chain Muscle : Canadian Makes a Big Splash in Hollywood

Garth Drabinsky came back to Los Angeles this week with a few more marbles in hand than the last time. And, little wonder, he couldn’t resist clacking them together a bit.

“It’s not every day that a Canadian company comes into an American marketplace and gains such a prominent position,” he said. And, he reminds: “It’s not often a 36-year-old Canadian entrepreneur does such things.”

It was just last week that champagne corks were popping in the Toronto offices of Cineplex Odeon as Drabinsky, its president, and several associates celebrated the company’s latest dramatic move. With the acquisition, announced Aug. 15, of the 600-screen Plitt chain of movie theaters, Cineplex becomes a premier operator--in a virtual tie for the lead position--of movie theaters in North America.

The $65-million deal put more than 1,060 movie screens under Drabinsky’s control. That, said analysts, makes him a powerful man in Hollywood. Although it is likely that Cineplex will shed some of those locations on its way to making the operations profitable, it retains an aggressive expansion plan. And, Drabinsky said, he intends to overtake the other major U.S. movie-house company, General Cinema, which operates about 1,070 screens.

The more movie screens a company controls, the more muscle it has in negotiations with movie distributors--very often the movie studios--over shares of box-office receipts.

Drabinsky has gone a few rounds with movie distributors before, with a good record to show for it. A former entertainment lawyer who spent three months of each year in Hollywood and environs, he became active in Cineplex in the mid-1970s to protect his “minor” investment. The company was ailing, excluded from many of the commercially successful motion pictures by Canada’s two major movie exhibitors, Canadian Odeon and Famous Players.

For a while, Drabinsky seemed content to strengthen Cineplex on a diet of art and specialty films, building up its own film production and distribution operations. But in 1983, he went after his competitors’ dominance of first-run, mass-appeal films with an antitrust action that broke the hold on movie distribution. Odeon suffered and a year later, in June, 1984, Cineplex bought Canadian Odeon, adding 297 screens to its operations.

When Drabinsky took over Odeon, it had been paying 45% or 46% of box office to the distributors, one analyst estimated. Drabinsky has since negotiated that down to about 41%, just a bit higher than the 39% take that analysts said was average in the U.S. market.

Cineplex Odeon, which also owns one of the largest movie studios in Canada and a gourmet popcorn franchise, last year had operating earnings of $7 million in Canadian dollars ($5.2 million U.S. at current exchange rates) and expects, without considering the Plitt operations, to more than double that this year.

Drabinsky said revenue, which totaled $80 million (Canadian) last year, is expected to reach $173 million this year. (In U.S. dollars, those figures are $59 million and $128 million, respectively.)

“The growth of the company has been very dramatic,” he said, “and, of course, the earnings have been pleasing to our shareholders.”

Among them are the Bronfman family, the wealthy founders and controllers of Seagram Co., who hold a 23% stake in Cineplex Odeon.

Drabinsky’s first movie-house venture into the United States was also dramatic: the Cineplex at Beverly Center. Movie-house operators--including Plitt Chairman Henry G. Plitt--were skeptical that Drabinsky could succeed with the 14-screen, 1,200-seat theater showing mainly art films. But, Drabinsky noted with pride, it worked.

“I like going into a city like Los Angeles and building a theater on the eighth floor of a shopping center . . . opening a theater in one of the most difficult markets in the U.S. and have it be the highest-grossing theater, on a per-seat, per-week basis,” he said.

In the Los Angeles area, Cineplex also operates the Brentwood and Fairfax theaters and is renovating the old Gordon Showcase.

The Plitt purchase was a major, and surprising, move for Cineplex Odeon, said a New York analyst who spoke on the condition that he not be identified. In the long run, he said, it will make Cineplex a dominant force in the U.S. movie industry. In the short term, earnings may be spotty as the Plitt chain, which has been losing money on an operating basis, is absorbed, the analyst said.

Drabinsky and several of his vice presidents will begin next week to visit every theater in the Plitt chain, review its operations and revise budgets. Some of the less profitable operations will be sold, Drabinsky said. Perhaps, speculated analysts, some of the single-screen theaters will be expanded into multiscreen complexes that are the Cineplex trademark.