The Theater of the Future Is a Virtual Reality : Entertainment: Iwerks’ Cinetropolis weds high tech to film, video and sound. With Itochu’s help, it hopes to establish the concept in Asia.

Iwerks Entertainment believes it is on the verge of creating the movie theater of the future. In a major boost for the Burbank company, the huge Japanese trading concern Itochu Corp. apparently thinks so too.

Since it was founded in 1986 by former Walt Disney Co. executives Don Iwerks and Stan Kinsey, Iwerks has become one of the top designers of special-format movie theaters for theme parks and world expos. The closely held company expects revenues of $35 million this year.

Now Iwerks has Itochu’s backing for its ambitious Cinetropolis concept.

In the coming decade, Iwerks hopes to create a worldwide network of entertainment centers containing giant-screen, 360-degree and simulation theaters with moving seats and interactive “virtual reality” games that use computer imagery to create artificial environments. Itochu recently took an unspecified minority equity stake in Iwerks and has entered into a joint venture with the company to find partners to build 30 Cinetropolis centers in Asia at a cost of about $30 million apiece.

Itochu, formerly C. Itoh & Co., with $155 billion in annual revenues, is one of the world’s largest concerns. It has interests in energy production, mining, lumber, textiles and industrial machines. It is perhaps best known in the United States for its $500-million investment in Time Warner Inc. in 1991.

Kinsey, Iwerks’ chairman and chief executive, said he is seeking similar alliances to develop at least 30 Cinetropolis complexes in the United States and Europe. However, Iwerks has no such agreements to date. (Don Iwerks is the company’s technical director.)

Iwerks Entertainment does not intend to take ownership stakes in any Asian complexes, although it might in the United States and Europe, Kinsey said. On all the projects, the company would lend its design, construction and operational expertise in return for fees and royalty payments.

The timing for Cinetropolis is right, Kinsey contends, in part because domestic film attendance is declining. This suggests to him that consumers might be lured away from their VCRs if a theater offered a completely new experience.

He also sees Cinetropolis as a low-cost successor to the modern theme park. Instead of building rides that require several acres outside urban areas, a 60,000-square-foot Cinetropolis could easily fit on a city street--a crucial selling point in countries such as Japan, where land is scarce. Also, Kinsey said, each cinema complex would be considerably cheaper than the $1-billion-plus cost of creating a theme park.

“Once you put in a roller coaster, it’s very expensive to change it,” Kinsey said. “We’re creating technology that you can change by changing the software, just like you change what you hear by changing the CD on your compact disc player.”

A Cinetropolis would have several theaters under a common roof. One theater might feature a simulated roller coaster ride with chairs that bounce around as in flight simulators, while another room could show high-resolution images of flights over the Grand Canyon or the Egyptian pyramids on a screen several times the size of conventional movie screens. A third theater might feature rock videos with artists such as Madonna and Prince--although Iwerks has not signed contracts with any artists to date. The films would change about every four months.

Plans are also under way for a Cinetropolis virtual reality ride that Iwerks is developing with Evans & Sutherland, a computer-graphics firm in Salt Lake City, in which participants would man controls that determine what images they see. One concept under development is to create a computer-generated underwater environment.

The centers will also contain restaurants, dance clubs and other attractions, Kinsey said. Entrance to one venue will be priced at $3 to $5, while an all-inclusive ticket would run $10 to $15.

Potential Asian partners will no doubt be closely watching as the first Cinetropolis--not a part of the Itochu agreement--opens in Ledyard, Conn., in August. For that complex, Iwerks has entered into a development deal with Foxwoods Casino, owned by the Mashantucket Pequot Indian tribe. Iwerks has a minority interest in that project.

The company isn’t alone in its pursuit of the theater of the future. Showscan Corp., Omni Films International Inc. and Imax Corp.--a Canadian company that pioneered the special-format theater concept--are following similar strategies. MCA’s new Universal City Walk, for instance, will open one of Showscan’s simulation theaters this summer.

Harrison Price, a Torrance-based theme park consultant, said the idea of enclosed urban entertainment centers has caught on in part because of the success of the Camp Snoopy indoor theme park at the Mall of America, the Bloomington, Minn., super-sized mall.

“It says that having a place in an urban setting where people can play in a protected environment is a good idea,” Price said.

Some movie studios are also exploring new theme concepts. Disney, for instance, is believed to be working on virtual reality technology, although it has kept mum.

“There’s nothing unique about Cinetropolis,” said Fitz-Edward Otis, vice president of sales at Omni Films in Sarasota, Fla. “It’s a marketing concept.”

Some observers warn, however, that despite Iwerks’ flashy technology, it’s what appears on the screen that will determine whether Cinetropolis succeeds. “Our competitors are trying to use moving seats and bigger screens to wow them with size,” said Roy Aaron, chief executive of Showscan in Culver City.

“But it doesn’t change the basic experience of movies,” Aaron said. “The question is, where do the stories, the films and everything that sustains it come from?”

Kinsey agreed that programming will be key to the Cinetropolis network, and in fact a large source of Iwerks’ revenues would be the fees for the films and software it produced alone or in partnerships. “For $100,000 or $200,000, they’re creating a whole new attraction just by leasing the film from us,” Kinsey said.

The risk for Iwerks is that not enough Cinetropolis centers will be built to cover its costs for producing the films.

For instance, Iwerks has licensed the “RoboCop” character from Orion Pictures for a live-action simulation film.

“If we had to create RoboCop for just one attraction, we’d never recoup the investment unless it ran for seven years,” Kinsey said. “But if we have seven sites, we can recoup the investment in six months to a year and come out with a new film.”

Though Cinetropolis would compete with the movie studios’ motion pictures and theme parks, Kinsey hopes to forge alliances with Hollywood for character and movie tie-ins.

“Before it’s all said and done,” he added: “we may have a movie studio as a partner.”