More people are frequenting discount theaters--so-called "dollar" houses--extending the theatrical shelf-life and expanding the gross of many movies. So why aren't industry executives dancing in the streets?
"There are mixed feelings about discount houses," says Jeff Blake, head of distribution at Columbia/TriStar. "On the one hand, you're happy to get more money at the end of the run--and it can be considerable (about 5% of total revenue, sometimes more). On the other hand, if two out of 10 people are encouraged to wait for those 'dollar' runs, it's an economic loss to the studio."
Distributors say discount runs can add as much as $5 million to $10 million to a film's overall gross.
But, there's a big difference between their getting roughly half of a $7.50 ticket (theaters retain the other half) and less than half of a $2 admission, executives complain. But then again, it's found money. Typically no ad dollars are spent to support the discount run. And no new prints are struck.
For the exhibitor, it's a way to turn a profit at a theater that isn't cutting it as a first-run house or to gain a competitive edge by offering a discount price over neighboring theaters.
Regardless, for the consumer, it's a boon--if he or she is willing to wait. And for families, senior citizens or anyone on fixed income (the primary customers for discount houses), waiting makes good economic sense. "If you're a coal miner in Pittsburgh with three children and you have a 'dollar' house two blocks away, you're going to wait to take your family to the movies there," says Nikki Rocco, senior vice president of marketing and distribution at Universal Pictures. For a family of five, it can mean the difference between a $37.50 night at the movies and a $10 one.
Several studios make films available for discount engagements--at least in a major market like Los Angeles--only after they've squeezed every first-run dollar out of the movie. "Forrest Gump" has been playing since last summer and has yet to reach discount houses. "Junior," which opened around Thanksgiving, recently began its discount run. Some studios, like Disney, typically hold a film for a few weeks before releasing it to discount theaters. In smaller towns, however, the time difference is abbreviated because the first run of a movie is shorter. For example, the discount run of a movie in San Bernardino may begin while it's still in full-price houses in Los Angeles or New York.
There are at least 30 discount theaters in the Greater Los Angeles area charging an average of $2 or $2.50 for recent releases. And, executives predict, there are more on the way. These theaters are a reminder of the days before videocassettes when films played second and third runs after their initial engagements. With the video release encroaching ever closer on the heels of a film's theatrical run, the drawing power of these theaters eroded by the mid-'80s. Discount houses seemed doomed until economics and entrepreneurship united to revive them over the past five years.
Some large chain theaters like Cineplex Odeon (at Fairfax and Beverly Boulevard) received such stiff competition from newer multiplexes nearby that when they failed to make a profit as first-run houses, they turned to discount admissions, observed Tom Pollock, chairman of Universal Pictures, which owns 49% of Cineplex. And attendance usually went north. And greater attendance meant better popcorn sales. "Concession stand prices are not discounted," says another distribution executive. "And that's where theater owners make most of their profits."
The other factor was the building of brand-new theaters expressly for the discount patron. There aren't any new low-priced houses in central Los Angeles because real estate prices are prohibitive. But in mid-size cities such as Pittsburgh, Sacramento, Dallas and Milwaukee, where land is cheaper, they are thriving, says Dick Cook, marketing/distribution chief at Disney.
Jim Kozak, a spokesman for the National Assn. of Theater Owners, says discount engagements are "a very vital part of the business. But theater owners like to pretend they don't exist." They say it distracts from their core full-price business, which still makes up more than 90% of their trade.
Randy Hester, director of corporate development for Cinemark U.S.A. Inc., has no such qualms. The Dallas-based company, along with the El Paso-headquartered Super Saver Films, has made a name for itself by building new theaters specifically for discount admissions. Of Cinemark's 1,150 theaters in 31 states, including California, Hester estimates about 30% are discount theaters. "It's a small niche of the theater business. But it serves a segment of the market that can't afford first-run--what used to be the drive-in movie crowd--families primarily."
In towns like Pittsburgh, Milwaukee and Sacramento, new discount houses have become an "aggressive alternative," Blake suggests.
Though he has no official figures, Hester says discount theaters account for, at most, 5% of the business, and there is a built-in ceiling. Of Cinemark's current construction plans, only one of 19 new complexes will cater to that audience segment. Depending on the film, however, that number can be as high as 10%.
Though competing studio executives dispute the figures, Warner Bros. distribution head Barry Reardon insists that "Maverick" grossed more than $10 million in discount houses, atop the $91 million it previously collected in first run. According to Universal's Rocco, "Little Rascals" reaped an additional 10% ($5 million) from dollar houses, bringing its total gross to $52 million.
Pollock contends that it's not just families, but the fixed-income crowd (primarily senior citizens), which is also a strong component of the discount business. It explains why "Fried Green Tomatoes" was a major performer in these venues. The third component is repeat business from people eager to see a favorite film one more time on the big screen, Cook says. That's why even a mid-range hit like "Cool Runnings" did 10% of its $68.9-million total in discount runs, explains the marketing/distribution president.
It would be nice if patrons who didn't want to see a "Wyatt Earp" for $7.50 (it only grossed $25 million) were still curious enough to catch it when it reached the discount theaters. But it doesn't work that way, say distribution executives. If someone doesn't want to see a move in first run, chances are they'll pass it by at the discount house.
But there are exceptions. Universal was surprised that its recent Arnold Schwarzenegger box-office dud "Junior," which had only grossed $32 million at full price, scored an impressive $1.1 million in its first weekend at discount houses. People who weren't curious enough to fork out $7.50 to see Arnold pregnant, were willing to spend $2. Rocco expects to collect $3.5 million for "Junior" in dollar houses--which would represent about 11% of its total gross.
But in general, there are two kinds of movies that do well in discount houses: Family movies gross disproportionately well whether they were a hit in first run or not. And any $100-million blockbuster will draw repeat customers as well as any stragglers who didn't catch it the first time out.
"Jurassic Park" added $21 million to its already phenomenal $330 million during its discount run, and, for the first time, Universal found it worthwhile to spend money on newspaper ads to tout the film's final theatrical engagements.
While some theater owners think the discount business has peaked, there are those in Hollywood, like Pollock, who see further potential.
"I'm all in favor of dollar houses or anything that keeps the theatrical experience thriving," says the Universal movie chairman.