Across the nation, about 10% of our movie theaters recently have closed or will do so in the near future. They are folding because of long term declining attendance and, more immediately, their operators’ inability to pay for the equipment costs of transitioning to the digital film distribution and projection techniques that the major Hollywood studios have made mandatory – no digital, no films. Most are relatively small houses located in small and medium-sized downtowns. Obviously, their closings probably will have huge adverse impacts on their downtowns.
The tragedy is compounded by the fact that, while some were seedy and many others had very low ticket sales, there were still many of these critical downtown assets that might have been saved. It was well known that these theaters were in danger and that the major studios were moving toward costly digital film distribution and projection upgrades. Tools for potentially saving these theaters were available. However, few downtown organizations had formulated viable action plans they could quickly implement should their cinema be threatened with closing. Once the problem appeared, they were overwhelmed by its complexity, the money needed to remedy it and the short time available to formulate a viable plan for the cinema, win community support and implement it.
The Need for Strategically Critical Business Retention Efforts.
In many ways the closings of these movie theaters are classic examples of failed business retention, but they are obviously something much more significant for their downtowns than the closing of the average retailer. Closed cinemas can mean the loss of important customer traffic generators, big hits on downtown images and the throwing of large vacant commercial spaces on the market that are difficult to lease or restructure for reuse. Far too often closed movie theaters become long-term downtown eyesores.
Most downtowns usually have a handful of establishments – businesses, museums, sports teams, cinemas, etc. — that are disproportionately important to their economic well being. Strategically, they are of critical importance. This, in turn, means that they are worth saving and warrant the investment of a downtown organization’s scarce resources.
The closings of the movie theaters suggests that downtown organizations should be aware of strategic downtown assets that are at risk and have at the ready at least the basic outlines of the actions they quickly can take to help retain these assets.
Determining what is and is not a strategic asset is a critical step. A movie theater, for example, is not a strategic asset by definition. A cinema that is in very bad condition and that attracts few patrons will not have strategic import and my observations suggest that some downtown organizations have indeed written off their movie theaters for these reasons. However, in these situations, the question about retaining the cinema then often turns into an even more complex question about the viability of reviving it.
The Downtown Organization’s Role?
In a recent conversation, the manager of small downtown district “X”, with a movie house that is in deep financial trouble, explained that there was little that the downtown organization could do because so much money would be needed not only for the digital projection upgrade, but also for substantial physical improvements. Of course, most downtown organizations, like this one, will never have the financial or staff resources needed to retain through their own actions the critical strategic establishments that are at risk. Nevertheless, that does not mean that they do not have a pivotal role to play in the retention of these critical assets.
Downtown organizations are effective not only because of their own activities, but also because of what they can get other people and organizations to do: e.g., they not only run street fairs and hang Christmas Decorations, etc., but they also get municipal and state agencies to fund wayfinding programs, support façade improvements, fund performing arts centers, etc. I would argue that this means that the most effective way that downtown organizations – especially small ones – can successfully retain imperiled strategically important downtown assets is to lead the mobilization of the community and its resources in a retention effort. Downtown district X may not have the resources to save its movie theater, but if it can get the municipality, businesses, nonprofits and residents in the community to contribute money and staff, the future of its movie theater probably would be quite different.
If downtown organizations do not play such a role in retaining these strategically important downtown establishments/functions, then who in the community will?
Furthermore, if playing such a role in retaining critically important downtown assets is not a key element of the downtown organization’s mission, then why does it exist?
The Existing Challenges Often Have Been Around For Quite A While.
As the travails of the movie theaters show, the challenges that these critical economic assets were facing were not surprises, but have existed for several years and were well known. In Downtown “Y” in NJ, for example, the possible closing of its cinema has repeatedly come to the fore since the mid 1990s, yet the recent announcement of its demise has sparked a fragmented and desperate effort within the community to save it, in which its downtown organization seems paralyzed. Many other downtown cinemas have had similar histories of teetering on the financial abyss. The downtown organizations in these communities should not have been surprised that their cinemas were on the verge of closing, but my interviews and review of published reports indicate that too many were.
Downtown organizations – even in relatively modest-sized communities– need to proactively identify their critical downtown establishments that are facing challenges and learn about what is happening in the industries they are in. By doing so, those with cinemas would have learned much to alert them of potential problems. For example, about a decade ago the movie industry took a big hit, with many of the chains flirting with bankruptcy or closing and many independents following suit. Furthermore, industry observers for many years have been writing about the attendance decline caused by the public’s growing home film viewing. Back in 2008 DANTH became so aware of this trend that we issued a major report on the challenges downtown movie theaters were facing. Despite the easy availability of such information, too many downtown organizations were caught unaware of the imminent danger their movie theaters were in.
Which Actions Are Timely Depends On When They Are Needed.
When an operator announces the closing of a movie theater, there is little or no time for the downtown organization to determine the economic viability of a movie theater operation, assess how much the community wants a local cinema and then formulate and implement an action plan to retain or save the existing operation. A successful retention effort under this scenario would most likely only occur when the downtown organization has the components of a relevant action plan in hand ready to tailor to the current situation and then implement.
Failing that, the retention focus would probably shift from the operator to the function, i.e., having a strong, viable movie theater in the downtown. This simply may involve the landlord seeking another operator to take over the theater or the far more complicated routes of creating of a community-owned corporation to take over the movie operation or perhaps even integrating it into a new performing arts center.
It is important to note, however, that for several years it has been known that theater operators would need to go digital, that the process would be costly -between $65,000 and $125,000 per screen – and that industry subsidies would not go to theaters with very low ticket sales. Earlier retention interventions would have had more time to work in and probably involved relatively simpler efforts. Instead of finding and recruiting a new operator or having to create and fund a new entity to operate the movie theater, the focus could have been on helping the operator pay for the digital upgrade through traditional bank loans or even crowd funding websites.
Some Relevant Reading:
N. David Milder, “Downtown Movie Theaters Will Be Increasingly In Great Danger”, Downtown Trends Assessment 2008, DANTH, Inc. March 2008 https://www.ndavidmilder.com/wp-content/uploads/2012/05/trends_p1_films_08.pdf
Joshua Bloom, “Community-owned Businesses: How Communities Become Entrepreneurs”, Main Street Now, March/April 2010 http://www.preservationnation.org/main-street/main-street-now/2010/marchapril-/community-owned-businesses.html
Kennedy Smith, “Capital Thinking: Creative strategies to support at-risk businesses”, Downtown Idea Exchange, February 2012 http://www.downtowndevelopment.com/perspectives/dixperspectives020112.pd
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Patricia Leigh Brown, ” Movie Houses Find Audience in the Plains,” New York Times, July 4, 2010 Article