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Megaplexes freeze out some indie theaters

In Redmond, Wash., a tiny 130-seat theater is barred from showing many new films due to  the clout of a nearby cineplex. Such deals make life hard for independent cinemas.
Image: Image: Mark and Kate Stern owners of the Big Pictures theater
“You know how a jackal gets to eat the carcass only after a lion eats? Well, that’s how it is (for us),” says independent theater owner Mark Stern. He and his wife, Kate, own Big Picture theater in Redmond, Wash.James Cheng /
/ Source: contributor

Beneath crystal chandeliers, nestled in foam seats and surrounded by purple draperies, patrons of the Big Picture theater can sample Hollywood films in cocktail-bar splendor. Martinis are hand-delivered. Cheddar-cheese popcorn is served in champagne buckets. Tickets cost $11. No kids are allowed.

“Welcome to heaven!” proclaims Mark Stern, co-owner of the Redmond, Wash., cinema.

There’s just one problem at Stern’s single-screen nirvana — and it is flickering up front for all to see. His latest feature is stale, having opened nationally 11 weeks earlier. Stern only recently was given permission to offer the film. The title: “It’s Complicated” — an apt description of today’s independent theater market.

In Redmond — emblematic of dozens of towns where indie-owned cinemas compete with movie megaplexes — Big Picture is barred by some film studios from playing the newest releases. In legal lingo, such Hollywood freeze-outs are called “clearances,” and they’re typically requested by large theater chains seeking exclusive use in certain cities. Studios can approve a clearance petition or not. But because the vast majority of the nation's screens are owned by a small handful of giant theater circuits, the chains carry enormous clout with film distributors.

Just look at a map to see Redmond’s battle lines: one mile from the 130-seat Big Picture sits the Bella Bottega, an 11-screen multiplex owned by Regal Entertainment Group, the largest theater circuit in the country, operating in 44 of the top 50 markets and averaging 12.3 screens per location. Last year, Regal earned $2.8 billion in revenue.

To block Big Picture from siphoning off its Redmond customers, Regal asked the studios not to exhibit their films at Stern’s theater until the Bella Bottega had dropped those movies. The studios acquiesced, forcing Stern to wait up to three months to snag a Bella Bottega discard.

“You know how a jackal gets to eat the carcass only after a lion eats? Well, that’s how it is [for us],” said Stern, who also co-owns a single-screen Big Picture theater in nearby Seattle.

Big guy vs. little guy
In a niche business that is both offbeat and urbane, a town-by-town smattering of mom-and-pop theaters and art houses survive on their colorful, creative idiosyncrasies. But the bigger plot follows an epic theme: big guy vs. little guy.

Stern’s dilemma in Redmond is “incredibly typical” among individually owned theaters, said Stephanie Silverman, managing director of the Belcourt Theatre in Nashville, Tenn. She’s part of an expanding national alliance of small cinema owners called Art House Convergence, representing about 70 theaters — some of them single screens, most of them nonprofits. According to a recent internal survey by the group, 61 indie cinema owners listed clearances as their most pressing plight.

“The challenges we face are [led by] restraint of trade and unfair competitive practices from the chains,” said Juliet Goodfriend, president of the Bryn Mawr Film Institute in suburban Philadelphia — part film education center, part theater.

The rising ire felt by many indie theater operators is focused on both the conglomerates (like Regal, AMC and Cinemark) and on Hollywood’s power base — the film studios.

“Know this: The film companies have nothing but disdain for small, non-chain theaters,” said Hildy Morgan, owner of the Dietrich Theater, a four-screen, nonprofit cinema near Scranton, Pa. “They don’t care if we exist.”

While Art House Convergence is mulling “actions we can take as a group,” Goodfriend said, she revealed no specific strategies to break the theater chains’ grip.

But Stern, who estimates that Regal’s Redmond blockade saps “hundreds of thousands of dollars” from his annual grosses said he is "preparing" to file a lawsuit against Regal. His case, he believes, rests on the fact that the third theater in Redmond, Gold Class Cinemas, faces no clearance from Regal. Like Big Picture, Gold Class promotes a luxury setting (reclining seats, cocktails and appetizers) and is also located one mile from Regal’s Bella Bottega. In late February, Gold Class offered six fresh films (including “Shutter Island”) that also were being shown on the Bella Bottega’s screens.

“Does this now become anti-competitive and antitrust? We believe so,” Stern said. “Regal is a bully. ... When you are a small business owner in this country and you want to be in a huge industry, watch out. There are lots of powers that be that’ll prevent you from entering the market.” left repeated telephone messages seeking comment from Dick Westerling, Regal’s senior vice president of marketing, but Westerling did not respond. According to an Aug. 28  letter sent by a Regal attorney to Stern (and later provided by Stern to, Regal “is in the process of evaluating its policy on clearances nationwide.” This evaluation, the letter said, would continue “through the end of” 2009, and Regal did not “expect to make any changes regarding its booking practices ... during the evaluation process.”

In Redmond, still another subplot is unfolding: Gold Class Cinemas is owned by Village Roadshow, an Australian company that has co-produced more than 60 films — many in partnership with Warner Bros. — including “The Matrix” trilogy and “Gran Torino.” In early 2009, Stern asked Warner Bros. if Big Picture could show “The Hangover” upon that movie’s release. His request was denied. Gold Class Cinemas, meanwhile, was allowed the play “The Hangover.” In an Oct. 30 letter to Warner Bros., Stern suggested that those facts showed Warner Bros. has “a severe conflict of interest” in Redmond.

Responding to Stern’s claims, Warner Bros. spokesman Scott Rowe said: “We are in ongoing talks with the Big Picture.”

“Warner Bros. Pictures,” Rowe added, “has a long history of tremendous support of small exhibitors and is proud of our relationships with them. As issues arise, we work hard to achieve mutually beneficial resolutions."

Survival of indie theaters
Given the sway of the big studios — and the theater clearances they grant — some indie cinema operators scan the business horizon and see a potentially sad ending.

At the Dietrich Theater in Pennsylvania, Morgan winces at the recent decisions by Regal and “the other big boys” to fill their multiplex screens with traditional “art house” fare — lower-budget movies like “Slumdog Millionaire” and “Crazy Heart” that are propelled by dialogue, not action; foreign-language films like “The White Ribbon"; issue-oriented documentaries like “The Cove"; and repertory or indie classics like 1972’s “Pink Flamingos.”

“I wouldn’t bet my retirement money on indie theaters,” Morgan said. “If it becomes the policy of Regal (and other theater chains) to show art films, then I don’t see how the little theaters can survive.”

Some indie cinemas (those not facing clearances) have remained robust by offering first-run commercial flicks along with beefy menus and well-stocked bars. With nine locations, Texas-based Alamo Drafthouse Cinemas bills itself as the only theater franchise that serves up a blend of movies and upscale meals, including coq au vin and hand-crafted beers. Company President John Martin said his concept, developed in 1997, is to provide “an entertainment destination that has something you can’t find at home — or at another theater in that market.”

“I see the indies having a chance to rise in the tide,” Martin said, “if they focus on being unique.”

Indeed, the script for indie success often includes the ability to pack live frills around the movies — for example, weeknight shows featuring comedy, private parties or chats with the movie makers.

At the Dietrich Theater, where revenues rose by about 15 percent last year, Morgan recently  ran a series of book discussions and a live play all centered on “The Grapes of Wrath.”

At the Bryn Mawr Film Institute near Philadelphia, president Goodfriend said her cinema set a box-office record in 2009. There, midweek opera fills seats on lighter nights. On the weekends, indie flicks like “A Single Man” and “The Art of the Steal” distinguish the theater from commercial megaplexes. Like many cinemas that cater to art film buffs, Bryn Mawr is a membership organization (6,100 strong) and a nonprofit, which enables its leaders to raise funds in the community. That business approach allows Bryn Mawr to stay true to its indie roots, resist booking mainstream mall-packing movies, and remain financially viable.

In fact, Goodfriend said she is convinced that “more and more” indie theaters will be “following our pattern” by becoming nonprofits, by building membership bases, and by leaning on the smart, little flicks that have long defined art house values: “great films, alternative culture, and repertory films, too.”