Glut of movie megaplexes turning into financial flop

Regal Cinemas of Knoxville, Tennesse, is seeking debt relief

So many movies; not enough patrons

In this story: Reeling from a building rush Hit today, gone tomorrow What's a struggling movie chain to do? RELATED STORIES, SITES

(CNN) -- Put terms like cinema megaplex and blockbuster movie together and booming profits should be right behind, right? Not necessarily so.

In fact, many of America's biggest movie chains are suffering under crushing debt, the product of overexpansion.

Three of the nation's leading theater chains have filed for bankruptcy protection: Carmike Cinemas of Columbus, Georgia; United Artists Theatre Circuit, of Englewood, Colorado, and the Edwards Theatres Circuit of Newport Beach, California.

The largest U.S. chain, Regal Cinemas of Knoxville, Tennessee, with 4,500 screens, is seeking relief from bank agreements. The parent company of General Cinema Theatres, meanwhile, has said it may consider a bankruptcy filing.

The result has been an increasing trend to close older, outdated theaters as the major movie purveyors struggle to keep up.

During the 1980s and '90s, theater chains rushed to erect movie screens, fearing competition from cable TV, home video and satellite service, according to the Boston Globe. The chains borrowed heavily to build expensive and expansive cinema super sites.

"I like to describe it as business decisions that made a lot of sense individually added up to make some not-so-good sense collectively," said John Fithian, president of the National Association of Theater Owners.

In some cases, rivals such as Loews and AMC Theatres not only built in the same neighborhood, but on the block.

"Building theaters right down the street from each other with multiple screens oftentimes playing the same films has really put the squeeze on exhibitors," said Paul Dergerabedian, president of Exhibitor Relations Co.

The result of this building frenzy is some 39,000 movie screens nationwide. That's about 8,000 too many, analysts told the Globe, before the industry can return to profitability.

The number of moviegoers has not kept pace with the number of movie screens

Part of the financial equation that hurts theaters is movie durability. The longer the movie plays, the more theaters stand to make.

That's because movie studios collect most of the box office receipts when a film first appears. It's only weeks into a run that theaters can start to see a bigger take of the gate.

With a paucity of blockbusters of late, the revenue streams just haven't been flowing the way theaters would like.

"It was the kind of summer where everything went out big, dropped and went away," said Anne Thompson of Premiere Magazine. "You didn't have a lot of sleepers with big legs --as they say long legs -- in the business."

Exhibitors are now looking for ways to attract more customers and improve their bottom lines.

They are showing shorts between films such as "X-Games" highlights or giving away free movie tie-ins such as trading cards when customers purchase a ticket.

Then there is the let-them-pay-to-be-pampered experiment.

"Another innovation that we're finding very successful,' said Fithian, "is the so-called luxury theater experience where you can go and for a premium price have table service."

Running television-style commercials is another strategy. Though not always a hit with viewers, the ads do bring in money beyond the sale of buttered popcorn and hot dogs.

For struggling theater chains, it's been an odd twist on "Field of Dreams." Build it and they will come -- if you're lucky.

CNN Entertainment News Reporter Paul Vercammen and CNN.com Writer Jim Tyrrell contributed to this report.

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Carmike Cinemas
United Artists Theatres
Regal Cinemas
General Cinema
Premiere Magazine

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