Exhibs gloat over summer glut

Theater operators look to be the primary beneficiaries of the glut of films battling for screens this summer. At least, that’s what Wall Street is banking on, as investors continue to push up the share prices of exhibitors like Carmike Cinemas, Cineplex Odeon and AMC Entertainment.

While the stocks of exhibitors historically rise before summer and Christmas — the heaviest moviegoing times — this year’s optimism seems to go beyond the typical seasonal trend. With more than 60 films on deck, including heavyweights like “Jurassic Park” and “Last Action Hero,” there is speculation that the summer of ’93 is poised to beat the record $ 2.1 billion box office collected in 1989.

And that puts exhibs in the catbird seat. “Theaters are in a no-lose situation,” says Ira Korff, head of National Amusements. “Even if the product isn’t particularly good, there’s plenty of it. Quantity does translate to the bottom line. And with those kinds of numbers you also increase the odds that something’s going to hit.”

The wealth of product — roughly 33% more than last summer — also prodded studios to expand the traditional Memorial Day-to-Labor Day summer window. Universal’s “Dragon” and Warner Bros.’ “Dave” have both performed well with early release dates. Exhibitors consider the longer season a bonus. “The longer we have that summer window the better that’s going to be for us,” says Peter Brown, chief financial officer of AMC Entertainment.

Some industry watchers are concerned that exhibitors may be overpaying for some of the big-budget releases. “Some of the rental terms the studios are asking on the big pictures are exorbitant,” notes John Krier of Exhibitor Relations. “That doesn’t leave much for the theaters. If they put an aggregate of 55% to 60% on some of these films and they don’t earn it, the only way the exhibitor is going to get by is on his concessions.”

And not everyone believes the glut will necessarily work to the exhibitors’ advantage. “Theater owners get their biggest percentage from films that have legs,” notes entertainment stock analyst Lisbeth Barron of S.G. Warburg. “If each of these films only lasts a week or two, the exhibitors are going to be paying the distributors a high percentage of the box. They need a half-dozen to a dozen strong films that have longevity, and that’s not clear yet.”

But the general optimism is fueling investment in publicly traded exhibitors. The share price of Cineplex Odeon has doubled since the end of March; it closed Friday at $ 2.25. Carmike has also been strong in recent weeks. Its Friday close at $ 16 represents a 13% gain since the beginning of March. AMC, which gave back some gains last week to close at $ 7.75, is still up 20% since the beginning of the year. The Variety/Furman Selz Exhibitors Index gained .9% to close Friday at 113.4, up 42.3% over the same time last year.

While some of those gains have to be attributed to business developments at the companies involved — Cineplex Odeon has done an excellent job restructuring its debt and curtailing costs and recently went cash-flow-positive, while AMC has benefited from a management realignment — much of the interest is being generated by the potentially huge summer payoff; many in the industry expect the box office to expand by 25% over last summer’s $ 1.9 billion.

Unlike last summer, which opened big with “Lethal Weapon 3” and “Sister Act” only to sputter out in the dog days of August, there are major releases scheduled for every weekend into September.

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