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Showbiz is psyched for cybermalls

Part theme park, part cineplex, with a splash of shopping mall and a high-tech veneer, a fledgling industry is putting together an unlikely cast of corporate characters.

The optimistic, if somewhat uneasy, bedfellows include signature entertainment companies, theatrical exhibitors, real estate developers, retailers and the public sector. From Times Square to Universal City, projects dubbed “urban entertainment centers” are attempting to create new revenue streams for recognizable names as diverse as the Walt Disney Co., Virgin Records and even Madame Tussaud.

The infant, mongrel industry, sometimes going by the unwieldy moniker “urban entertainment destination projects,” or UEDPs, has its leaders projecting multibillion-dollar revenues – yet exactly how the disparate players will jell once the construction dust has settled remains as sketchy as the still-forming nature of the projects themselves.

But the motivations are clear: Shopping center developers, having lost many of their anchor tenants over the past decade, are looking for a way to revitalize their industry, and see entertainment companies as rich in potential. Urban developers, having watched office construction creep to a halt, are grasping for projects. Public officials scrambling for ways to bring life back to crime-ridden inner cities see high-security UEDPs as a way to attract timid tourists and other shoppers. Entertainment companies like Disney and Universal hope to penetrate regional markets that can support more than a souvenir store but less – way less – than a full-scale theme park. Enter the UEDP.

New York City has no less than three UEDP projects currently under way:

* Disney, forging ahead with plans to turn Times Square’s dilapidated New Amsterdam theater into a state-of-the-art entertainment center, also is teaming with the city’s Tishman Urban Development Corp. as one of three bidders hoping to turn a porn-glutted site (near the New Amsterdam) into a glitzy hotel-retail-entertainment tourist haven.

* The Chelsea Piers, a Manhattan riverfront project combining an elaborate sports and recreation complex with film and television production studios, should be completed by year’s end.

* And Sony Theaters, which opened its flagship multiplex and Imax 3-D theater last fall, has plans for a four-plex in a Times Square center that would also house a Virgin Megastore and a $10 million sports-themed restaurant devised by Robert Earl, creator of Planet Hollywood.

Meanwhile, in Las Vegas, where the Forum Shops at the Caesar’s Palace casino melds a suburban shopping-mall sensibility with Ancient Rome kitsch, plans by its Santa Monica-based developer Gordon Co. now call for a 450,000-square-foot expansion. That project will include an Imax 3-D theater, a multiplex and a live show – or a pseudo-live show, at any rate: $16 million worth of special effects and animatronics will place 3,000 visitors in a “battle of the gods” scenario, complete with explosions and a simulated flood.

Those are only a few examples of what industry sources say are UEDPs planned or under way in 20 U.S. cities. The Irvine Co., a California-based developer, recently announced a partnership with the Edwards Theaters circuit to develop a 21-screen entertainment center in Orange County, a screen count that tops even the 18 screens at what some consider the quintessential UEDP, MCA’s Universal CityWalk. Along with 200,000 square feet of dining and retail space, CityWalk includes the multiplex, the Universal Amphitheatre and Universal Studios’ Hollywood theme park and tour, all packaged in a tidy replica of Los Angeles sans gangs and urban edge.

Given the sense of faux reality of the standard UEDP, it’s little surprise that theme-park pioneer Disney is taking an active role in the new industry. The company is leading the way in the proposed renovation of Times Square. But the challenges involved in cleaning up Gotham’s notoriously seedy neighborhood serve as a distillation of the problems facing UEDPs across the country.

Disney’s interest in Times Square began simply enough. Flush with the success of Broadway’s “Beauty and the Beast,” the company was looking for a place to house future theatrical productions, and after securing state financial assistance to help pay the reported $29 million in renovation costs, Disney settled on the decrepit New Amsterdam Theater on 42nd Street. Although Disney so far has kept mum on specific plans, the theater most likely will include some mix of theater and film or multimedia entertainment.

But even Disney can’t Disney-ize Times Square without help. Before making a final commitment to the state by July, the company “has to get comfortable that other players will participate” in the 42nd Street overhaul, says David Malmuth, VP and general manager of the Disney Design & Development Co. Disney clearly does not want to be the sole tourist attraction on an otherwise boarded-up block, and while Viacom is known to be considering plans for an MTV attraction there, plans for a Madame Tussaud’s Wax Museum recently disintegrated when its negotiations with the Lehman Bros, investment bank fell apart.

Unexplored area

The Tussaud-Lehman breakdown is only one example of the pitfalls that come when disparate companies join forces in what, despite all the UEDP hype, remains an unproven industry. “It’s a challenge,” says Malmuth, “to define a project that meets the financial and community interests of all the parties. It’s a worthwhile pursuit, but it’s very difficult.”

The common cause of profit notwithstanding, the mix of businesses poses some friction. In New York, the nonprofit, Washington, D.C.-based Urban Land Institute held a two-day seminar on UEDPs March 16-17, with reps from Disney, Sony, IMAX and Universal mingling with 500 mall developers, Coca-Cola execs and civic orgs from Dayton, OH; Pittsburgh; Bloomington, IN, and the like. While the mood was congenial and optimistic, Michael Rubin, a keynote speaker and president of MRA Intl., a Philadelphia-based consulting firm involved in the planning of 10 UEDPs around the world, conceded that the entertainment industry as a whole has yet to fully embrace or even understand the concept.

According to a professional paper penned by Rubin and two colleagues, UEDP partnerships are difficult to establish, and perhaps more difficult to maintain. “The operating methods, time frames, risk profiles, financial resources and objectives of developers and entertainment companies are remarkably different,” Rubin said. “Even the largest development companies are dwarfed by entertainment companies. Even the most swiftly moving entertainment group will be exceedingly bureaucratic in the eyes of developers.” Most projects that falter, he concluded, “will do so as the result of unsuccessful partnering arrangements.”

Perhaps that’s what was on the mind of one shopping mall exec at the New York seminars. After hours of listening to presentations about 3-D technology, virtual reality and other cutting-edge entertainment attractions, the developer addressed the panel with his chief concern. “I still have to be able to sell a hamburger,” he said.

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