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Toho still a giant in the film business

Japanese distributor stomps on 75 years later

TOKYO — Toho is an old-time Hollywood mogul’s dream: a vertically integrated behemoth with its own theater chain and studio — both the biggest in the country — whose lineup dominates the domestic B.O., year after year, decade after decade. In 2006, eight of the 10 top-grossing local pics were distribbed by Toho, including all of the top three.

Like its signature character, Godzilla, Toho is so formidable as to be in a class by itself. But unlike the Big G, Toho has a deep-rooted corporate culture and strategy, not merely a killer stomp.

Celebrating its 75th year since its founding by Osaka railway magnate Ichizo Kobayashi in 1932, Toho is a core member of the giant Hankyu Hanshin Toho Group, which includes hotel, travel, department store, real estate and railroad companies as well as another Kobayashi creation: the Takarazuka all-woman theater troupe that has been a national institution since 1914.

Group membership has its advantages — such as Toho’s PR ties with the Hanshin railroad that puts its posters into Hanshin’s stations and trains — but Toho management operates the company independently, save for two HHT Group execs who sit on the Toho board.

Led by former inhouse producer Hideyuki Takai, the Toho management team pursues a strategy that flows directly from its origins as an owner and operator of legit theaters and pic palaces.

“Toho entered the film business from the hardware side,” prexy Takai says. “In other words, we began with good theaters in good locations — and we’ve built the company on that foundation ever since.”

The goal, says Takai, is to “be a well-rounded company in terms of production, distribution and exhibition, providing healthy entertainment to the Japanese public.”

The Toho chain today encompasses 560 screens across the country, including those of Toho affiliates. Many are in central downtown sites coveted by major Japanese producers and Hollywood distribs. From January to June 2007, B.O. revenues from all chain theaters totaled ¥22,485 million ($190 million), 1.4% ahead of the same period last year, while admissions amounted to 17.8 million, for a year-on gain of 2.2%.

In early August, at the peak of the summer holiday season, Toho theaters were showing not only pics from Toho’s own lineup, including the latest “Pokemon” toon and live-action fantasy “Monkey Magic,” but “Transformers” (UIP), “Ratatouille” (Buena Vista), “Live Free or Die Hard” (Fox), “Spider-Man 3” (Sony) and “Volver” (Gaga).

Toho also manages legit theaters, including the cavernous 2,000-seat Imperial Theater in Tokyo’s Hibiya entertainment district and Theater Crea, a new 600-seat venue that will open in November near Toho’s Tokyo headquarters. Legit B.O. is expected to total $109.3 million in fiscal 2007, for a year-over-year rise of 2%.

In many cases, Toho owns not only the theaters themselves, but the land they’re built on — an arrangement that has long laid a solid foundation for corporate profits. “Movies are a risky business,” Takai observes. “It’s impossible to know in advance how well a film is going to do. Our real-estate business adds an element of stability.”

In the 1980s, Toho’s conservative corporate culture seemed ill-suited to the era’s bubble economy, when Japanese stock and land prices were soaring. Toho resisted the temptation to invest out of its corporate comfort zone while others in the biz were taking plunges in golf course development, condo building and other real estate speculation — and reaping huge paper fortunes.

When the bubble burst in the early 1990s, the corporate wreckage extended as far as the eye could see, but Toho stood tall. “Some of the land that had been bought for ¥10,000 (during the bubble era) was worth ¥100 afterwards,” Takai comments. “We didn’t have that kind of damage because we didn’t speculate. It was really a happy result for us. When the multiplex boom started in 1993 with the first Japanese multiplex in Ebina (a Yokohama suburb), we had the resources to grow our theater chain.”

Now that land prices are on their way back up — in 2006, they surged 17% in Tokyo — Toho is not only reaping larger profits, but is aggressively developing its properties to ensure future growth.

The core property is Toho’s studio in the Tokyo suburb of Seijo Gakuen, where the company has poured $42 million into a five-year renovation and expansion project. By the time work is completed in the spring of 2008, the studio will have two new 7,100-square-foot soundstages, for a total of 12, as well as a new post-production center, office building and actor’s center.

With a capacity for 30 features annually, the 84,400-square-foot studio is Japan’s biggest. It also available for rental by outside producers, including rival Shochiku, which recently lensed the Hideo Nakata horror “Kaidan” there.

“We’ve built it for the next half-century,” Takai says, “for the whole Japanese film industry.”

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