A new theater chain with a verve for marketing has emerged out of the Southeast, and is expected to run smack into some big competitors.
At the opening last month of Regal Cinemas’ newest 14-screen theater outside Philadelphia with “Jurassic Park,” the exhibitor hired a dozen Elvis impersonators to jump from a plane 3,000 feet to the parking lot.
“It was a tremendous turnout,” recalled Greg Dunn, Regal’s marketing VP, with a laugh. Indeed, 5,000 people showed up for the spectacle and are likely to remember the newest venue.
Regal’s unique approach to grand openings is something of a trademark and guaranteed to continue, said Mike Campbell, 39, chairman and CEO of Regal.
So far, the recipe’s worked. The Knoxville, Tenn.-based chain sold one-third of its shares to the public last week at $ 13 a share, raising $ 22.75 million. The move paid down a majority of the company’s $ 24.4 million in long-term debt. The shares closed Friday at $ 13.75.
Just 3 years old, Regal used its borrowings to go on a buying spree, going from 48 screens in 1990 to 229 just two years later. That topped 318 in the first six months of 1993. As a result, last year’s operating income doubled to $ 4.7 million on an 80% increase in revenue of $ 40 million.
Campbell cut his teeth running Premiere Cinemas until he sold out to Cinemark , the country’s sixth-largest exhibitor, back in 1989. By January of the next year, Campbell had acquired one theater and with partners began constructing new properties in small towns throughout the South.
But times are different than in the roaring ’80s. Exhibitors have consolidated, with many regions dominated by one or two major players. While Regal is tightly run, it doesn’t boast the same margins as its larger rivals. Regal manages to eke out a 10% profit margin, while the top exhibitors wring out 15%-20%.
Cost controls will be critical if Campbell is to stave off competition from United Artists Theaters and Carmike Cinemas, the country’s No. 1 and No. 4 chains, respectively.
“You have two very strong operators; clearly each is going to protect its turf,” said Chris Dixon, an analyst with Paine Webber. “Carmike has the highest operating margins in the industry, with tighter control of expenses.”
That means it can afford to make higher bids for films and give bigger discounts to theatergoers. Another concern could be lack of growth opportunities.
“A lot of the markets have been cherry-picked, and you won’t find many places in the South,” said Mike Patrick, CEO of Carmike. “I don’t see any vulnerability.”
Carmike will open 100 screens between now and year-end, promises Patrick, many in the Southeast.
While Campbell has picked the middle markets, outside large cities, he figures there’s plenty of room for another exhib. “We’ve done a lot of research in the East, and there’s lots of zones or markets that will fulfill our growth strategy,” he said.
With a successful offering completed, Campbell can see if the market will make room for his mix of Elvis and movies.