Los Altos Opinions Exchange

Theater economics

Issue: Downtown Parking
Date of Posting:12/5/00
Author: King Lear

Mr. Rees has some understandable concerns about the economic viability of a new theater in Los Altos, based on the many bankruptcies of theater chains in the news these days.

We need to understand why these theater chains are declaring bankruptcy and closing theaters, how those reasons may apply to locally owned theaters, how they might apply to a theater in downtown Los Altos, and finally what the worst case loss to the city would be if a theater were to fail.

The chains in trouble are going bankrupt to get out of long term leases to stem profit losses. Most of the theater chains in trouble are national chains, thus their decision is not tied to our local economy. They are typically guilty of incurring large debt loads to buy out other chains and/or build many new theater complexes. The locally owned Camera Cinema who is proposing a theater as part of a multiuse development proposal at Main and First Street has been in business locally for 25 years and has never had a failure yet and is not contemplating one. The Century Theaters, including the Mountain View complex off Shoreline, is also doing just fine. While there was a lack of blockbuster movies introduced this summer, there is no long term trend that says movies are out.

This may be contrary to intuition, but an excellent time to put in a new theater is during tight times in the theater business. This insures that the business plan at the start is practical during such conditions and therefore will be successful at all times. This is similar to buying stock when everyone else is selling theirs. If you do it intelligently, you can be very successful.

I am very confident that a theater in Los Altos would succeed, even if others in our area were to have difficulty. It would be a modest theater with 600 to 700 total seats divided into multiple screens, so it does not take a lot of attendees to make a profit. An average attendance of about 30% is profitable for many theaters. It would be modern with stadium seating in at least the larger of the screen rooms giving it a good start as the most attractive theater around.

Finally, and this is the key to its long term success, it will be in the heart of a wonderful downtown with safe and walkable access to restaurants, cafe’s and shops, and plentiful parking for the evening shows. None of the competing theaters in our area have this delightful advantage. There are 40,000 people living in the 94022/94024 area called Los Atlos/Los Altos Hills who would always choose our local theater for such entertainment, given that it is in their Downtown and that the shows are the type they enjoy (high quality). There are also many in Mountain View who have already adopted our Downtown as their preferred area to shop. The theaters that will suffer will be the ones showing similar movies in Mountain View, Palo Alto and Menlo Park without a Downtown Village atmosphere to attract them before and/or after the movie.

Mr Rees is concerned that if a theater were to fail, we would be stuck with a white elephant in full view on Main Street. But that low risk has been considered by the developer with a fail safe design. In the first place, if the marquee on the corner were to be taken down, the develpment’s external appearance would have no residual evidence that a theater was ever there. There would still be an indoor/outdoor cafe’ on the corner and shops along First Street. There would still be condominiums upstairs. The internal theater space with about 11,000 square feet near Foothill Expressway would be converted to office space with a lobby entrance off Main Street. The office spaces would not be Class A but would still lease for more than the theater paid.

Problems, questions please contact webmaster@los-altos.org