With closing of competing theaters, Wichita becomes a Warren town

11/14/2012 5:30 PM

11/14/2012 5:30 PM

The Northrock 14 has closed, leaving Bill Warren the last man standing.

What’s that mean for Wichita? And how likely is it that Wichita will get competing theaters?

While there’s no predicting what an aspiring entrepreneur could do, those in the industry say the market isn’t inviting competitors.

Warren had close to a monopoly on the Wichita movie scene already, as the number of his screens grew during the decade and the Northrock cinemas struggled.

Twenty or so years ago, Wichita had a variety of smaller theaters with different owners. But as Warren built a movie palace on the west side and then opened more screens on the east side and downtown, the smaller theaters folded.

Dickinson Theatres closed its older Northrock 6 in 2003.

No one has rushed to open competing theaters since. Wichita is pretty much a Warren town.

Nor do many movie-goers seem to be demanding competition, either.

“I like the quality,” said Paula Hearn of Wichita, who was about to see “Skyfall” at the Warren Old Town Tuesday night. “I’ve been to ones in Kansas City, AMC, and these are better.”

But, she added, it’s always nice to have choices.

“I would like other options, just because the prices seem so high,” she said.

Warren

Warren, who didn’t return several messages for comment for this story, has said in previous interviews that he hasn’t abused his near-monopoly in the past and won’t abuse his monopoly now.

At the time of the Dickinson announcement in late September, he said in an interview that he has raised ticket prices only when his costs increased, and not as his market position has gotten stronger.

“Anytime you raise prices you create a barrier,” he said. “Any business will not raise prices unless they have to.”

The record shows his price increases are roughly in line with movie ticket price increases nationally.

In 2003, Warren’s tickets were $7 for an adult evening ticket and $5 for the matinee, according to the website. Today, tickets are $10 and $7, according to his website.

The National Association of Theater Owners computes that the average ticket price between 2002 and 2011, the most recent year available, a rise of 37 percent. Had Warren’s ticket prices been calculated from the decade ending in 2011, without accounting for an increase this year, the increase in cost for an evening ticket would have been 29 percent.

As a comparison, the U.S. consumer price index, which measures prices generally, rose 25 percent over the decade.

One reason for the restraint: Even monopolies have trouble raising prices if their customers have other options entirely.

And movie tickets are a perfect example of discretionary buying. There are plenty of alternatives, including DVDs at Red Box, streaming video from Netflix and other companies.

Warren, in September, said he feels plenty of competition from other forms of leisure.

“Everyone thinks the other theaters are the main competition,” he said. “They’re not. It’s restaurants. It’s football. It’s downtown. That’s our competition. Don’t worry about trying to compete with your competitors. Do the best job you can and the rest will take care of itself.”

Competitors

Warren in the past has said his strategy has been about winning market share by offering better value than other theaters. That has translated into stylish, well-maintained theaters, with such amenities as seats that mold to your body and large screens.

He also offers a range of premium theater experiences for higher prices, such as IMAX and dinner theater, as well as discount viewing, such as at the Movie Machine at Towne West Square.

One interested observer to the changing movie scene is Brian Mitchell. A farmer by trade, he laughs when asked about buying 11 theaters with 81 screens in small towns across five states in recent years. He says it’s “a hobby out of control.”

He owns theaters in El Dorado and at Strother Field, between Winfield and Arkansas City. He tangled with Warren when he bought the Chisholm Trail shopping center south of Newton in 2006 and terminated Warren’s lease to operate the shopping center’s theater so he could operate it himself. Warren threatened to open a competing multimillion-dollar retail center nearby and offered discount movie tickets to lure patrons to Wichita.

But Mitchell said he has nothing but respect for Warren’s operation. And, he added, the ticket prices are reasonable for the value.

“You’ve got to give Bill credit, his theaters are first class,” he said. “I wouldn’t see anyone coming into town with a normal theater because going up against the Warren would be a tough go.”

High cost of entry

It costs close to $1 million per screen to build a movie theater, said Richard Herring, owner of a movie theater consultancy called Start A Movie Theatre. And any entrant would have to build at least 12 screens.

So, he said, the price of entry for a regular commercial movie theater is high.

And, he said, movie distributors want theaters to be more than five miles apart to reduce cannibalization, cutting the number of prime locations.

“It’s hard to build in an existing market, especially one with an established exhibitor,” Herring said.

He said he gets calls all the time from people wanting to open a theater, but they’re usually people who although they like movies, they don’t know anything about the financial realities of running a theater.

And the growth in the movie industry isn’t encouraging. Nationally, the number of people watching movies in theaters is stagnant and viewership per person is falling.

To combat the trend, the movie theater industry keeps trying to enhance the movie-going experience with new technologies. For instance, “The Hobbit” will be shown next month in some theaters at a higher frame rate to give the picture a hyper-realistic look.

“They’ve improved the visual and the next big leap will be the sound, for something that can’t be imitated in the home,” Herring said.

But, he said, many of the technological enhancements cost money. Meaning, newcomers would have an even harder time entering the market.

“It’s all about consolidation and downsizing and greater efficiencies,” he said.

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