Regal Outlines Theater Diversification Plan

By Robert Marich

   Oct. 24, 2008 -- Cinemas are diversifying into new or higher revenue businesses that should enable movie theaters to evolve in a way that they not only survive – amid the video explosion – but thrive.
   Regal, which is the biggest U.S. circuit that expects to end this year with 6,795 screens at 551 locations, outlined this growth strategy in an investors conference call this week. The Knoxville, TN-based theater circuit giant will increase its count of big-screen IMAX auditoriums to 52 by end 2010 from 18 now, equip more regular screens at its multiplexes with 3D capability, and project non-cinema content such as concert using electronic digital projection, which is replacing mechanical projectors.
   “A key element to Regal’s strategy in the next several years will be to provide enhanced theater going experiences,” Regal Entertainment chairman and CEO Michael Campbell told investors. All its initiatives generate higher average ticket prices than conventional screens. Regal’s annual revenue runs at $3 billion.
   Added Campbell, “As of today there are a total of 40 3-D films announced for release over the next several years and we are pleased with the studios’ commitment to this premium content which also allows us to price at a premium compared to our existing 2-D ticket prices.”
   In another indication cinema is not dead, Regal likes to point out it paid dividends $18.46 in cash to shareholders since its initial public offering, which was priced at $19.00 in May of 2002. The stock traded in the mid teens, until slumping to $11 a share in the recent Wall Street meltdown.
   In the conference call, Regal said it is able to fulfill its new cinema building commitments, despite the recessionary economic environment. However, because those new cinemas are one part of big shopping malls, it is dependent on mall developers keeping their building schedules. Because commercial property and consumer spending is in a funk, Regal sees its new cinemas slowing somewhat because property developers will probably push back some malls.