No competition

Last month, the Sacramento City Council agreed to bail out the struggling Esquire IMAX theater on K Street. But the IMAX’s sluggish attendance numbers may stem from a peculiar relationship with neighboring Century Theatres.

On March 7, Sacramento City Council approved a $75,000 subsidy of IMAX’s annual lease. Councilman Steve Cohn, the only member to vote no on the subvention, told SN&R that he is “concerned about the precedent of using redevelopment dollars to subsidize ongoing operations of business.” In spite of Cohn’s misgivings, an 8-to-1 majority (including Mayor Heather Fargo) opted to help IMAX through 2010.

The company’s previous lease, negotiated under former Esquire Plaza owner David Taylor, was the same as its now-discounted amount: $275,000. The new owners George and Angelo K. Tsakopoulos, after raising the annual lease by $150,000, agreed to forego $75,000.

One of the reasons the theater has been unable to meet attendance goals is an apparent restriction on what films can be shown at the theater.

IMAX, which last year saw a significant drop in revenue for films produced in-house (films like Deep Sea 3D or Grand Canyon: The Hidden Secrets), has begun employing a process called DMR (digital remastering) to transfer high-profile 35 mm Hollywood films to the IMAX format. (DMR revenues were up 18 percent in fiscal year 2005 while overall film revenues dropped by 1.4 million, or almost 5 percent.)

This DMR method has been a huge success for IMAX. For instance, one top-grossing film last month was not an in-house production, but instead a Warner Bros. release: V for Vendetta: The IMAX Experience (a DMR film). Vendetta’s opening weekend earned a per-theater average of $24,341, more than double the revenue of IMAX’s Deep Sea 3D. Unfortunately, Esquire IMAX missed out on Vendetta, losing approximately 2,500 potential moviegoers opening weekend. Esquire IMAX plans on screening the movie later this month.

Councilman Ray Tretheway, whose district includes both the Esquire IMAX on K Street and the Century 7 Downtown Plaza theater, told SN&R that if IMAX “could break away and get first-release [DMR] movies that are printed in the IMAX format, they’d have no problem—nearly overnight—making that 300,000 goal per year. But right now in close proximity are the theaters in Westfield that have not allowed them to run simultaneously new-release movies in the IMAX format.”

There are nine IMAX theaters in California. Two of them are embedded in educational institutions and show only educational films. Six others do show first-release DMR films. Esquire IMAX does not show first-release DMR films at its K Street location.

When asked why, Doug Link, theater director for Esquire IMAX, would not comment. Stacy Ivers, Warner Bros.’ vice president of corporate relations, refused to comment on the relationship between IMAX and Warner Bros. distribution. Warner Bros.’ president of theatrical distribution, Dan Fellman, told SN&R that screening Vendetta in Sacramento is “up to the IMAX operator. So, if he wants to play it and calls our office, I’m sure he can make a deal.”

Century 7 Downtown Plaza theater general manager Darrell Henson said he was unaware of any formal policy preventing Esquire IMAX from showing Vendetta at the same time as Downtown Plaza. But he acknowledged that Century has monopolized first-release films downtown. “As soon as we get rid of V for Vendetta, they’ll be able to pick it up, for some weird reason.”

Multiple calls and e-mail requests to Century headquarters for an interview went unreturned. IMAX’s Vendetta, which opened March 17 on 56 IMAX screens nationwide, has yet to open in Sacramento.

“I did it with some reluctance,” admitted Tretheway of his vote for the subsidy, “but the reality of it is IMAX has been running at a deficit for several years and stayed committed to stay in downtown Sacramento.”

Link distinguished the K Street location as “a strategic theater for IMAX Corp. If we’re not costing IMAX Corp. any money, it’s a great location for us to be.

“This is a marquee business,” Link added. “This isn’t just somebody going, ‘Hey, we’re not hitting our numbers because you haven’t done something. Give us some more money.’ This is the city protecting an investment. It’s not a lot of money.” Unlike some theaters in Sacramento, the Esquire IMAX is truly a pristine venue, he explained. “I could cut costs in a lot of ways and hit my bottom line,” Link mused. “I spent at least $15,000 last year on neon repair.”

Esquire IMAX currently takes in about 225,000 moviegoers per year. Tretheway acknowledged that if IMAX “could increase [attendance figures] by 75,000 … then the subsidy would go away. It’s not that big a gap to meet.”

Of course, Century Theatres’ apparent stronghold on first-release Hollywood films like Vendetta is a huge obstacle preventing the Esquire IMAX from bridging this gap.

“We’ve always had a hard time capturing the 15- to 30-year-old market,” admitted Link. “What these DMR films have done is brought that market into the theater.

“If we could do 300 to 350,000 people a year at this theater, we would be golden. Things would be great. We wouldn’t be asking the city for any help at all with our rent increase.” Link also believes that “with the full development of K Street, I am confident we’ll have no problem hitting those attendance goals.” He also sees a potential megaplex on K Street as “extremely beneficial” for IMAX.

While the Esquire IMAX struggles with its local situation, the IMAX brand will be challenged by changes in the film industry. In spite of the success of Polar Express and the Harry Potter films in the IMAX DMR format, the company is in transition, or what co-CEO Brad Wechsler has referred to as a “watershed” period. In a March 2006 interview with Time magazine, Star Wars director George Lucas proposed that in the future “the average movie will cost only $15 million.” Accordingly, a film like Polar Express, with a production budget of $165 million, might not get the green light in Lucas’ vision of a future Hollywood—nor would it be available, hypothetically speaking, as a DMR film.

IMAX also will no longer have a monopoly on 3-D technology. Century, which operates more than 80 screens in the area, recently announced the imminent rollout of 3-D-capable digital projection in its cinemas. Joe Berchtold, head of Technicolor Digital Cinema, told SN&R from Burbank that “by Memorial Day, we will have digital cinemas in Century Theatres in Sacramento.” Berchtold also noted that “two of the major digital-cinema projection manufacturers [NEC of Folsom and Barco of Rancho Cordova] are setting up shop” and that Sacramento will be one of the first markets to have this new digital technology.

Warner Bros.’ Superman Returns will be the first major Hollywood 3-D IMAX DMR release, which will hit theaters in late June. The new IMAX technology is in a nascent stage: Only 20 minutes of Superman will be in 3-D; during the film, a “visual cue” will let viewers know when they should put on their 3-D glasses.

It is unlikely, however, that IMAX will receive a first-release copy of the film; Century has dibs on it.