Moviehouse

Market feasibility overview
Hempstead,
NY

June 2012

MOVIE THEATRE

Overview

Members of Renew Hempstead have suggested and shown strong support for development of a movie theatre in downtown Hempstead. Renaissance Downtowns engaged our firm to explore the potential market viability of a movie theatre. This brief summarizes our findings.

In comments on the Renew Hempstead website, members recommended the following possible characteristics for a downtown movie theatre:

 Small community theatre  Smoke free  Locally owned, not a chain  Security  Collaborate with Hofstra  Not too many seats in one theatre  Host student films, documentaries  Stage for open mic night  Family nights  Alternating screen  Should have regular snacks  Solar power  Free wifi  Reduced ticket price for bringing in  Mini arcade inside recycled things  Lounge area  Recycled popcorn bags as well as cups  Stores inside the movie theatre  Every fifth visit is free  A little bar for older people  Major motion pictures and Sundance  Red carpet in the entry

Many of these characteristics would likely be feasible; others would likely be dependent on the specific business model adopted by the theatre.

Industry profile The film exhibition industry has undergone dramatic changes over the past several decades, driven largely by three factors:

Community Land Use + Economics Group, LLC www.cluegroup.com

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1. The practice of “clearance” effectively gives preference to chain theatres to exhibit first-‐run movies, making it difficult for independently owned movie theatre to exhibit new major-‐ release movies.

2. Streaming content from online sources now makes it easy for people to choose from a vast range of movies and watch them in their homes and on mobile devices. This has had a measurable impact on the movie theatre industry: according to the Motion Picture Association of America, 1.57 billion tickets were sold in 2002, versus 1.28 billion in 2011. It is affecting film exhibition in several indirect ways, including increasing ticket price sensitivity and underscoring the importance for theatres to generate revenues from concession sales, facility rentals, special events, and other methods.

3. Digital film distribution now makes it possible for theatres to offer a much broader range of content than ever before – not just movies, but also live concerts and sports events, corporate videoconferences, videogames, distance-‐learning classes, and many other activities. In slightly more than a decade, digital cinema has become the industry standard; most new movies will be distributed in digital format, and many older movies are being converted from film to digital. Digital projection equipment is considerably more expensive to buy and maintain than film projection equipment – digital projection equipment averages approximately $100,000 per screen (versus roughly $50,000 per screen for film projection equipment), has a shorter lifespan than film projection equipment, and can cost $5,000-‐
$10,000
annually to maintain. But, because digital distribution makes it possible for theatres to offer a broader range of programming, during a broader range of operating hours, it also offers the possibility of increased revenue to theatre operators. Over half of all movie theatre screens are now digital.

In order to exhibit commercial films, theatres lease films from film distributors who, in turn, work on behalf of and in partnership with movie studios. Theatres typically keep between 20-‐25 percent of ticket sales during the first few weeks the film is exhibited at the theatre; the remaining 75-‐80 percent goes to the studio (the exact percentages are negotiated for each film). The percentage of revenue from ticket sales retained by the theatre gradually increases after the first several weeks the movie is offered, sometimes up to as much as 75-‐80 percent after a month or more (by that time, however, most people interested in seeing the movie have already done so, so attendance is typically low). Depending on the film, movie studios and distributors may also require that a theatre make a certain minimum number of seats available; this often makes it difficult for small theatres to obtain popular new releases. For these reasons, many movie theatres have relied heavily on concession sales for several decades. And, it is now almost imperative that a theatre offer expanded programming and a broader range of activities than theatres have typically offered in the past. Some theatres earn additional revenue from video games, vending machines, and other minor ancillary products and services.

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In recent years several chain movie theatre companies have begun developing movie theatres offering a more upscale viewing and dining experience, with features such as reserved seats, superior food and bar service, chair-‐based ordering, wifi, and reclining seats. These include Cobb Theatres’ Cinebistro1, Sundance Cinemas2, AMC’s Dine-‐In Theatres3 (Fork & Screen for casual dining and Cinema Suites for premium dining), Muvico4, and Regal’s Cinebarre5. None have outlets yet on Long Island – or in New York City (there is a Sundance Cinema in Westchester, a Muvico in Meadowlands, and three AMC Dine-‐In Theatres in the New Jersey suburbs). There are several independently owned theatres in the metropolitan area offering above-‐average snacks, such as Angelika, at 18 West Houston, which has a café serving snacks and non-‐alcoholic beverages, and ReRun Gastropub Theatre, in Brooklyn’s DUMBO – but none are convenient to downtown Hempstead.

The 42,390 movie theatres in the US and Canada In 2011 grossed $10.2 billion in ticket sales, an average of $240,622 per screen. Recently built suburban theatres have an average of roughly 225 seats per screen, with an average of 6.5 screens per theatre; recent town center theatres tend to have fewer screens, with theatres varying in size between 125-‐250 seats. New film venues typically average approximately 7.5 -‐ 8.5 square feet per seat. Multipurpose theatre are slightly larger, with roughly 8.5 – 9.25 square feet per seat. In both, seats are typically 23” wide, with rows spaced 36” apart – so, about 15 seats (three rows of five seats each) need a roughly 10’ x 10’ area. Stadium seats and reclining seats need slightly more space. Theatres used primarily for performing arts arrange seating more efficiently – but, because of larger stage and backstage space requirements, they average about 10.25 – 11.5 square feet per seat.

In the US, frequent moviegoers drive movie theatre sales, with roughly 10 percent of moviegoers responsible for roughly half of all ticket sales (“frequent” meaning attending a movie one or more times per month). Overall, men and women are equally likely to go to a movie theatre, but Hispanics and people between 12-‐24 years of age are the most frequent moviegoers, relative to their respective demographic categories.

African American Caucasian Hispanic Others % of population 12% 65% 16% 7% % of frequent moviegoers 10% 56% 24% 10%

Table 1. Frequent moviegoers, by ethnicity. Caucasians represent the largest ethnic group attending movies but, of all ethnic groups, Hispanics are more likely to be frequent moviegoers (Source: Motion Picture Association of America, “2011 Theatrical Market Statistics”). 1

www.cobbcinebistro.com

www.sundancecinemas.com/about.html 3 www.amctheatres.com/dinein/ 4 go.muvico.com 5 cinebarre.com
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% of population % of frequent moviegoers

2-‐11 14% 7%

12-‐17 8% 16%

18-‐24 10% 19%

25-‐39 21% 28%

40-‐49 14% 9%

50-‐59 14% 9%

60+ 19% 12%

Table 2. Frequent moviegoers, by age. 25-‐39 year-‐olds represent the largest age group attending movies. People between 12-‐24 are more likely to be frequent moviegoers (Source: Motion Picture Association of America, “2011 Theatrical Market Statistics”).

Market demand Using data from the 2010 Census of Population and the 2010 Consumer Expenditure Survey, we examined the market demand for theatre admissions (film and live performances) and for snacks and nonalcoholic beverages generated by residents of three geographic areas: Hempstead, Nassau County, and the Census tracts within a roughly five-‐mile radius of the Main/Jackson intersection. We based our estimates of market demand on the household income characteristics of the residents of these three geographic areas, as household income (versus age, household size, or other demographic characteristics) is typically the most significant determinant of how people spend money for admissions-‐based entertainment.

For each of these two business categories and three geographic areas, we developed estimates of how much market demand a new theatre in downtown Hempstead might be likely to capture (assuming good management and marketing, adequate capitalization, and other sound business practices), based on minimal, moderate, and aggressive levels of market penetration (Tables 3 and 4). “Minimal”, “moderate”, and “aggressive” are relative, but some rough benchmarks include:

 Minimal:

o Online ticketing o Average film programming o Average concessions o Average seating o No special discounts o Operating hours: evenings after 4-‐5pm; weekends after noon

 Moderate:

o Online ticketing o Occasional special programming o Theatre rentals for special events o Average concessions

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o o o o 

Better-‐than-‐average seating Discounted tickets for shows beginning before 5:00 pm Loyalty program for frequent moviegoers Operating hours: weekdays after noon; weekends after 9:00 am

Aggressive: o Online ticketing o Diverse programming, including first-‐run films, independent films, niche-‐interest films, live music and sports broadcasts, fashion shows, on-‐screen videogame competitions

o Occasional live performances o Theatre rentals for special events o Superior concessions o Superior seating o Loyalty program for frequent moviegoers, with superior benefits o Operating hours: weekdays and weekends after 8:00 am

The estimated market demand outlined in Tables 3 (for theatre admissions) and 4 (for snacks and non-‐alcoholic beverages) does not include other product and service lines that might possibly be added to a new downtown theatre’s business plan. For example, the theatre might offer beer or wine as part of its concessions (with appropriate licensing and insurance, of course), significantly boosting concession sales. Or it might rent kiosks or shallow storefront space (most likely in space flanking the lobby) to other, compatible businesses, generating income from subleases.

Geographic area

Theatre admissions
Hempstead

Census tracts Nassau County Total Total demand
$

2,034,000 10,117,000 87,344,000

Est. capture rate

Minimal 1.50% 1.00% 0.15%

Moderate 4.00% 2.75% 0.25%

Aggressive 6.50% 4.50% 0.35%

Est. capture targets

Minimal $ 31,000 101,000 134,000 $ 266,000

Moderate 81,000 278,000 223,000 583,000

Aggressive 132,000 455,000 313,000 900,000

Table 3. Consumer demand and estimated sales capture targets for theatre admissions. Minimal, moderate, and aggressive capture rates are dependent on the strength of business plans and success of implementation (Sources: 2010 Census of Population, 2010 Consumer Expenditure Survey, CLUE Group)

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Snacks + non-‐ alcoholic beverages
Total demand
Est. capture rate

Minimal

Moderate

Aggressive Est. capture targets

Minimal

Moderate

Aggressive

Geographic area Hempstead $ 2,779,000

0.50% 0.75% 1.00%

14,000 21,000 28,000

Census tracts 11,676,000

0.25% 0.50% 0.75%

29,000 58,000 88,000

Nassau County 99,191,000

0.01% 0.02% 0.03%

10,000 20,000 30,000

Total

53,000 99,000 145,000

Table 4. Consumer demand and estimated sales capture targets for snacks and non-‐alcoholic beverages consumed away from home. Minimal, moderate, and aggressive capture rates are dependent on the strength of business plans and success of implementation (Sources: 2010 Census of Population, 2010 Consumer Expenditure Survey, CLUE Group)

Regional supply We identified eleven movie theatres within a five-‐mile radius of the intersection of Jackson and Main Streets in downtown Hempstead, with a total of 54 screens (Table 5).

Name Street address City Screens AMC Loews Fantasy 5 18 N Park Ave Rockville Centre 5 AMC Loews Roosevelt Field 8 630 Old Country Rd Garden City 8 AMC Raceway 10 1025 Corporate Dr Westbury 10 Clearview Franklin Square 989 Hempstead Tpke Franklin Square 6 Clearview Herricks 4 3324 Hillside Ave New Hyde Park 4 Clearview Grand Avenue Cinema 1841 Grand Ave North Baldwin 5 IMAX Dome (Cradle of Aviation Museum) 1 Davis Ave Garden City 1 Malverne Cinema 350 Hempstead Ave Malverne 5 Merrick Cinema 15 Fisher Ave Merrick 4 UA Lynbrook 6 321 Merrick Rd Lynbrook 6

Table 5. Movie theatres within five miles of Jackson and Main. In total, these eleven theatres offer 54 screens (Sources: Polk City Directories, CLUE Group)

These eleven theatres offer a diverse range of experiences. AMC Loews Roosevelt Field offers stadium seating and digital projection; AMC Fantasy and AMC Raceway offers digital projection (but not stadium seating). The three Clearview theatres are reported to be in poor repair and to

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offer uneven service and, therefore, to have declining attendance levels – but they offer free movies one night each week to Optimum Triple Play subscribers, which has won them some customer loyalty. AMC Loews Fantasy Five and Malverne are in town centers, and both receive high marks on Yelp for location, quality, and service. Malverne Cinema 4 offers independent and foreign films. Merrick Cinema (the only independently owned of the theatres we identified) offers special discount days and is reputed to have good sound equipment. Lynbrook is a historic theatre but is reported to be in poor repair, and community leaders have considered a plan to demolish the building and replace it with a newer theatre. Former Lynbrook mayor Brian Curran told a Five Towns reporter last year that a new downtown movie theatre could “…ignite a 10-‐ year to 15-‐year business boom for the downtown, similar in the way that the Fantasy movie theatre in Rockville Center did it in the 1990s for Rockville Centre.”6

Because of the possibility that a new movie theatre in downtown Hempstead could also host live performances, we attempted to assemble a list of performing arts theatres within a five-‐ mile radius of Jackson and Main. In assembling the list, we focused on theatres similar in size to a potential downtown movie theatre. We found no comparable theatres. There are numerous theatre, music, and dance companies within this radius, but all those whose audiences and space requirements are comparable to those that might be provided by a downtown movie theatre with capacity for small live performances appear to rent space from area churches, schools, and civic institutions.

It is worth noting that there are two historic theatre buildings in downtown Hempstead that are still used for public assembly purposes:

 The Hempstead Theatre, at 310 Fulton Street, opened on April 29, 1922. It was designed by architect Eugene DeRosa and developed by Salvatore Calderone. Calderone also developed the Calderone Concert Hall in Hempstead as well as theatres in Glen Cove, Lynbrook, Mineola, and Westbury. The Hempstead Theatre had a seating capacity of 1,500 and featured both first-‐run movies and vaudeville shows. The building was used for several years by the Department of Motor Vehicles; it now houses the DRC Christian Fellowship.

 The Calderone Concert Hall, at 145 N. Franklin Street, was the last of the theatres developed by Salvatore Calderone on Long Island. With almost 2,500 seats, it is reputed to have been the largest movie theatre on Long Island. Like the Hempstead Theatre, it featured both first-‐ run movies and live performances. The Calderone hosted hundreds of classical, jazz, and classic rock concerts in the 1970s and 1980s – most to sold-‐out crowds – including performances by the Grateful Dead, David Bromberg, Linda Ronstadt, Aerosmith, the Allman Brothers Band, Van Halen, Dire Straits, and Jefferson Airplane. The building is now used by Faith Baptist Church.

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http://fivetowns.patch.com/articles/closest-‐movie-‐theater-‐to-‐five-‐towns-‐may-‐be-‐redone

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A third theatre developed by Calderone – the Rivoli – has been demolished. It stood at the corner of Main and West Columbia.



The building at 80 Main Street was originally an auto dealership (the Nassau Garage, built in 1910). Several years later it was converted for use as a 500-‐seat theatre – first the State Theatre, then the Fulton, then the Fine Arts Theatre. It now houses a variety of shops and offices.

Discussion
There
are 54 screens in the Census tracts within a five-‐mile radius of the intersection of Jackson and Main. With a population of 182,129 living within this five-‐mile radius, there is one screen for every 3,373 residents. Fifteen of these screens are in three theatres that are somewhat outdated and in poor repair, and one is a specialized theatre (the IMAX theatre at the Cradle of Aviation Museum). If we remove these from the analysis, the ratio of residents to movie screens becomes 4,793 residents per screen. The US/Canada average is 8,229, suggesting that the local market might be saturated.

But, there are two important mitigating factors. First, there are currently no movie theatres in Hempstead itself. So, although there are a number of theatres within a five-‐mile radius, none are convenient to most Hempstead residents. Second, with only a small handful of exceptions, the movie theatres within this five-‐mile radius offer essentially the same programming: current-‐ release, first-‐run, mainstream films. By offering standard programming fare to Hempstead residents, a new downtown movie theatre could capture some of the market demand now leaving the community for theatres in nearby communities. And, by also offering non-‐standard programming, a new downtown movie theatre could function – at least for some of its events – as a regional destination.

We therefore believe that, with aggressive marketing, sound management, diverse programming, and several solid revenue streams from several sources (ticket sales, concessions, and facilities rentals), a downtown movie theatre with the capacity to also host small live performances could succeed in downtown Hempstead. We also believe that a downtown theatre is essential to creating a vibrant evening economy in downtown Hempstead, bolstering business for current and future restaurants and making the district more attractive to current community residents, new downtown residents, commuters, and visitors.

Some suggestions:

 Develop the theatre as a multi-‐purpose theatre that generates revenue from a broad range of programming and related products and services. At a minimum, these programming products should include:

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o o o

o o o o First-‐run feature and independent films Niche films, of particular interest to specific audiences (e.g., specific ethnic groups; people with specific hobbies or interests) Lunchtime and after-‐work films and live event broadcasts targeted primarily to downtown workers – events such as NASCAR races (and other live, streaming sports events), fashion shows, and replays of historic sports events. Instructional programming targeted primarily toward adult learners Live, streaming religious services Children’s programming On-‐screen video games (Guitar Hero, etc.)

Programming Feature films

Target market General public

First-‐run niche films

Special-‐interest groups

Live, streaming sports events Special-‐interest films + programs Instructional programming Simulcast religious services Children’s programming On-‐screen video games

Downtown workers Downtown workers Adult learners Religious groups Children, families Teens

Timeframe Th-‐Sat evenings;

weekend afternoons Th-‐Sat evenings;

weekend afternoons Lunchtime, after work Lunchtime Mornings, afternoons Weekend mornings Saturday mornings Early Monday evenings

Table 6. Illustration of potential programming for a new downtown movie theatre. With activities throughout the day, the theatre could earn revenue over a longer period of time than traditional first-‐run movie theatres.

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





Develop a multi-‐pronged marketing plan that uses specific marketing messages for specific programming and their respective targeted markets. Mono-‐dimensional, “one size fits all” marketing will almost certainly not be effective in reaching the broad range of audiences that would give the theatre its best chances of achieving its revenue goals.

Include a shallow stage and backstage facilities (but not a stage fly) for live performances. Locate the theatre within two (or three, at most) blocks of the downtown transit station, with a high concentration of restaurants nearby. The theatre management entity should manage programming for film-‐related events, but it should rent the theatre to other entities (such as live performance programmers) for non-‐ film events.

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

Explore the possibility of rehabilitating and reusing one of the district’s two historic theatres as a multi-‐function theatre. The potential availability of historic rehabilitation tax credits and New Markets tax credits could make the rehabilitation of one of these historic theatres economically viable, and a rehabilitated historic theatre would provide market distinctiveness within the region.

General limitations and disclaimer Retail market analyses, their components, and derivative business development plans provide important guidance on how a business or commercial center should, theoretically, be able to perform and on the sales levels businesses should be able to achieve. However, a number of factors affect the actual performance of retail businesses and commercial centers, including the skills of the business operator and property manager, level of business capitalization, the quality of the physical environment, changes in overall economic conditions, the effectiveness of business and district marketing programs, and many other factors. The information in this report is intended to provide a foundation of information for making business development decisions for the Village of Hempstead, but it does not, and cannot, ensure success.

Crowdsourcing is an innovative tool for identifying new business ideas and building enthusiasm (and, eventually, customers) for new businesses. However, crowdsourcing participants are a self-‐selecting group and do not necessarily represent a statistically accurate sample of a community’s overall population. We therefore recommend that, in instances in which a prospective business wishes its customer base to extend beyond the crowdsourcing group itself, the business’s owner(s) conduct statistically valid consumer surveys to estimate support and price tolerance for the product and service lines the business proposes to offer.

Prepared for Renaissance Downtowns/Urban America by Community Land Use + Economics Group, LLC

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