NYC Movie Theater On The Brink Gets A Lifeline

NEW YORK CITY— The fight to save New York City’s neighborhood movie theaters has all the makings of a scrappy underdog story: beloved local institutions on the brink, deep-pocketed owners and a loyal audience refusing to let the lights go dark.

In Kips Bay, a petition to save AMC Kips Bay 15 had collected more than 8,000 signatures after NYU Langone purchased the retail complex where the theater operates and the theater announced plans to close by the end of the year.

“Theaters have been part of local communities for decades," Paul Hardart, a New York University Stern School of Business professor who directs the school’s Entertainment, Media and Technology Program, said.

"I don't think neighborhood theaters are going away, but they do have to evolve."

One of the City’s neighborhood theaters under pressure, the Regal UA Sheepshead Bay, is fighting to stay in the picture.

Its owner, fashion executive-turned-real estate investor Joe Nakash, failed to pay off a $26 million mortgage when it came due in March.

The 14-screen theater, at 3907 Shore Parkway, and its parking garage recently received a $20 million appraisal, according to Morningstar Credit Analytics.

The theater generated about $3 million in revenue last year, roughly one-third below pre-pandemic levels.

But lenders are expected to approve a loan extension this month, giving the theater more time to recover.

An $8.4 million renovation completed earlier this year has also refreshed the multiplex just as Hollywood delivered a summer packed with major releases.

"The fact that significant money has recently been invested in renovating the theater suggests that there is still a belief in the theatrical experience," Hardart said.

William H. Greene, a professor emeritus of economics at New York University’s Stern School of Business, said theaters need to consistently draw audiences to fill their large, costly spaces, which often sit mostly empty.

A multiplex requires substantial space, equipment and staffing, even when many of its seats go unused. That makes it difficult for struggling theaters to cut costs without reducing the experience they offer customers.

Converting a theater to another use can also be difficult and expensive.

That helps explain why the Sheepshead Bay property's $20 million appraisal falls $6 million below its outstanding mortgage.

"I'm sure sheepshead Bay's experience is the same as everyone else's," Greene said. "For some straightforward reasons, trends are generally working against the theater owners."

Greene said theaters have experimented with other programming, such as opera and community events, but he does not expect those uses to solve the industry's broader problems.

Studios also control which movies reach theaters, how long they stay and when they move to streaming, leaving theater owners with less leverage, Greene said.

That makes the movies themselves increasingly crucial to a theater’s survival.

“Strong blockbusters are increasingly the lifeblood of the theater business,” said Paul Hardart, a New York University Stern School of Business professor who directs the school’s Entertainment, Media and Technology Program.

The latest Spider-Man movie and Christopher Nolan's The Odyssey have given theaters some of their biggest draws in years.

The pandemic changed moviegoing habits, while streaming gave consumers a nearly endless supply of entertainment at home, Hardart said.

"The threshold to get us to leave home and spend $20–25 to see a movie has gone up," he said.

The Odyssey and premium formats like IMAX have helped raise the stakes in the other direction, giving moviegoers a reason to feel the theater experience is worth the money and effort.

IMAX Chief Executive Richard Gelfond has described the format as a distinct product rather than a direct competitor to standard moviegoing.

He compares IMAX to a luxury car: the audience pays more for a different experience.

Only 25 theaters in the United States and 41 worldwide can show IMAX 70mm film, according to IMAX.

The scarcity can turn a movie screening into an event of its own.

The Odyssey helped push IMAX to its highest-grossing month ever in July, with $257 million in worldwide box office revenue, according to the company.

Hardart expects fewer marginal locations to survive, with the remaining theaters placing greater emphasis on major releases and upgraded experiences.

The good news for theaters is Hollywood’s production pipeline has recovered, bringing a steadier flow of new movies than in the years immediately following the pandemic and the 2023 writers’ and actors’ strikes, Hardart said.

"A strong slate can make a meaningful difference for a theater because once people are in the building, they are not just buying tickets," Hardart said. "They are also buying concessions and, increasingly, premium experiences."