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1952 Theatre Catalog, 10th Edition, Page 53 (19)

1952 Theatre Catalog, 10th Edition
1952 Theatre Catalog
1952 Theatre Catalog, 10th Edition, Page 53
Page 53

1952 Theatre Catalog, 10th Edition, Page 53

New Influences Affecting Theatre Appraisal

A Survey of the Problems Confronting the Appraiser In the Market Valuation of Motion Picture Theatres

Before attempting to discuss new influences and their effect on motion picture theatre valuation, it may be well to sketch briefly some of the general aspects of the motion picture business. This is background information with which the appraiser should be thoroughly familiar in order that he may better judge the interplay and significance of the new influences being brought to bear on this industry.

By this industry is meant not only the single motion picture theatre on a specific street in some one community. Rather it means the whole industry from the Hollywood studio with the changes being made in the character, quality and quantity of the pictures themselves, to that small isolated theatre. Somewhere in between there are all the changes which have occurred or are developing within the complicated field of distribution.


BRIEF: A myriad of new influences are being brought to bear on the motion picture industry . . . each of them affect. ing the present-day market value of theatres . . . High costs of construction: and equipment . . . the theatrds ability to command suitable product . . . III"precedented living costs . . . and competition from such extra-industry forces as television . . . all vitally afect theatre valuation.

Properly located, well managed theatres will continue to operate at a profit

. . and show a reasonable profit on a carefully appraised market value . . . Increasingly better product coming out of Hollywood . . . third dimension films . . theatre television . . . will count.

*-- To indicate the complexity of the situation facing the industry, a few of the important factors will be discussed. These will be treated in more detail later as the statistical data reflecting the present trend within the industry IS presented.

One of the prime problems affecting value is the high cost of construction and equipment. Figures will be cited which show the percentage increase over the past 25 years. Construction costs have risen in all fields but none more dramatically than in theatre buildmg.

. Then, too, there is the problem of each individual motion picture theatre as to ltS place in the community and its ability to obtain proper product. This latter item is often governed by the modernncss of the theatre, its size, location, Emd parking facilities. The theatre that can pay the most money for any given


By MORTON G. THALHIMER President, Neighborhood Theatres. Inc., Richmond, Va.

film and still operate at a profit is the one that is most likely to succeed.

Proper consideration must be given to the highly competitive situation of any given theatre and the possible oversupply of theatre seats in the particular area. The age of the theatre and equipment with careful consideration of depreciation and obsolescence, are important elements.

A careful analysis of the income and expenses of the theatre must be made in order to judge its ability to operate at a profit; and its income situation must be considered in relation to these previously mentioned factors and to any prospective changes in these influencing elements.

However, before attempting to discuss these new influences and their effects on motion picture theatre valuation, it may be well, if indeed not necessary, to consider some over-all statistical data.

From the best available information there are:

19,311 conventional theatres

with seating capacity of 12,122,000

2,300 (approximately) drive in theatres with an average capacity of 500 cars each. Estimating an average of 3 people per car, they have a seating capacity of . . . . .. 3,750,000

Total 15,872,000 If we round the figure off at an approximate seating capacity for the country of 16,000,000, this means that there is one seat for every 10 of our entire population. In 1939 one seat for each 15 of the population was considered ample.

Let us assume that in the conventional theatre there are an average of three shows a day. This would mean that approximately 36,500,000 persons could attend the theatre each day. If the drive-in theatres offer two shows a night, an additional 7,500,000 persons could be accommodated. This would make a total possible attendance each day at the motion picture theatres of the country of 44,000,000 persons. If We multiply this by 7, we would have a weekly potential of 308,000,000. This means that every man, woman and child in the United States could go to the movies twice each week to occupy the seats available.

During the peak years of motion picture attendance a 1946, .1947, 1948 the average weekly attendance was 90,000,000. In 1949 this dropped to 70,000,000, and the 1950 figure will probably be somewhere in the neighborhood of 03,000,000. This latter figure

is important when compared with the 1939 figure of 85,000,000 per week.

At the same time it should be remembered that in 1939 there Were a total of 17,829 conventional theatres and practically no drive-in theatres; whereas in 1949 there were 19,311 conventional theatres and 2,300 drive-ins, making a total of 21,611.

Therefore, in the 12-year period there has been an increase of 3,800 theatres, or 21 per cent. At the same time there has been an approximate decrease of 20 percent in attendance.

The importance of these significant figures cannot be. too heavily underscored in any motion picture appraising or in'any consideration of the rental value of such a theatre.


According to the best available statistics there is invested in this industry in the United States a total sum of $2,881,000,000. This is broken down as follows:

Production (studios) ..$ 141,000,000

Distribution (branch

offices, etc.) . . . . . . .. 25,000,000 Nontheatrical . . . . . . . . . 15,000,000 * Theatres . . . . . . . . . . . . . 2,700,000,000

Total $2,881.000,000 This means that the average theatre investment in the United States, including drive-ins, is $122,000 per theatre. It is important to note that the investment in theatres is 16.4 times as much as the total investment in production and distribution. If allowance is made for cost of studios in relation to foreign distribution, theatres in this country have an investment of over 20 times as much as production and distribution.

It is very difficult to break down by division the theatre receipts because of the various types of theatres throughout the country whose admission prices vary anywhere from $.09 to $1.75 per admission, and because of the various types of buildings and services rendered.

A leading trade journal gives the following breakdown of the approximate distribution of the box office dollar:

Payroll, theatre staff and man agement Real estate rent, insurance, taxes, interest and deprecia- r tion . . . . . . . . . . . . . . . . . . . . . .. 20% Local advertising and publicity . 8% Light, heat, cooling . . . . . . . . .. 8% Interest, profit, dividends '6% Other taxes and insurance 4% Other added attractions, miscele laneous, etc. . . . . . . . . . . . . . .. 25% Film rental. including features, short subjects, news, etc. 35%

Total 100%
1952 Theatre Catalog, 10th Edition, Page 53