Muvico: Judgment Day
A chain of luxury movie theaters brings fame and fortune to its founder, a visionary immigrant. But the founder and his investors fall out.
Veering from the script
The AmStar/Horton deal never closed. Michael Whalen Jr., Muvico's CFO of five years, became president.
Whalen and his team have dumped Hashemi's Empire concept as too risky and off point. In a December interview in the upscale restaurant at Muvico's Boca theater, Whalen outlined the company's core business: Creating entertainment venues combining movies, a restaurant, bar and perhaps interactive gaming. The aim is to make the movie itself, as Whalen says, "part of the experience; it's not the experience."
Whalen appears as captivated as Hashemi by a luxury vision as he shows off the theater's new carpet, the balcony love seats and the fresh flowers in the men's room. Revenue and attendance in Boca have risen for six years, an unheard of run in an industry where attendance at new theaters tends to fall off quickly. Industry attendance declines by 1% to 2% a year, Whalen says, evidence of a "structural flaw" in the business model that Muvico will address by removing the barriers that keep people other than the ubiquitous teens from theaters.
Muvico will continue to offer on-site child care, restaurants and adult-only premium seating. Muvico is testing infrared cameras as a way to combat misbehavior by patrons.
Whalen, however, plans significant departures from Hashemi's script. Gone will be the expense of individual themes for every theater. Whalen will stick to a more cost-effective, single Grand Palace template for new construction. High-margin seating for those 21 and older will continue, but balconies will give way to a stadium club level configuration at eye level with the screen. Whalen also favors smaller theaters of generally no more than 14 to 16 screens.
"Hamid's vision for the industry is on," Whalen says. "I think where it falls apart is the size of the box is too big." Smaller theaters need to sell only 500,000 to 700,000 tickets a year to be profitable rather than the 1.3 million that 20-screeners need. Smaller theaters also can double the percentage of high-margin premium seating to as much as 20% of total seating. As the industry converts to digital distribution, showing live sporting events and concerts in 3-D may come, Whalen says.
Muvico has $18 million in the bank, the highest operating margins in the industry, generates $17 million annually in cash flow before interest, depreciation and amortization and is covering debt service, Whalen says. Muvico opened a theater in Estero, south of Fort Myers, in December. In a less ambitious schedule than Hashemi's, Whalen expects to open theaters this year in Boynton Beach and Chicago. In 2008, he hopes to open a Meadowlands, N.J., theater, featuring floor-to-ceiling window views of the Manhattan skyline and a rooftop outdoor screen -- but without the helipad Hashemi envisioned.