Q&A: John Fithian and Mike Campbell

By Carl DiOrio June 4, 2008, 05:47 PM As chairman and CEO of Regal Entertainment, Mike Campbell, right, sits atop the world's biggest theater circuit with 6,763 screens in 551 theaters. Campbell, who has risen to his lofty position from a career start running a single-screen hardtop in Knoxville, Tenn., is known for his quiet wit and steely negotiating style. John Fithian has been CEO of the National Association of Theatre Owners since January 2000, running the world's biggest trade group for cinema operators from offices in Washington and North Hollywood. Son of the late Indiana congressman Floyd Fithian, he helps the trade group and its members navigate the legislative waters and grapple with a host industry challenges. THR's Carl DiOrio talked to the exhibition industry's two best-known leaders about their views on the summer boxoffice, the state of the theatrical business and the current challenging economic climate. The Hollywood Reporter: Will summer 2008 set another new boxoffice record? Campbell: We have a strong slate of films this summer, but what you're missing is what I'd call the three money-in-the bank films you saw last year in May. There's a lot of diversity in product this summer, but will it be a record summer? I can't say that. Fithian: This year we have a few more unknowns. Some of those will surprise on the upside and some on the downside. THR: And the year? Campbell: What I would say about the fourth quarter is that last year that was our weakest quarter, so on a comparable basis I think there's more powerful product in that quarter of this year. Fithian: I don't disagree at all. I think it's also important to remember we are coming off two up years in a row. THR: Exhibition tends to be recession-resistant, but wouldn't a spreading recession hurt concession sales? Campbell: This is the most affordable out-of-home entertainment option that consumers have available, but at some point, do people stop buying concessions? I don't think so. At some point, people may be a little more selective in some of their purchases, but at this point in time we haven't seen that. THR: Do hard times hurt smaller chains and mom-and-pop exhibitors more? Fithian: I don't believe there is a different impact on smaller chains in hard economic times. In fact, it is often the consumers in smaller markets who are most challenged during recessions. So they don't take the vacation. Higher gas prices mean they don't go for long drives to theme parks or other places. They stay closer to home, and when people stay closer to home, they tend to go to the cinema more often. THR: Mike, there's been speculation your circuit's unprecedented size might yield an advantage in film-rental negotiations with studios. How have things panned out? Campbell: Our film costs as a company have been fairly stable over the past 10-12 years and are still around a 50-50 split. So I don't see any huge leverage coming from our size. THR: The industry screen count has started to grow again over the last couple of years. Can over-screening mistakes of the past be avoided? Fithian: We're just shy of 39,000 screens in the U.S., and that's up a thousand or so from a year ago. I always watch this space. I think there is a need for modern cinemas, but at the same time we have to close off the older ones that aren't servicing us any more. Campbell: We believe that screen growth is healthy in the 1%-1.5% annual growth area. But very little is from the major operators. It's been from the mid-size circuits and the smaller circuits and is often because their markets weren't the beneficiaries of stadium seating early on. Fithian: Screen count is one metric, but keep in mind that the average number of screens per complex continues to go up, and the number of complexes has actually gone down over the past few years. THR: How many movies do you each catch weekly? Campbell: I probably average one a week. Fithian: I probably see two to three a month, and the vast majority I see are family pictures with my 5-year-old daughter. THR: Any recent favorites? Campbell: I enjoyed "Iron Man." I thought it was fresh, and I thought Robert Downey Jr. was perfectly cast. Fithian: "The Chronicles of Narnia: Prince Caspian" was terrific. THR: Has there been a recent movie that had you asking yourself how such a picture ever got greenlighted? Fithian: (laughing): I'm not going to touch that one! Campbell: I don't think anybody ever starts out to open a losing retail store or to make a picture that isn't appealing and doesn't make money. But it just happens and it's part of doing business. THR: Do either of you regularly watch DVDs? Campbell: I prefer seeing my films on the big screen. Fithian: I watch DVDs of television product, because I want to get rid of the commercials, frankly. THR: Exhibitors tend to like less restrictive ratings, yet there continues to be a regular flow of R-rated movies. Are you OK with that? Campbell: From a selfish, economic point of view as an exhibitor, we do better with PG and PG-13 films, and on any given year you generally see 17 or 18 of the top 20 films as PG or PG-13. There is still a place for R-rated films, but we do better at the boxoffice and at the concessions with PG and PG-13 films. Fithian: I am mystified why everybody in Hollywood wants to be Quentin Tarantino instead of trying to sell movie tickets. THR: Any other specific advice for Hollywood on the kind of pictures they should make? Fithian: More family titles of any genre. When you take an action film and decided to make it PG-13 instead of R, it does better. And in most cases, if you have a comedy and decide to make it PG-13 it does better, although there certainly is a role for the harder-edge comedies as well. But as the father of a 5-year-old, there are times I am looking to go to the movies with my child and can't. THR: You like to encourage "12-month releasing." Isn't there a limit to how many tentpoles can open while school is in session? Fithian: Yes, but we're still doing it wrong. Virtually every school in the country is still in session the first weekend in May, and the biggest movies in 2007 were released over the first weekend in May. Yet we leave April almost entirely off the table, and the circumstances of school are very similar in April and May. There are only so many blockbusters you can tolerate in the year, but in summer when they are so close together we are losing money. With those huge titles last May, we lost— in my estimation —$50 million-$100 million because we had them all in one month. If one of those had been in April, I think we would have made a lot more money. Campbell: We could increase the boxoffice several percentage points by having a release schedule that was spread a little more evenly. THR: What will be the ideal number of 3-D movies for Hollywood to release each year? Campbell: I don't think every film needs to be a 3-D film, at least for the foreseeable future. But I do believe that the films that you normally see make up the top 10 films of the year — which are typically high-quality animation or CGI animation or live-action scifi and so on — those films are very much candidates for 3-D. Fithian: We have to get an infrastructure, and we have to see how patrons respond, (but) I think 3-D is a substantial value-add to the digital cinema transition. I think it will grow attendance and boxoffice for cinemas. But I wouldn't go as far as, say, my friend Jeffrey Katzenberg in saying that 70% or so of movies should be released in 3-D. Campbell: At least for the foreseeable future, I think we should offer an alternative and have 2-D as well as 3-D (on individual releases), because not everybody is an advocate. THR: Ten years down the road, will 3-D releases represent a majority of all films? Fithian: I don't believe so. I believe it will be a substantial minority. Campbell: I would agree with John.

NATO's John Fithian and Regal's Mike Campbell size up the summer and what lies ahead for the exhibition business

By Carl DiOrio

As chairman and CEO of Regal Entertainment, Mike Campbell, right, sits atop the world's biggest theater circuit with 6,763 screens in 551 theaters. Campbell, who has risen to his lofty position from a career start running a single-screen hardtop in Knoxville, Tenn., is known for his quiet wit and steely negotiating style.

John Fithian has been CEO of the National Association of Theatre Owners since January 2000, running the world's biggest trade group for cinema operators from offices in Washington and North Hollywood. Son of the late Indiana congressman Floyd Fithian, he helps the trade group and its members navigate the legislative waters and grapple with a host industry challenges. THR's Carl DiOrio talked to the exhibition industry's two best-known leaders about their views on the summer boxoffice, the state of the theatrical business and the current challenging economic climate. THE HOLLYWOOD REPORTER: Will summer 2008 set another new boxoffice record? CAMPBELL: We have a strong slate of films this summer, but what you're missing is what I'd call the three money-in-the bank films you saw last year in May. There's a lot of diversity in product this summer, but will it be a record summer? I can't say that. FITHIAN: This year we have a few more unknowns. Some of those will surprise on the upside and some on the downside. THR: And the year? CAMPBELL: What I would say about the fourth quarter is that last year that was our weakest quarter, so on a comparable basis I think there's more powerful product in that quarter of this year. FITHIAN: I don't disagree at all. I think it's also important to remember we are coming off two up years in a row. THR: Exhibition tends to be recession-resistant, but wouldn't a spreading recession hurt concession sales? CAMPBELL: This is the most affordable out-of-home entertainment option that consumers have available, but at some point, do people stop buying concessions? I don't think so. At some point, people may be a little more selective in some of their purchases, but at this point in time we haven't seen that. THR: Do hard times hurt smaller chains and mom-and-pop exhibitors more? FITHIAN: I don't believe there is a different impact on smaller chains in hard economic times. In fact, it is often the consumers in smaller mar-

kets who are most challenged during recessions. So they don't take the vacation. Higher gas prices mean they don't go for long drives to theme parks or other places. They stay closer to home, and when people stay closer to home, they tend to go to the cinema more often. THR: Mike, there's been speculation your circuit's unprecedented size might yield an advantage in film-rental negotiations with studios. How have things panned out? CAMPBELL: Our film costs as a company have been fairly stable over the past 10-12 years and are still around a 50-50 split. So I don't see any huge leverage coming from our size. THR: The industry screen count has started to grow again over the last couple of years. Can over-screening mistakes of the past be avoided? FITHIAN: We're just shy of 39,000 screens in the U.S., and that's up a thousand or so from a year ago. I always watch this space. I think there is a need for modern cinemas, but at the same time we have to close off the older ones that aren't servicing us any more. CAMPBELL: We believe that screen growth is healthy in the 1%-1.5% annual growth area. But very little is from the major operators. It's been from the mid-size circuits and the smaller circuits and is often because their markets weren't the beneficiaries of stadium seating early on. FITHIAN: Screen count is one metric, but keep in mind that the average number of screens per complex continues to go up, and the number of complexes has actually gone down over the past few years. THR: How many movies do you each catch weekly? CAMPBELL: I probably average one a week. FITHIAN: I probably see two to three a month, and the vast majority I see are family pictures with my 5-year-old daughter. THR: Any recent favorites? CAMPBELL: I enjoyed "Iron Man." I thought it was fresh, and I thought Robert Downey Jr. was perfectly cast. FITHIAN: "The Chronicles of Narnia: Prince Caspian" was terrific. THR: Has there been a recent movie that had you asking yourself how such a picture ever got greenlighted? FITHIAN (laughing): I'm not going to touch that one! CAMPBELL: I don't think anybody ever starts out to open a losing retail store or to make a picture that isn't appealing and doesn't make money. But it just happens and it's part of doing business. THR: Do either of you regularly watch DVDs? CAMPBELL: I prefer seeing my films on the big screen. FITHIAN: I watch DVDs of television product, because I want to get rid of the commercials, frankly. THR: Exhibitors tend to like less restrictive ratings, yet there continues to be a regular flow of R-rated movies. Are you OK with that? CAMPBELL: From a selfish, economic point of view as an exhibitor, we do better with PG and PG-13 films, and on any given year you generally see 17 or 18 of the top 20 films as PG or PG-13. There is still a place for R-rated films, but we do better at the boxoffice and at the concessions with PG and PG-13 films. FITHIAN: I am mystified why everybody in Hollywood wants to be Quentin Tarantino instead of trying to sell movie tickets. THR: Any other specific advice for Hollywood on the kind of pictures they should make? FITHIAN: More family titles of any genre. When you take an action film and decided to make it PG-13 instead of R, it does better. And in most cases, if you have a comedy and decide to make it PG-13 it does better, although there certainly is a role for the harder-edge comedies as well. But as the father of a 5-year-old, there are times I am looking to go to the movies with my child and can't.

THR: You like to encourage " 12-month releasing." Isn't there a limit to how many tentpoles can open while school is in session? FITHIAN: Yes, but we're still doing it wrong. Virtually every school in the country is still in session the first weekend in May, and the biggest movies in 2007 were released over the first weekend in May. Yet we leave April almost entirely off the table, and the circumstances of school are very similar in April and May.

There are only so many blockbusters you can tolerate in the year, but in summer when they are so close together we are losing money. With those huge titles last May, we lost— in my estimation —$50 million$100 million because we had them all in one month. If one of those had been in April, I think we would have made a lot more money. CAMPBELL: We could increase the boxoffice several percentage points by having a release schedule that was spread a little more evenly. THR: What will be the ideal number of 3-D movies for Hollywood to release each year? CAMPBELL: I don't think every film needs to be a 3-D film, at least for the foreseeable future. But I do believe that the films that you normally see make up the top 10 films of the year — which are typically high-quality animation or CGI animation or live-action scifi and so on — those films are very much candidates for 3-D. FITHIAN: We have to get an infrastructure, and we have to see how patrons respond, (but) I think 3-D is a substantial value-add to the digital cinema transition. I think it will grow attendance and boxoffice for cinemas. But I wouldn't go as far as, say, my friend Jeffrey Katzenberg in saying that 70% or so of movies should be released in 3-D. CAMPBELL: At least for the foreseeable future, I think we should offer an alternative and have 2-D as well as 3-D (on individual releases), because not everybody is an advocate. THR: Ten years down the road, will 3-D releases represent a majority of all films? FITHIAN: I don't believe so. I believe it will be a substantial minority. CAMPBELL: I would agree with John.∂