Local View: Lincoln theater policy needs change

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BY KELVIN KORVER

In response to our application to build a new multiplex theater at Prairie Lakes Shopping Center (84th and Nebraska 2), the city of Lincoln commissioned a “market study” to determine the impact it would have upon existing theaters. Aside from the dubious proposition that approval of our application should hinge upon the competitive effect it may have, the study itself warrants close scrutiny.

Even a cursory reading of the study should raise serious concern for anyone who believes that a competitive marketplace is beneficial to consumers. The study focused “on the impact (our proposed theater) will have upon the overall Lincoln, NE, theater market, with a specific emphasis upon the potential affect (sic) of this site upon … The Grand 14 … in Downtown.”

No other use of land in Lincoln is subjected to this kind of analysis. No other use — even in the downtown — is protected from competition in this manner.

The study’s bias against new theaters outside the downtown is obvious. By using averages for “the U.S. as a whole,” rather than comparable cities, it asserts that the Lincoln market is “over screened.” In fact, Lincoln has fewer screens per population than Omaha; Des Moines, Iowa; Wichita, Kan., and Madison, Wis.

Recently, another 16-screen theater project was announced in Omaha. Omaha will have four megaplexes (some greater than 20 screens at each location) and is able to increase this number when the market dictates it. Lincoln, under the existing policy, will forever have only one theater complex that can have more than six screens (and must be downtown). No matter what Lincoln’s growth is, we are to never have the opportunity to have a megaplex outside of downtown even when the “drive distance” is more than 10 miles away from downtown. The movie industry in other cities place movie complexes three or four miles apart — as can be seen in Omaha!

The study projects attendance at Prairie Lakes to be 437,858 per year, and a 25 percent “permanent loss of attendance for the Grand 14.” Then, incredibly, the study notes that to achieve that number of admissions, “the Prairie Lake 18 will have to capture 100.7 percent of its entire 10-minute (drive time) population base.” What?! How can any business capture more than 100 percent of its market? Does that tell you something about the study’s assumptions?

Worse yet, the study also projects financial results for our proposed theater. Using assumptions that inflate the cost of construction, it concludes that the proposed theater will lose more than $1 million per year. It predicts “that a theater operator at Prairie Lake will never achieve a return on investment, and that no prudent theater operator would build the proposed theater on the proposed site.”  That is a unique statement because there are several vendors interested in putting in a megaplex at 87th and Nebraska 2. Shouldn’t we let the free market determine the economic viability?

So there you have it. A study, ordered, paid for and relied upon by city staff to oppose private investment in Lincoln concludes that our application should be denied because:

A. It will draw so much business away from the taxpayer-subsidized Grand 14 that it won’t be able to cover debt service and will “cause economic hardship… to the existing theaters … (and) to the nearby retail and food establishments.”

OR

B. “It is unlikely that a prudent theater operator would incur the economic risk of constructing a megaplex upon the proposed Prairie Lake site.“

This is not market analysis, it is just a bunch of words put together to justify the city’s perpetuation of a bad theater policy.

The facts are:

n Lincoln is the only city of this size that has only one theater vendor.

n  The current restriction of six screen theaters outside the downtown area ensures that a second vendor will not come into Lincoln’s market.

I don’t believe downtown is that weak, and I support prudent use of tax dollars to improve downtown. However, the current theater “policy” is wrong. It was wrong 20-plus years ago when first adopted.

The “policy” was wrong 10-plus years ago when the developer of South Pointe was denied the right to build a 12-screen theater. It would have had too big an impact on downtown, the politicians said, and forced a compromise — six screens. But the only theater operator willing to build only six was Lincoln’s only theater owner, who also added six more screens outside downtown (three at Edgewood and three at East Park). Who/what is protected by this “policy“?

The “policy” is wrong today.

NOBODY believes it is a policy that ought to be expanded to protect downtown hotels, restaurants, bars, banks or jewelry stores. So why theaters?

Kelvin Korver is vice president of Eiger Corp., the applicant to build a theater multiplex in southeast Lincoln.