Every year, nearly two million area moviegoers see films at K-B Theatres' 25 screens at 13 locations. The company, founded by brothers-in-law Fred Kogod and Max Burka, is now headed by Kogod's son-in-law, Marvin Goldman, and his son, Ronald.
Kogod and Burka entered the movie business by default. Already moderately successful in the grocery and real estate businesses, the immigrant entrepreneurs took over the Princess Theatre in Northeast Washington when its owners couldn't pay off a loan.
"They discovered that the movie business was a pretty good sideline, requiring little effort,"according to 59-year-old Marvin Goldman. "They hired a general manager and accountant and did quite well. Later, they built the Atlas Theatre, which was a couple of blocks away from the Princess." Eventually, the partners built the Apex Theatre along Massachusetts Avenue in upper Northwest. It has given way to a modern office building, which houses K-B's 10,000 square feet, ground-level corporate offices.
In the early 1950s, according to Marvin Goldman, the theater business entered one of its cyclical declines. And, in 1953, even though their four or five theaters were showing gross revenues of $600,000 to $800,000, Fred Kogod and Max Burka were not making enough money and decided to leave the movie business.
Burka's son, Fred, and Marvin Goldman bought them out. In 1964, Fred Burka's son, David, entered the business, as did Ronald Goldman in 1967. The firm remained a four-way partnership until 1978 when the Burkas sold their half interest to the Goldmans. Although they use no official titles, Marvin Goldman serves as chairman of the board and president, and his 38-year-old son, who holds a law degree from American University, performs the day-to-day duties of a chief executive officer.
Exact financial figures are not available for the chain, but annual gross revenues are believed to approximate $10 million. Market share data also are not available, but industry sources indicate that K-B ranks second, in terms of revenues and number of screens, in the area. First place belongs to James and Theodore Pedas's Circle Theatre chain. However, because the Pedas brothers also are part-owners of the Showcase theaters, the value of their holdings is not comparable to the Goldmans, who do not share ownership with anyone.
According to Marvin Goldman, his chain is making a profit, but not long ago there were significant problems. "From 1975 to 1978, we lost a million dollars, primarily because we were reacting to situations rather than initiating them, but that has stopped now."
Marvin Goldman complains about his slim profit margin on each ticket he sells--especially as it compares with days gone by. While K-B made 15 cents to 18 cents on every dollar it sold in tickets 30 years ago, that return has dropped to 1 1/2 cents to 2 cents. For example, K-B had exclusive rights to show Richard Pryor's "Some Kind of Hero" in the District, where it was booked at the Cerberus Theatre. Each ticket cost $5, which meant that K-B realized a 7 1/2-cent to 10-cent profit on each ticket. The picture did well nationally, earning $16 million the first two weeks it ran, but the Goldmans gave the impression that it did not do as well here.
Why have profits, even with a ticket selling at $5, dwindled? Marvin Goldman explained that the business "has gone from a buyer's market in the '40s and '50s to a seller's market today. Then, on the biggest film, the exhibitor, or movie theater owner, paid the distribution company 50 percent of the gross over a certain time period, and the average movie called for 30 to 35 percent." Today, with approximately 100 movies being made each year--compared with 500 during the '40s and '50s, the companies can be choosy. And they command a large chunk of the money from a theater owner to show their films.
In the mid-'70s, the distribution companies instituted the "90-10" clause in most contracts involving the exhibitors' leasing of films. Under that clause,, if a theater realized gross revenues of $10,000 during the first week that a movie was shown, an agreed-upon deduction of $4,000 was taken out by the theater to cover house expenses. Of the remaining $6,000, the movie company got 90 percent, or $5,400, and the theater received only $600, for a total of $4,600.
The industry later instituted a "70-floor" clause, which guaranteed them at least 70 percent of the house's weekly gross. The film company had a choice of that arrangement, or the 90-10, whichever offered the most money. Using the same $10,000 example, the distributor would choose 70 percent, or $7,000 of the $10,000 gross. "Ninety-five percent of the movies we buy today--and that applies to every studio--have one or the other clauses in effect," says Marvin Goldman.
When it comes to bidding for a new picture, the distribution companies also have the upper hand. In only 23 states is the practice of blind bidding not permitted. As the term implies, under that system a theater owner must bid, and subsequently lease, a film without first seeing it. In the '60s, fewer than 10 percent of the films offered were done so blindly. In the late '70s, that percentage rose to 85 percent.
"We did great on 'The Exorcist,' " says Ronald Goldman, "but we had to take its sequel, without seeing it. I'll never forget it. We had committed $150,000 to it, and the night before it came out, I saw a screening and immediately called my dad in Europe to tell him we were going to lose everything." And even though, nationally, its first day was the biggest in Warner Brothers' history, word got out that the film was bad, and Ronald Goldman's prediction turned out to be correct.
During his tenure as president of the National Association of Theater Owners, Marvin Goldman fought hard to eliminate blind bidding. Currently, Northern Virginia and Prince George's County forbid it, but in the District and Montgomery County it is permitted.
Even when allowed to view a movie before buying it, theater owners must commit themselves far in advance of its release. For example, bidding is held in the spring for films that will be shown at Christmas. According to Charles T. Jordan, branch manager for Warner Brothers, "when we know approximately when a film will be released, within a week or two, we inform the theaters. We also let them know how many runs number of screens in an area we anticipate licensing the film. The average opening run is 8 to 12, but 'Death Wish II,' which opened here recently, ran at 29."
Presumably, when more than one theater owner in the area buys the same film, they pay the same price. "I wouldn't divulge the exact price of a picture, because that's between us and our customers," Paramount's Claudia Ungar said, "but from us, they do pay the same price."
In the Washington area, where ticket prices run at $4.50 or $5, viewers can choose from 300 screens. Nationally, there are approximately 16,000 screens, with an average ticket price of $2.87. Today, an average 20 million people attend at least one movie a week.
Even at such prices here, K-B insists that it makes most of its money on concessions. In a very labor-intensive business, the Goldmans began cutting their labor costs when they built their first triplex theater, the Studio, at 4600 Wisconsin Ave.. "By doing so," Marvin Goldman said, "we not only have three shots at the public's taste, instead of one, we can hire one projectionist to show all three pictures."
Multiple-screen theaters will continue to be the company's primary thrust. "After all," points out Ronald Goldman, "the three screens at the Studio, with a total of 400 seats, outgross the Langley with 1,000 seats."