Ted and Jim Pedas, who built up Washington's largest theater chain from a funky repertory theater near George Washington University, stood last week in the glitzy, art deco and marble interior of the new six-screen Cineplex Odeon theater on upper Wisconsin Avenue and reflected on the changes in the local movie business.
Just two days earlier, it had been announced that the Pedases were selling the Circle Theaters chain they had built over 30 years for $51 million to Cineplex Odeon, a fast-growing theater chain headed by hard-charging impresario Garth H. Drabinsky.
"We either had to expand in a big way and take on the next level, or get out," Ted Pedas said.
Last week's passing of the baton from the Pedas family to Cineplex Odeon -- turning the Toronto chain into this area's No. 1 movie theater chain -- makes clear what some in the industry have been saying recently: The days of family-owned, independent movie-theater chains may be numbered.
"I think the decision all of us face is whether we are going to do one of three things: get substantially bigger, try to compete at a moderate size or get out of motion picture exhibition and redeploy those assets," said Paul Roth, owner of the Roth Theater Circuit, which owns 100 screens in Maryland, Virginia and three other states.
Faced by competitors that have bundles of cash, Hollywood connections and lavish theaters, many of the independent chains are scrambling to keep up -- or, like the Pedases, are selling to one of the me- ga-chains that dominate the industry. Others are looking for special niches -- such as 99-cent second-run theaters, serving food with the movie, or specializing in art films.
For movie theatergoers in Washington, considered a lucrative market by the national theater circuits, this push willmean more lavish theaters with state-of-the-art technology, plush chairs, upscale food and multiple screens.
Executives of the large chains say their enormous resources mean they'll be better able to keep theaters in top-notch condition.
But naysayers say a company with out-of-town headquarters will be less attuned to problems at local theaters. They also predict higher ticket prices, although the national chains vehemently deny that.
The push by national companies also means that the days of single- or twin-screen theaters probably are numbered because the large chains dislike having theaters that are so exposed to the risk of a flop.
But the verdict is still out on how concentration in the movie exhibition industry will affect the kinds of movies that are available in theaters.
Some industry executives argue that the chains can afford to take risks on art films and foreign films, while others say the profit-minded circuits will stick to Hollywood blockbuster fare like "Rocky" and "Beverly Hills Cop."
There also is concern that the ownership of some of the chains by major movie studios -- MCA Inc., which owns Universal Pictures, has a 48 percent interest in Cineplex Odeon, for instance -- will further limit movie-goers' choices.
The sale of Circle Theaters is a major change in the local movie theater community. For years, the theater industry here was an intimate little group, dominated largely by the Pedases, the Roths and the K-B Theaters' Goldman family.
"We used to sit around and schmooze ... everybody knew everybody," said Alan Rubin, coowner of Georgetown's Biograph Theater. "Now it's more impersonal. ... I think the reason the Pedases got out is that it's not fun anymore."
Ted Pedas said his family first tried strengthening Circle through expansion and acquisition, including a takeover of the Showcase chain a few years ago.
More recently, they tried unsuccessfully to buy the Roth chain and another unidentified local movie chain.
The Pedases also explored going public or taking on a financial partner to get more cash. But they eventually settled on the $51 million sale to Cineplex Odeon, only hours after meeting Drabinsky.
By that time, they had gotten offers from three other national chains, Pedas said.
The Goldmans of K-B Theaters and Roth Theaters still are in the local movie theater business.
And Ron Goldman, president of the K-B chain, said he believes the hometown advantage will help his 52-screen circuit, now the second largest in the area.
But there is no denying that Cineplex Odeon will now be king of the local movie marquees, with 172 screens at 50 theaters in Washington, Maryland and Virginia.
Cineplex, which has about 1,600 screens at nearly 500 locations nationally, came into the Washington market last year with the purchase of the Neighborhood Theaters Inc. chain.
Even beyond the acquisition of Circle and the opening of the Wisconsin Avenue theater, Drabinsky hinted last week that he is interested in further expansion in the Washington area.
When the Pedases agreed to sell, Circle Theaters had plans for two other theater complexes in Washington: an eight-screen theater near Tenley Circle and a four-screen theater in an office building planned for the site of the old Circle Theater on Pennsylvania Avenue NW.
Drabinsky said he would be interested in anything the Pedases had on the drawing board. But one source speculated that the eight-screen Tenley complex might not be considered attractive because it would be so close to Cineplex Odeon's new Wisconsin Avenue theater.
The Pedases still own the land at both sites and said nothing had been decided on development of either site.
Other national chains also are making major investments in the Washington market. Massachusetts-based National Amusement Inc., which owns Viacom International Inc., a cable and broadcasting company, has two Multiplex Cinemas in Northern Virginia, with 12 screens in Merrifield and 10 screens in Alexandria.
American Multi-Cinema, based in Kansas City, is building three theaters in the Washington area, which will give AMC a total of nine local theaters with 71 screens by the end of next year.
And United Artists, the largest national movie theater circuit, with more than 2,000 screens, has an eight-theater complex at Fair Oaks Mall.
Thus the momentum has shifted, with a majority of the screens in the Washington area in the hands of the large national companies. It is a trend that has been seen across the United States in recent years, particularly in major metropolitan areas.
A $1 billion buying spree in the past couple of years reportedly has put nearly half of the screens in North America into the hands of the major theater circuits.
What will these changes mean for Washington area moviegoers?
National chain executives argue that moviegoers should be elated. They say they have the resources and the desire to run first-class operations.
For instance, Ira A. Korff, executive vice president of National Amusement Inc., said the company builds "entertainment centers" on 10 to 15 acres of land.
The Multiplex Cinemas include plush, rocking seats, state-of-the art sound and projection systems and acres of parking.
Similarly, Drabinsky brags about Cineplex Odeon's commitment to elegance and technology.
The chain's new Wisconsin Avenue theater complex features a sophisticated sound system and extra wide-screen 70-mm film capabilities, along with cushy seats, wool carpeting, original artwork and real butter on the popcorn (Most theaters use butter-flavored oil.).
Industry observers say the smaller chains can hardly afford to mimic such extravagances. But they also warn that once an area is dominated by the national chains, ticket prices may go up.
They point to New York City, where Cineplex Odeon recently raised ticket prices to $7.
"The $7 movie has been blown out of proportion," said Drabinsky, saying the price reflects the high cost of doing business in Manhattan.
He said he plans to hold to the current local high of $6 for tickets.
Likewise, Korff said, "We keep our prices competitive, and I don't anticipate we're going to change the prices in the near future."
Large chains also have certain economies of scale working in their favor to help keep costs down, according to Douglas Gomery, a professor of film at the University of Maryland.
"If you have five theaters, it's easy to add a sixth. It takes the same number of people to order the popcorn or book movies. Likewise, it's a lot easier to run 50 theaters than 10," Gomery said.
In addition, multiscreen theaters are less risky. If one or two movies at a complex bomb, the box office take from the other six or eight may still be healthy enough to give the theater a good week.
"When you have twin or single screens, you can't afford to make as many mistakes," said Paul Sanchez, owner of P&G Theaters in Silver Spring.
Most of P&G's five Maryland theaters have twin screens, and Sanchez said, "I don't think you'll ever see a twin or even triple built again."
Indeed, several locally owned single and twin theaters have closed in recent years.
However, Gomery expressed concern that the choice of movies that the public can see is increasingly being concentrated in a few hands.
A preference for Hollywood blockbusters could bode badly for movie buffs who prefer classic, art or foreign films, Gomery said.
However, he also said that the theater circuit giants, with their multiscreen theaters, are the companies that can best afford to take on a risky movie, "and Drabinsky is one to take chances."
Drabinsky declined to make any commitments to showing art, repertory or foreign films in the Washington area, but said he is a supporter of such films.
For now, independent theaters like the Biograph will have that specialty market largely to themselves.
Ironically, the original Circle Theater became a Washington institution by playing frequently changing double bills, although the Pedases said they operated the theater at a loss.
Sanchez and Ed Stabler, manager of Loehmann's Twin theater in Falls Church, said a major problem facing the remaining independent theaters is booking decent first-run movies.
Distributors can blanket the Washington market by releasing movies through Cineplex Odeon and K-B theaters, and thus can afford to ignore the other theaters.
Meanwhile, local theater owners are trying other techniques to attract customers. Sanchez has been charging 99 cents per ticket at three of his theaters and showing only second-run movies that are proven box-office hits.
He said he has met with uneven success, and plans to raise the price to $3 at his Andrews Manor Twins, near Andrews Air Force Base, and convert the business to a combination restaurant and movie theater.
But there's competition in that niche. Atlanta-based Cinema N' Drafthouses Inc. has theaters in Arlington and Bethesda, and is looking to expand.
All of the changes in the movie-theater business mean a tough struggle for the remaining independent theaters, particularly the medium-sized chains.
"There's always going to be room for the independent theater owner to succeed," Ted Pedas said.
He said, "There will always be a niche left for the small independent," such as foreign films or art films or more rural areas of the country that have been ignored by the chains.
"But you can't be in the middle. You must be very big, or very small," Pedas went on to say.
But Pedas -- who, with his brother, will continue to produce and distribute films after the sale of Circle is complete -- said the trend to theater ownership by chains like Cineplex Odeon isn't necessarily bad for the movie business.
What's important, he said, is that the person running the business "has a passion for film. ... I saw that in Drabinsky, and in his whole organization. ... They have energy I haven't seen since Jim and I started in this business. They love the movie business."