Is Luxury the Ticket?

It's a torpid summer night in Florida, the kind made for watching DVD movies, lying motionless in refrigerated living rooms. Yet here is Eddie Ventrice, 43, tie off, shirt untucked, sprawled in the VIP section of the Muvico Palace theater for a 7:05 showing of War of the Worlds. Sure, he's got a 60-in. set at home as well as a 40-in. flat screen, not to mention a wife and kids. Sure, his ticket cost $18. But here he gets to hang with two buddies and watch killer aliens on the big screen. There's a lobby bar with a martini menu and a restaurant serving mahimahi. Says Ventrice, with eyes glued to a pre-movie American Express commercial starring Robert de Niro: "It's definitely worth it."

It has been a torpid year for Hollywood and, by extension, for most movie theaters. Attendance is down 10% from last year. Theater owners and industry execs blame the drop not on this year's bombs but on last year's hits, namely Mel Gibson's The Passion of the Christ and Michael Moore's Fahrenheit 9/11, which together made up the $500 million box-office difference. But so-so selections only remind moviegoers of the other reasons they're avoiding movie theaters these days: double-digit prices, irritating commercials and that imbecile down front with the Mariah Carey ringtone. As a result, the biggest chains are reeling. Market leader Regal Entertainment Group's stock is off 10% this year, and poor results have pushed rivals AMC Entertainment and Loews Cineplex Entertainment into a merger.

The demanding tastes of moviegoers have inspired a few upstart cinema chains, however, to try a different script. By building extravagant theaters, adding family events and offering plush amenities, those exhibitors are enticing viewers back--even at higher prices. In a down market, the boutique theater chain Muvico, a Fort Lauderdale, Fla., company with 12 theaters in three states, has managed to boost attendance 2% this year. National Amusements, run by Viacom heir apparent Shari Redstone, is expanding its upscale Cinema de Lux brand of theaters, which sells 35% more tickets per theater than its sibling brands. At Pacific Theatre Co.'s swinging ArcLight Cinemas in Los Angeles, attendance has swelled 25% over the past two years. Says Paul Dergarabedian, president of Exhibitor Relations Co., a box- office--tracking firm in Encino, Calif.: "It's counterintuitive--if attendance is down, why would you invest more in a theater?--but this template is one that is working."

It's working for Hamid Hashemi, CEO of Muvico. The Iranian immigrant began accumulating Florida cinemas in the 1980s. "I thought, What an easy business," he says. "The movies are made by someone else. You sell popcorn. Easy!" But when a major chain opened a rival screen down the street and put his first theater out of business, Hashemi realized he had to offer what the big guys didn't. "At the end of the day, you all get the same 35-mm tape," he says. "What sets you apart is how you package it."

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