Mandates and the Movies – Who Pays for Overregulation?

by Charles Gruenwald
Clash Daily Guest Contributor

Out of all of the news stories that have been coming out of Hollywood within the last few months, the one story that will affect everyone who watches movies in theaters – as well as drive-ins, is the story that appears to be receiving little attention. This story also highlights the dangers of picking other winners and losers in the business world.

Starting in 2013, movies are no longer shown on film projectors – the new movie projection format is digital.

Yes, past changes within the entertainment business have usually come with their own unique baggage. For example, the transition from vinyl albums to compact discs resulted in record stores having to increase the investment in their inventory in order to appear well-stocked, since CDs are much smaller than records.

However, the transition from film to digital will require the owners of theaters and drive-ins to install new equipment – new, expensive equipment such as projectors, screens, and in the case of drive-ins, new projection booths that are closer to the screens. Based on quotes from theater owners, the typical cost for making these modifications to small theaters and drive-ins is approximately $100,000 to $150,000; these numbers vary according to the number of screens.

Now, survival in the business world depends upon the ability to change when necessary. The affected businesses in the entertainment world have a few choices: buy the new equipment, show older movies on film – if possible, or close. A few theaters want to remain in business, and they are looking for ways to raise money in order to do so. From Kickstarter campaigns, to holding concerts, to applying for loans, small movie houses are trying to keep their lights on. Unfortunately, the rough economy over the last five years has hindered the ability of some businesses to pay for whatever equipment that they need outright.

The Harvest Moon Drive-In in Gibson City, Illinois, is one theater that could not have survived in our current economy if its owners did not use their savings to cover operating costs. With their diminished savings, paying for the modifications has become difficult. Despite the money issues, there are plans to eventually open with the needed equipment.

Unfortunately, about thirty drive-ins have announced that they had shown their final film in 2012.

There are a few reasons why this issue is important.

First of all, the movie studios will be assisting the larger theater operators with making the necessary changes, leaving the small operators, such as the Harvest Moon, and the Catlow Theater in Barrington, Illinois without similar help.

Granted, movie studios, like all businesses must make money in order to survive. Therefore, decisions are made in an attempt to do just that. The decision to switch to digital was made in order to cut costs associated with movie distribution.

Second, the act of helping only the larger operators, while ignoring the smaller ones, gives the perception that Hollywood is picking winners and losers, with the losers being mostly independent, rural theaters. The loss of local theaters in remote areas, such as Gibson City, would result in the residents of those areas either planning road trips to see new releases, or find other entertainment options. If the economy remains stagnant, driving long distances to watch a new movie may not be a realistic option for some people.

Third, there are critics of the small operators who are trying unorthodox fundraising methods, such as the aforementioned fundraisers and concerts, in order to raise money. For some reason, there are people who claim that all failed businesses are a good thing, since something better will take their places. The individuals who make this claim regarding small theaters and the digital conversion fail to realize that the free market, in its current form, contains elements that not only promote the occasional destruction of viable enterprises, but may support the survival of businesses that that have earned the right to fail.

Yes, businesses fail. Questionable leadership, a bad economy, and poor locations are among the reasons why. Unfortunately, “artificial” issues, such as overregulation, excessive taxes, expensive mandates, and crony capitalism could lead even the best-run businesses to meet an unnecessary demise.

I am not an owner of one of these small theaters who face extinction due to an industry mandate, nor do I work for one. I am also not a shareholder of a large theater chain or movie studio. I also do not believe that the government should intervene, since history has shown that government intervention would most likely result in more lost jobs, as well as the continued erosion of the rights of businesses and workers. However, the thought of so many small businesses closing at our current point in time – when jobs are needed, is a nightmare for everyone involved.
Is there a fix for this industry-created dilemma?

Just like different levels of government, private industries have their own mandates – with their own intended, as well as unintended consequences.
I had chosen to write about this subject since the affected theaters, via Facebook or articles from local newspapers, were the only places where any information has been available.

So, when the media chooses which Hollywood news is the most-deserving filler material in its newspapers or news broadcasts, the almost-unreported stories may also be the biggest stories.

Image: Old Drive-In Movie Theater on Route 66 near Sapulpa, Oklahoma; source: Flickr; author: Kevin;Creative Commons Attribution 2.0 Generic license

Born in Chicago and raised in northwest suburban Cook County, Chuck Gruenwald developed an unfavorable opinion of machine politics quite early in life. In addition to cars, electronics, law enforcement, and politics, Chuck enjoys writing, and is also a horse racing fan. He has recently written op-eds for uncommonshow.com