Why Drive In Theatres Close

I recently saw a Milwaukee area CBS News report on the Keno Drive In Theatre going dark.  The reporters highlighted a rally at the site by supporters protesting the closing.  The overall theme of the rally and newscast suggested the Keno was a cherished public asset; the owners of the property should be sensitive to community needs and keep the theatre open.

The Keno Drive In opened in 1949 and still maintained its original wooden screen tower (its most distinctive feature).  Years ago, the property was sold to a developer, who leased it out to a third party (the same people who operate the Cascade over near Chicago) to run as a Drive In.  The Keno was the largest operating outdoor theatre in Wisconsin, capable of handling over 800 cars, and was located in the largest demographic area in the state: Milwaukee down through northern Illinois.  Naturally, it was the highest grossing (ticket sales) outdoor theatre in the state.

So why did the Keno close?  Shouldn’t a community asset be preserved for the good of the community?  In defense of the property owner, who has been demonized by many in the local press, he has every right to do whatever he wants with his property.  The Keno sits within a developed area and the land now has greater economic value with other uses.  Greater economic value to the owner and the community: property and sales taxes, necessary for providing children’s education and other government services, will increase if the property is developed.  If a Drive In theatre is so important to the community, the city or county can use tax dollars to build one.  Don’t hold your breath waiting for that to happen.  State, county, and local governments view Drive Ins like any other business: a source of tax revenue, not something on which to spend tax revenue.

One Drive In expert (?) interviewed by the local reporter parroted the common, but false, notion that high land prices is the major factor in the decline of Drive In theatres.  With most other profitable businesses, if the land under the facilities has increased in value such that it can be developed to better use, the owner sells his property and moves his business somewhere else.  There is still a lot of open land within a reasonable distance of Milwaukee.  The operators of the Keno, or any other investor, could have rebuilt the Keno in another nearby location.  A Drive In only requires 10 to 20 acres (for a single screen like the Keno), which could be obtained for between $100,000 and $200,000 (the last time I checked agricultural land prices).  Building out the theatre itself would take another $800,000, so you’re looking at an investment of over $1 million for a Drive In comparable to the Keno.  And that’s a conservative estimate.  Sure, you can build something smaller and cheaper out in the boonies where land goes for less, and there are a lot of small, run-down country Drive Ins for sale for a couple hundred thousand.  But the economics of the business are the same.  So it’s not high land prices that are to blame; Drive Ins close because they don’t generate enough revenue to justify the investment to keep them open.

And one big reason Drive Ins don’t generate enough revenue is because the general population doesn’t support them.  You wouldn’t know that from talking to people.  Everyone likes having a Drive In around and waxes poetically about their memories, but that doesn’t mean they actually go there.  When most strangers I encounter learn that I own the local Drive In, they go on about how wonderful it is and how much they love Drive Ins. And then in the same breath they say they’ll have to try and get out there some year, not even realizing the irony in their statement.  The harsh reality is that Drive Ins are similar to indoor theatres in that business rises and falls in response to the quality of the films coming out of Hollywood.  The economics of our business are further hampered by our seasonal nature (especially up here in the cold north) and the deleterious vagaries of the weather.  Drive Ins do have good, loyal patrons: just not enough of them. Most customers only come out if it’s a movie they really want to see, the weather is good, they don’t have something else to do, their kids aren’t acting up, their friends are coming along, and in general, the stars are perfectly in alignment.

That’s not to say Drive Ins are not profitable: some are.  But the level of profits, in a rational economic sense, doesn’t justify the level of investment and effort required to keep them operating.  Now, I’m not privy to every theatre’s income statement, but if you looked at the level of angst (outright whining and moaning) from practically every Drive In owner over the capital cost of converting to digital projection ($75,000 to $100,000 per screen), you could not possibly conclude that these theatres were anything more than marginally profitable.  In fact, many Drive Ins are either citing the cost of digital for closing, or begging for donations to buy the equipment: not the hallmark of a professionally run, profitable business.  And bottom line, if Drive Ins were profitable businesses, then investors would be out there building new ones.  All of the owners I know (a small and dying breed) operate their theatres as a labor of love, not to get rich.  But if any of them sold their theatres to development, I wouldn’t blame them a bit.

It’s unfortunate that the Keno closed, but Drive In fans in the area have other options: the McHenry Outdoor Theatre is a short drive away.  And that theatre still has its original screen tower.


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