You Can Build It, But They Might Not Come
The owners of Broadway Cinemas must have been thrilled when Muhammad Ali's limo pulled up in front of their business. This was December 2001, and the 10-screen theater in Louisville was hosting the hometown premiere of Ali starring Will Smith. As the governor, the mayor, and Louisville basketball great Darrell Griffith strolled the red carpet, Ali charmed the crowd, squeezing hands and throwing mock punches. "It was a wonderful night," says Sean Waddell, a nightclub owner whose father is Ali's first cousin. "All of the theaters were filled, and they ran out of popcorn."
A black-owned theater that opened in 1999 in the West End, the city's most populous black neighborhood, Broadway was the brainchild of three city leaders -- state Sen. Gerald Neal, former Kentucky State University president Raymond Burse, and funeral home owner Walter Prescott Porter. Taking a page from Magic Johnson, who owns theaters in Harlem and South Central L.A., the partners hoped to create a profitable business that would serve as the economic anchor in its neighborhood. They invested $1.5 million of their own money and borrowed nearly $2.6 million from four lenders, led by Republic Bank. The cash was used to transform a Winn-Dixie grocery store into a 1,650-seat theater, complete with state-of-the-art projection and digital sound systems. In 2000, its first full year of sales, the business reportedly posted revenue of about $1.3 million and a loss of $194,000.
In retrospect, feasibility studies the partners provided for the banks hint at what would go wrong. In the studies, Broadway's owners noted that they would break even if only a modest number of the seats were occupied on a daily basis. Critics now say the partners -- busy with their other professional commitments -- never made marketing the theater a priority. "I know people who should have been customers who never went because they didn't hear anything about it," says Steve Trager, Republic Bank's CEO.
Broadway rarely hosted special screenings or community events. Judith Egerton, the Louisville Courier-Journal's film critic, recalls that her paper had to seek out the owners to do an article when Broadway first opened. "They didn't seem very savvy about getting the word out," she says, adding that she "went to Broadway quite a bit because it was never crowded."
Failing to market the independent neighborhood theater aggressively was a crucial mistake, according to Jeffrey Thomison, who follows entertainment for Hilliard Lyons, a local brokerage. The market had plenty of movie screens before Broadway opened, he notes, and the theater's location "is not heavily commerced on weekends, which is when the industry makes its money."
Because it was, in Trager's words, "a good community project," the banks were patient. In 2002, the lenders adjusted payment terms and capitalized past due interest, according to their attorney John McGarvey. But even the new terms proved to be difficult for the owners, so the lenders began foreclosure proceedings. The owners (who declined to discuss their finances with Inc., citing ongoing litigation with their lenders) countered by filing for Chapter 11 protection last summer. Revenue continued to fall. On February 3, the day they converted to a Chapter 7 liquidation, Broadway Cinemas screened its last picture show.
At one point, the partners tried to get the business back, and they even put down a $10,000 deposit, McGarvey says. When they were unable to make a formal bid, however, that money was forfeited. A group led by Sean Waddell -- the club owner and Ali's relative -- has attempted to buy the theater; so far, unsuccessfully. Porter, the partner who owns the funeral home, hopes Broadway reopens. A successful theater, he says, would signal that West End businesses "can be as prosperous and economically aggressive as any community in America."