Another Rave review: Investment and exhibition team brings National Amusements locations to Dallas circuit


When Film Journal International first profiled Rave Motion Pictures in March 2005, the Dallas, Texas-based circuit received our “Rave Review” for, among other things, having gone from zero to 283 screens in a mere four years. For its encore appearance in FJI, the circuit is now eyeing the 1,000-screen mark with the purchase of a sizeable number of theatre assets from National Amusements Inc. (NAI).

“The management team here is very excited about where the exhibition business is right now and what we think will happen,” enthuses Tom Stephenson, chief executive officer of the newly organized and re-branded Rave Cinemas LLC. And he’s especially excited about the investor group Rave has partnered with.

“Rave is a great and relatively young company,” he details. “National Amusements is one of the great storied companies in this industry. My family was not in this business, but the family of Charley Moss practically started this business in all sorts of ways. Michael Lambert is one of the great media investors in this country today, and TowerBrook [equity sponsor TowerBrook Capital Partners L.P.] is one of the key private-equity firms.”

Stephenson says he’s “just so proud to be in a position to build this company together with such a great group. That is truly one of the greatest things that has ever happened to me. We are very proud of what we have been able to acquire but, just as importantly, proud of whom we have been able to do it with.”

On Dec. 17, this group of investors and cinema operators completed the acquisition of 29 NAI theatres from the Redstone family portfolio—another six are subject to landlord and related approvals, but expected to have been incorporated by publication time. Concurrently, Rave Cinemas, LLC (Rave) was newly formed by combining those theatres with the business operations of four Boston Ventures-owned Rave Review Cinemas (RRC). Rave also acquired RRC’s corporate infrastructure and the Rave Motion Pictures brand under which they operate. The remaining 21 locations still owned by RRC are managed under Stephenson’s leadership with the same executive team just as before.

“I think this is a huge opportunity,” attests co-investor and Rave Cinemas chairman Charles B. Moss, Jr. “We like this industry very much,” he says, speaking for a family whose entertainment roots go even deeper than the Redstones’, back to the days of New York City vaudeville (FJI March 2006). “Knowing this business and hopefully very well, we believe it has a very bright future.” (Equally positive words about our industry from Rave vice chairman and head of Lambert Media Group, Michael Lambert, can be found in our accompanying profile. Having known all the parties involved, Lambert is given credit as the unifying element who brought the deal together.)

“Rave and the former NAI theatres are now the fifth-largest circuit in the country,” Moss elaborates. “I know this may sound pretentious, but I truly believe we are the only circuit in that top end of the size market that is truly entrepreneurial. Our requirements are about presentation and quality, not about physical structures.” With 65 theatres and almost 1,000 screens located in 20 of the United States and represented in seven of the top ten Designated Market Areas (DMAs), the circuit will account for some $500 million in annual box-office revenues.

No wonder Stephenson feels “it really was a deal that came together in such a way that it was helpful for all parties. Rave Cinemas’ management got to have a much larger footprint by buying some terrific assets of a storied company in this business. We found some wonderful new partners in Charley Moss, Michael Lambert and the guys from TowerBrook. Boston Ventures was able to pay off some debt. Giving them a more unleveraged vehicle going forward…while carrying the majority of their assets until they are ready to sell the rest of them.”

Given the larger economic turmoil and market conditions, the issue of leverage was also key to NAI’s decision to sell. As a result, the holding company for media and entertainment conglomerates CBS Corp. and Viacom Inc. will now be able to pay down its debt further. At the same time as the venerable Redstone family circuit continues to hold on to its key locations, National Amusements president Shari Redstone also takes full control of her successful KinoStar operations in Russia by purchasing all six theatres with Charles Ryan of UFG Private Equity and Paul Heth, the established partner in Rising Star Media.

“It was very clear,” Stephenson contends about the talks with NAI, “that they wanted to retain what they have always described as their ‘core’ theatres, which are those in and around Boston and New York. We were able to buy all their remaining assets.” Further underlining the “wonderful” fit of the two groups of theatres, “there really wasn’t any overlap,” he says. “With the exception of Cincinnati, perhaps, where Rave operates one location and National Amusements has a very large presence, we are in similar areas but not in the same towns. The theatres really fit together very nicely.”

In addition to such demographic and geographic compatibility, the combined Rave now stands to reap the benefits from integrating the physical and operational sides of the acquisitions as well. “We obviously didn’t want to make any changes over the busy holiday season,” Stephenson explains. “The process of rebranding the newly acquired theatres as Rave will be starting now. Going forward, we have a very thoughtful and well-planned-out integration process.” From his point of view, “we have two really good companies here. We can learn a lot from National Amusements, as we have some things to offer them as well.” Elaborating upon the goal of “best practices,” he assures that “we are going to work very hard to integrate the best of both worlds.” Of course, there are economies of scale to be had when it comes to vendor agreements. “On the cinema-advertising side as well,” Stephenson feels, “the bigger footprint you can deliver to your advertising partners, the more helpful it is to them.”

One good example for the smoothness of the transition—and one that keeps the potential confusion of guests in mind—is the fact that moviegoers can find their favorite local theatre in any given area, both on the and websites. Also, NAI will retain their respective names and trademarks, including Cinema De Lux, Showcase and Multiplex Cinemas. Their former locations will be “rebranded in the right Rave style,” Stephenson says, but without being forceful. “Each building will be a little different. Some of them will be spiffed up a bit more perhaps than, let’s say, Fairfax Corner 14 (Virginia) or Buckland Hills (Connecticut), which are beautiful buildings just as they are right now. There will be name changes and you may find some more digital signage, such as menu boards within the theatres, for example, and some other features that we have found to be working very well for us.”

Speaking of digital, as an undisputed leader in DLP Cinema projection, “Rave prides itself on being an all-digital circuit with multiple 3D capabilities in every building,” he confirms. “While there are digital installations in virtually every one of the National Amusements theatres, we will work very aggressively to make the full digital transition happen there as well.”

On a more personal level, this is all about “creating a better experience” for people, which for Stephenson include both customers and staff. “If you think about the employee side, which I am not sure we talk about enough in this business, the more opportunities we have for growth, the better the opportunities are for our general and district managers, the assistant theatre managers…” This way “we can attract a better talent pool,” he believes. “We want to continue to make Rave a terrific place to work… With the acquisition, we have laid out a series of new challenges for ourselves and therefore a series of career paths for many of our people.”

On the company path getting wider, Charley Moss agrees. “Whenever you’re operating across a large area, clearly you have to be sensitive if you want to maintain a certain level of quality.” Operating in five states with his own Bow Tie Cinemas, and as chairman of Rave with 20 states, he envisions that “a proportionate increase in the systems and size to manage the new assets” is in order. “The philosophy, as far as I am concerned, will not change. Tom Stephenson’s philosophy and mine are pretty much the same about providing a good experience to the public. It is more than just ‘the movie’ and all about the entire experience of going to the theatre. Bow Tie’s slogan is about bringing style and elegance back to the moviegoing experience.” Although “Rave operates out of that same quality-of-experience philosophy,” Moss assures those of our readers who have been wondering that Bow Tie is and will remain separate from Rave Cinemas.

Having closed on this massive deal, do Stephenson and Moss believe there is room to further grow this industry along with their respective businesses? “We just had a pretty big meal,” the latter laughs. “Step one is to digest it before we move on…” That said, Moss believes this industry continues to open up opportunities for the right-sized company. “You could argue that most of the viable locations have already been built. Yet we do all find new locations… You could also say the same about the majority of consolidation having been completed, but there’s still the kind of deal that we are talking about here. I think it’s a moving target…”

Stephenson, too, does not think that the industry “will go on a retail building boom as we have done in the past decade, when there were so many new builds all over the United States. There will still be opportunities to have individual theatres here and there, but my own view is that the majority of growth will actually come through additional consolidation.”
So there’s a trilogy in the making? “We want to integrate this acquisition as well as we possibly can,” Stephenson assures. “We set ourselves definite goals as to what we want to accomplish in this acquisition. To the extent that we accomplish those, yes, we would be on the lookout for other opportunities that we think would make sense.”