Before there was a Dream, there was Cinema 812. Before that, there was the Steinbeck. Before that, there was the Golden Bough. And before that, there was the Hill.

For nearly 50 years, art films have had a home on the Monterey Peninsula. The homes have sometimes been funky--Cinema 812 sported futons and pillows for seats and frequently seemed enveloped in a smoky haze--but they have always reflected the Peninsula''s strong interest in the cinematic arts.

"There certainly is a need" for art houses on the Peninsula, says Edie Karas, former literature and film instructor at Monterey Peninsula College. For a moment, with the closing of The Dream Theatre in October and the subsequent announcement that the owner of the other specialty theater in Monterey--The Osio Cinema, owned by Resort Theaters of America--was filing for Chapter 11 bankruptcy, it looked as if that need might go unfulfilled. But according to the Richard Lawrence, chief executive officer for Resort Theaters, local moviegoers can be assured of still being able to see art movies in this town.

"In the immediate future, it [the bankruptcy] doesn''t mean anything," he says. The declaration of bankruptcy allows the company to reorganize and restructure its finances, but Lawrence says he doesn''t anticipate that will affect the Osio at all.

Nevertheless, the Osio''s newfound status as the only place in Monterey to see an independent movie highlights the danger of putting all our indie films in one basket, especially when that basket belongs to a chain that is vulnerable to national trends and pressures.

The Plot Thickens

Given the price of popcorn and a soda, you''d think the companies that build and operate movie theaters would be rolling in dough.

Some are, but some of the largest are in bankruptcy. Resort Theaters, which besides owning Osio also runs Galaxy 6 Cinemas at Del Monte Center, Lighthouse Cinemas in Pacific Grove, and the Crossroads Cinemas in Carmel, is not alone in its bankruptcy. United Artists, operators of the State Theatre in Monterey, declared bankruptcy on Sept. 5, about a month before Resort.

Their woes are indicative of the movie theater industry as whole--four of the 10 largest theater chains in the United States have declared bankruptcy this year.

"What happened is that they expanded too fast, too much," says Kit Parker, president of Kit Parker Productions, a film distribution company in Sand City.

Lawrence agrees.

"There are just too many screens in this country," he says.

According to the National Association of Theater Owners, the number of movie screens rose 56 percent during the last decade, from 23,814 in 1990 to 37,185 in 1999. During the same period, ticket sales rose 24 percent, from $1.19 billion in 1990 to $1.47 billion in 1999.

"The number of screens in the United States just zoomed way beyond the demand," Lawrence says, adding that theater companies not only built more screens, but built vastly more expensive screens to keep up with the trends in film projection and sound and the demands of moviegoers.

Dan Tochini, president of Theatrical Promotions, Inc. in Santa Rosa (the company that operated The Dream), says in some cases theater companies began to compete against themselves by building newer, state-of-the-art megaplexes--"I call ''em ''atomic bombs,''" he says--in the same markets they had built multiplexes a few years earlier.

As the newer theaters were built with better sound systems and stadium seating, patrons abandoned the older theaters.

"They killed themselves," he says.

As a result, operators found themselves saddled with large amounts of debts and expensive leases for unprofitable theaters. The remedy is bankruptcy. All the failed chains filed Chapter 11 bankruptcies that allow them to reorganize and restructure their debts.

Only Game in Town

Yet even in their compromised state, the chains can outperform a neglected local art house, if not in winning viewers'' affections, then in taking the market. Pacific Grove resident Alan Baldridge came to the Peninsula in the late 1960s and fondly recalls seeing movies at Cinema 812 on Cannery Row, then at The Dream when that opened in 1975. He is less fond of the Osio, the newest theater in Monterey and one that he finds cramped and uncomfortable.

"It''s torture sitting in there," he says. Still, he goes: It is the only place locally where he can find small and foreign films.

Baldridge''s comments are not something the management of the Osio is unfamiliar with. Nikki Forcier, area manager for Resort Theaters, says it inherited the problem when it took over the theater''s lease just two months before it opened.

Somehow, she says, the original designers placed the emergency exits in the back walls--where the screens are--in each of the theaters. In order to meet fire codes for an unobstructed exit, the screens in each theater had to be raised a minimum of seven feet from the floor--not the best position for viewing in a small theater.

Regardless, she says, there is a steady demand for the kinds of movies the Osio plays.

"The Peninsula clearly needs a theater that is devoted to serious films rather than the typical Hollywood product," Baldridge says. "Films the rest of the world cares about."

At CSU Monterey Bay, Karen Davis agrees.

"I think one less art house is just a tremendous loss for a community," she says. Davis teaches film at the university and also works as a film programmer selecting pieces for the Mill Valley and the San Francisco international film festivals.

From what she has seen, she says, there''s a strong audience for specialty films in the area. In fact, she thinks the area is a prime candidate for film festivals, which can boost audiences for specialty films in the area.

"Film festivals give sizzle," Davis says. "Art houses feed very well off film festivals." Festivals, she says, generate community interest in small, art and foreign films. Then the art houses sustain that interest throughout the year.

In October, CSUMB was the venue for an international film festival sponsored by the local chapter of the United Nations Association and the Weekly.

"We had a really great response," says Larry Levine, president of the United Nations Association and one of the organizers of Monterey Bay Film Fest 2000. It featured 15 films from 11 countries and drew hundreds of filmgoers to the university''s World Theater. But it was too late to save The Dream.

"I think The Dream suffered from not having a connection with a catalyzing event," Davis says.

Kit Parker thinks The Dream suffered from competition.

When it was the only art house in the local market, he says, it got its choice of specialty films and, if you wanted to see a film that didn''t come from Hollywood, it was the only place to see it. That changed when the Osio opened.

But according to Tochini, competition was only one factor in its decision to depart.

"There''s a good art market in Monterey," he says, "there''s just too many screens." And, while The Dream might not have been as profitable as the company liked, it wasn''t running in the red yet.

So why did they lock the doors?

"We were in too many markets other than this and we''re not really art operators," says Tochini. The Santa Rosa-based theater company has about 15 screens scattered around California. Its other theaters present more mainstream fare, and Tochini says The Dream was never a good match for the company.

Art theaters, he says, require more intensive marketing and, as his company looked to establish newer theaters elsewhere, giving The Dream the attention it needed for success didn''t make sense.

That The Dream was rundown is undeniable.

"We enjoyed going there," Baldridge recalls, "but you had to avoid the broken seats." And, he says, more than one of his friends had complained about a unique odor, similar to wet carpeting, that often pervaded the theater.

Karas agrees it was not the optimal movie-going experience: She often went to The Dream alone because her husband thought it was dirty. She, and others, looked forward to an art theater were they could find a more comfortable environment and more up-to-date projection and sound equipment.

"We thought the Osio was going to be that theater," she recalls. But, like Baldridge, she found the Osio small, cramped and uncomfortable.

"I really miss The Dream," she says now.