Islanders started lining up at 4 p.m. outside Vashon Theatre last week, eager to snag tickets for the Seattle International StandUp Comedy Competition, a special event owner Eileen Wolcott hosts annually at the theater.

By 7 p.m., almost every seat was full and the lobby was a blur of activity as Wolcott darted back and forth making last-minute arrangements with the event’s producers.

But behind the evening’s high spirits, a more sobering reality seemed to hang in the popcorn-scented air — the fact that the theater had been burglarized in the middle of the night some 72 hours earlier. Nearly $10,000 worth of valuable equipment had been stolen, including an expensive digital projector. 

Though all the stolen equipment was insured, the burglary was a devastating blow to Wolcott’s morale, and it immediately affected the theater’s bottom line by forcing the cancellation of a documentary film screening and a birthday party — both of which depended on the digital projector.

It also exposed a financial fault line at the heart of Vashon Theatre.

“We’ve been really struggling this year,” Wolcott said. “We need everyone to come to the movies right now. If this continues to be a trend, I don’t know what will happen by next October.”

Multiple factors have contributed to a situation that has put Vashon’s only movie theater — a beloved local landmark and gathering spot — on shaky financial ground.

Attendance is down, Wolcott said, not only because of the ongoing recession but also because the Island now offers several more entertainment options — including free movies at two restaurants — than when Wolcott and her husband Gordon bought the theater in 2003.

But the theater’s biggest financial threat has come from changes in the way movie studios distribute their films and work with theaters — changes that have been gradual but devastating to small, independently owned movie houses across the country.

About three years ago, Wolcott began to notice that studios were rushing films to DVD more quickly after their theatrical runs. That meant she had to move faster to bring films to Island audiences.

A year later, she observed with mounting alarm that many new independent films were starting to become available almost immediately to home viewers as part of on-demand cable television packages — cutting into another niche area of her programming.

But the most damaging industry change occurred a little more than a year ago, she said, when major studios — including Sony, Fox and Warner Brothers — began to insist that theaters host longer and exclusive runs of blockbuster films and pay higher percentages of the box-office take for the privilege of doing so.

“It’s a complicated system,” Wolcott said, “where the studio wins no matter what you do.”

Under the new rules, Wolcott must return 65 to 90 percent of her ticket proceeds to the film studios for most first-run films. At the same time, she’s also responsible for paying taxes on the entire amount of each ticket sale, despite the fact that she only keeps a small fraction of the gate price.

She has also been required to promise studios that she’ll program only one film at a time and keep the film running in her theater for as long as three weeks — a losing proposition for an Island with a finite movie-going population.

That means if a new, R-rated action film is playing in Vashon Theatre, Wolcott can’t appeal to a different demographic by programming a children’s film at the same time.

“When I started, I was playing eight movies a month,” she said. “Now I’m playing three or four.”

While movie theaters all over the country have been reeling from the new fees and restrictions, the hardest hit have been places like Vashon Theatre, single-screen theaters located in small towns.

Rocky Friedman lives in Port Townsend, where he is part owner and full-time programmer of the jewel box-sized Rose Theatre, a two-screen venue with 158 seats in one theater and 83 in the other.

“It’s just a harder market out there,” Friedman said. “Films that did $5,000 a few years ago are now doing $3,000. Movies just don’t hold the place in our culture they used to.”

Friedman said the Rose Theatre survives because he only programs a few blockbuster films each year and concentrates the rest of the time on showing independent, archival and art house fare, which costs much less than blockbuster films.

Friedman also books live events at the Rose, including touring productions of the Metropolitan Opera and the National Theatre of London.

And he aggressively promotes his films by sending out an e-mail newsletter to 4,500 subscribers every week.

“You have to be innovative and creative about this,” Friedman said. “I look at every movie and think, ‘what group will this appeal to?’ And then I contact them.”

Another film programmer, T.J. Saddis, who works at the historic 260-seat Lynwood Theatre on Bainbridge Island, said she has also seen a decrease in attendance at her theater.

“We’re down by a significant amount,” she said, but added that the Lynwood doesn’t show blockbuster films at all. Instead, it offers only independent, foreign and documentary films, supplementing its schedule with special events.

Wolcott said she doesn’t want to turn Vashon Theatre into an art house, because she knows Islanders appreciate having the chance to see blockbuster films without having to take a ferry ride.

What’s more, she said, there’s a Catch-22 in presenting less expensive and less well-known independent and foreign films: Fewer people would come out to see them.

The big crowds that show up for blockbuster films buy a lot of concessions, providing her with enough of a profit to pay her eight part-time employees, she added.

But the margin is razor-thin, she acknowledged.

Right now, she isn’t paying herself for her more than full-time work at the theater, relying on her husband’s income as a fire chief in West Seattle to keep her family afloat. She’s also had to dip into a line of credit on her Seattle home to cover some of the theater’s operating expenses, a debt she hopes to pay off soon.

Still, she said, she is always looking for ways to diversify Vashon Theatre’s offerings in order to turn a higher profit and keep the theater’s doors open.

“My motto has been to do a lot of different things,” she said, pointing out that the theater has become one of the most popular spots in town for childrens’ birthday parties.

Wolcott regularly programs independent films, documentaries and traveling programs from film festivals, as well as concerts and other live events.

She pointed to an upcoming event — a Michael Jackson sing-a-long, complete with vintage film and television footage, coming up later this month — as an example of the kind of programming she’d like to do more often.

Wolcott is also excited that well-known Hollywood screenwriters Robin Swicord and Nicholas Kazan will come to the theater later this winter to give lectures and host screenings of some of their films.

She hopes to come up with other innovative ideas, and to that end, she regularly has brainstorming sessions with members of Vashon Film Society, a nonprofit group formed in the mid-1990s to support the theater and promote film-going on the Island.

She also intends to keep opening up the theater for free community events, including two in December — the community caroling sing-a-long, and her annual holiday gift to the Island, a free screening of “It’s a Wonderful Life.”

And much like George Bailey, the protagonist played by Jimmy Stewart in that classic film, Wolcott has a generous community spirit that is being repaid in hard times.

Last week, she said, Islanders showed up in droves after learning about the burglary by word of mouth and via e-mail blasts from Vashon Film Society.

“People have been dropping off donations, and buying gift cards for their holiday guests,” Wolcott said. “I’m so grateful to be a part of this community.”

She also said she has already been able to replace her stolen digital projector and is ready to resume hosting birthday parties and special screenings.

“We scrambled as fast as we could,” she said. “We’re back in business.”