I am also a big fan of Sunset Boulevard, that said, the BATB show is outdated, and while I would love to replace it with an updated version, It's run it's course for now I think. I would replace the theater with a lovely new indoor theater, very plush and very posh. Inside would be an updated version of the new Cruise Line Show "Disney Wishes" the name would change and details would change to. (They wouldn't be visiting Disneyland, but rather Disney's Hollywood Studios). It's a very long show so it would be marketed like an event, almost along the lines of Fantasmic or the American Idol Finale show. It would probably have three shows per afternoon, and be paired with a new Restaurant "Oscar's." which would feature homages to classic Oscar winning films.
I'm not sure exactly what to do with the theatre, one option would be the Carthay Circle, which would then of course, require an exterior refurbishment on the current Carthay Circle Facade along the street. If anyone else has any suggestions feel free.
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That's just my idea, but we all seem to be of one mind to replace BATB. In my mind, I would like to keep it a show, just make it an indoor theater. (But I also have a plan to include a Newsies show in the Premier Theater, and replace Little Mermaid with a ride) so that just happens to fit best in my head.