Despite the protests of local citizens, Hollywood legends, and the National Trust for Historic Preservation, the theater was demolished in 2001 by Nebraska Methodist Health System for a parking lot.
Following construction, the theater was leased to the Cooper Foundation of Lincoln, Nebraska for exhibition of films in the Cinerama format.
In 2000, Carmike Cinemas installed a Sony Dynamic Digital Sound system in the main auditorium, new seats, a new curved screen and new curtains.
A patron would call in advance to purchase reserved seats, referred to in the trade as a "hard ticket sell."
The final Cinerama film to be shown at the Indian Hills was How the West Was Won which played for forty two weeks until it closed in March 1964.
It followed Waller's earlier eleven-camera, eleven-projector "Vitarama" process, first presented in 1939 at the New York World's Fair, which proved too unwieldy for widespread commercial deployment.
Prior to the first Cinerama production, movies were projected on a nearly-square flat screen and the sound was one-channel monophonic.
As a result of Cinerama the film industry adopted the single-projector wide-screen format and stereophonic sound as the norm.
According to David Strohmaier, a Los Angeles filmmaker and producer of a documentary film called "Cinerama Adventure," the Indian Hills Theater was unique.
The letter indicated that the theater met National Register Criteria "A" in that the "Property is associated with events that have made a significant contribution to the broad patterns of our history" and Criteria "C" in that the "Property embodies the distinctive characteristics of a type, period or method of construction or represents the work of a master, or possesses high artistic values, or represents a significant and distinguishable entity whose components lack individual distinction."
Shortly after the announcement of the theater's sale, Nebraska Methodist was contacted by Ed Reitan, a Los Angeles developer of air traffic control systems and winner of a 1989 technical Emmy Award for his restoration of the earliest television color videotapes.
Reitan reported in a posting on In70mm.com: "Pleas from myself in direct meetings with NMHS to at least save and use the central Cinerama theater for their own auditorium were ignored."
After the meeting on the morning of June 20, 2001, Karstens and Lutthans were asked to be present for a press conference scheduled for later that day in front of the theater.
Methodist nicely had the whole package wrapped up in one short day, with the assistance and blessing of Karstens and Lutthans!Unknown to Reitan at the time, Karstens and Lutthans were discussing the approach to be used at the press conference with legal advisors both in Omaha and Los Angeles (including talks with Robert Nudelman of Hollywood Heritage), immediately following the morning meeting.
On June 22, 2001, the Methodist Health System's employee newsletter "Newstime" stated: "Methodist Health System has offered to donate the theater furnishings left behind, including the screen, projectors, curtains and most of the seats, to a group (the Investment Group) who wished to operate the Indian Hills building as a movie theater.
The June 29, 2001 issue of "Newstime" stated that the news conference had been "well-represented by the local media" and followed "a meeting between MHS officials and a national cinerama interest group, who jointly concluded that shared use of the building was not economically viable."
Karstens, Rich, and Lutthans have all stated since that their appearance at the press conference was not meant as any sort of endorsement of the views put forth by Methodist Health System.
The Society was assisted by letters of support to the local newspaper from film industry members such as Kirk Douglas, Charlton Heston, Janet Leigh, Patricia Neal, Robert Wise, Richard D. Zanuck, and Ray Bradbury.
Additionally, film historian Leonard Maltin appeared in a public-service commercial that aired on local television and radio in support of the Society.
Filmmaker and Cinerama historian David Strohmaier stated, in video testimony, that the Indian Hills was "the finest venue for wide-screen films in the world."
On August 20, 2001, before the Omaha City Council had a chance to vote on the Preservation Commission's landmark recommendation, Nebraska Methodist demolished the theater.
That was the finest theatre I had ever seen in my life, and the last of its kind, and everybody involved put in so much work, and now the space is a beautifully paved, empty parking lot.