Category Archives: Analysis

Multiplexes Set to Feast on Television Leftovers

Son of God and Veronica Mars

“Son of God” (left) and “Veronica Mars” – two theatrical releases derived from television properties.

Two movies hitting North American cinemas over the next three weeks are primed to do blockbuster business. Unlike most blockbusters however, they aren’t being released with the support of multi-million dollar marketing campaigns. Both are derived from properties that originated from a source cinema owners’ have traditionally considered their biggest nemesis; television.

Despite their small screen provenance, if either or both titles perform as expected, it could set a new paradigm for how Hollywood goes about distributing certain films and we can expect to see the concept duplicated.

Son of God

The first of these films to hit multiplexes (in North America and Latin America) is “Son of God”. The movie is an abridged reworking of “The Bible”, a 10-hour mini-series that aired on the History Channel less than a year ago. The new theatrical adaptation whittles the television version down to 2 hours, 38 minutes and is recut to focus solely on the story of Jesus Christ.

The television mini-series was an all inclusive tale that included Bible stories from the Book of Genesis through the Book of Revelations. When it premiered last March on the History Channel to an audience of 13 million, it set the 2013 record for cable viewership and was the most watched program the network had ever produced. The Blu-Ray and DVD release of “The Bible” was just as successful going on to become the all time sales champ for mini-series on home video.

The mini-series was the first scripted program from Mark Burnett, a veteran of reality-TV producer of such shows as “Survivor” and “The Voice”. He produced “The Bible” with his wife, Roma Downey, and it was always their intention to extract a theatrical release out of the series. The only question was who would help them release the film. The answer was Twentieth Century Fox.

On the run up to the February 28th release of “Son of God” Burnett and Downey went on an extended publicity tour, showing excerpts of the film to various Catholic and Christian religious groups throughout North America and certain international markets. The gambit seems to have paid off, for much in the way pastors and clergymen promoted “The Bible” to their congregations, they have also used the pulpit to encourage their flocks to go see “Son of God” upon its release.

A week before its release numerous media outlets, starting with the Hollywood Reporter, began picking up on the escalating advance sales the film was generating. The trade publication discovered that a children’s charity, Compassion International, had purchased 225,000 tickets in 40 cities and gave them to local churches to disperse.

YouTube Preview Image

It was reported that at least 10 multiplexes around the United States were booked solid by church groups and organizations. Not just in a single auditorium, but in what was dubbed a “theater takeover” every single screen in these cinemas was scheduled to show “Son of God” the night of February 27th.

Read More »

Why Digital Alone Won’t Kill Second Run Movie Theatres

Screenshot 2014-03-03 16.37.52

The threat that the digital conversion poses to single-screen and drive-in cinemas have been highlighted several times on CelluloidJunkie.com (here, here and here), but there is a third category of cinemas that also face an existentialist threat with the phasing out of 35mm prints. Second-run cinemas, also called discount theatres, dollar theatres, dollar movies and sub-run theatres have built a business on showing film prints and films no longer playing in regular cinemas, typically one or two months after the film’s opening; a business about to go away.

While mostly found in the US, they also exist in other major cities around the world, where they mop up the last theatrical box office takings a film is likely to see before it moves on to download, DVD/BD, streaming and pay-television. Favoured by large families, pensioners, students, unemployed and the working poor, these cinemas have always constituted a way to get a sprinkling of big screen magic, even if the seat was creaky and the floor was sticky, for as little as a dollar.

Silver Screen

Screenshot 2014-03-03 16.38.13

The recent closure of the eight screens Silver Cinemas South Hills in upstate New York’s Wappingers Falls (pop 5,488) after 16 years of providing low-cost entertainment to the town was a stark illustration of this sector’s death spiral. On Tuesdays films there were just $1 and the rest of the week they were still only $2. Patrons there will instead have to go to Regal (Hoyts) Cinemas Galleria Mall 12, or there is the Overlook Drive-in one of the rare all-digital drive-in cinemas. The cinema had lost its lease, but the writing has been on the wall since it became clear that it would never show The Wolf of Wall Street since no 35mm print was made for the film’s North American release.

With its closure the number of Silver Cinemas shrank from eight locations to seven, dropping from a total of 55 screens to 47. The chain is an interesting operation, being a division of Mark Cuban’s 2929 Entertainment art-house exhibition arm Landmark Theatres. It is not the only low-cost arm of a major exhibitor. Other major chains often keep a smaller multiplex open even after they open a newer and larger mega/multiplex nearby, by turning them into a second-run cinema.

This was for example the case with Regal Cinema’s Bellis Fair 6 in Washington state. This too has now closed. In UK there is the Odeon Panton Street that shows slightly older films, particularly art-house ones, which is probably the last cinema in central London where tickets cost less than £10 (yes, that’s considered ‘budget’ by West End standards).

Dollar and Sense of Second Screens

The economics of second run cinemas is very straightforward. Rental terms deals between distributors and exhibitors have a steep drop-off after the first week, with films increasingly going ‘wide’, ie on as many screens as possible, in the opening week. This is especially the case in peak seasons such as summer or major holidays with a glut of releases.

A film is thus more profitable to exhibitors the longer it plays in cinemas, because a larger proportion of each box office dollar is kept by the cinema. So while Disney is no doubt pleased that Frozen has grossed over $1 billion worldwide (and become the studio’s first non-Pixar film to win an Oscar for Best Animated Feature Film), it is cinemas that are cheering that it has been playing to families for weeks and weeks on end.

Read More »

10 Reasons Why Dolby’s Atmos Will Bypass Your Living Room for Your Headphones

Right from its launch, Dolby has made no secret of the fact that it sees a business for its Atmos immersive audio (IA) technology beyond the cinema. Part of the grand plan was just revealed at the Mobile World Congress currently underway in Barcelona – and it is a very different path from that of rival Auro. Put it this way, DON’T hold your breath for Pioneer to come out with a Dolby Atmos home cinema amplifier but DO expect Samsung’s Galaxy 6/7 to feature AtmosM.

Everyone knows by now that Dolby and Barco are locked into a struggle about who will dominate the next generation of digital audio in cinemas, with the object-based Atmos fighting against the 11.1 Auro. So far the fight has largely gone Dolby’s way, with Atmos screens outnumbering Auro by a factor of 4 to 1, though with some countries such as India being more inclined to embrace Auro.

With Dolby in full control of the Atmos technology and patents, they can afford to bide their time a bit more and build up a larger footprint (earprint?) in cinemas. Particularly following the deal to acquire Doremi, which will help them expand and disadvantage Barco/Auro. Barco, meanwhile, only controls the Auro technology as it relates to cinemas and the patent owners are starting to look at consumer markets such as home cinema and automobiles.

When we asked the question a month ago ‘Has Auro Abandoned Cinema for the Home?‘ we quickly got a response from Auro Technologies saying “we’re happy to confirm that Auro has no plans to step away from the cinema market: quite the contrary in fact. We’re confident that expanding into the consumer market will only strengthen our growing presence in cinema.” The idea is that with more films mixed in Auro 11.1 and seen and heard that way in the home, people will want to experience it the same way in cinemas.

The logic makes some sense, if you consider that consumers who chose Dolby 5.1 in the home did have a positive influence on demanding the same or better in the cinema. However, it also points to the two-front battle that both Dolby and Barco/Auro are waging in the Immersive Audio War. One is to get take up in cinemas and beyond, the second is to get content owners to make their films, television shows and games mixed and encoded in their flavour of IA. Here both are sparing no effort in snaring the best content and creatives, with both Barco and Auro engaged in not just Hollywood but getting films, mixing facilities, preview theatres, directors and audio engineers in countries such as France, India and China familiarised and equipped with their technology. Content is very much King in this battle.

But when it comes to the consumer, the battle lines are drawn quite different, as we will see.

Read More »

Will China Spoil the Party for IMAX in 2014?

imax-corporation-share-price-price_chartbuilder-1

Who doesn’t wish that they had bought IMAX stocks in 2001? Back then the once-great large format film company had been reduced to a penny stock on the back of US cinemas filing for Chapter 11 bankruptcy protection to get out of expenses leases and also costly contracts with IMAX. Digital was just over the horizon and even the vaunted Digital Media Remastering (DMR) up-converting technology had yet to make a dent and give it access to first-run films ( re-release of “Apollo 13″ was the first DMR title).

Yesterday the shares jumped to over $27 on the NYS ( C$30 on TSE) on the back of one of the companies best quarters ever. It might not quite have reached the heady heights of the late 1990s, but it is still a good time cash in for anyone who bought cheap. The question now is, can the good times last?

IMAX’s revenue increased from $77.4m to $105m, while profit more than doubled to $27.8m for the last quarter of 2013, compared with a profit of $12.8m a year earlier.  Analyst firm Piper Jaffray rightly described it as a “blockbuster” fourth-quarter results. The revenue was primarily driven by three titles: “Gravity”, “The Hobbit: the Desolation of Smaug” and “Stalingrad”, the latter of which did well in Russia and Europe ahead of its US release in February. IMAX also got good at being brutal in 2013, by yanking under-performing titles like “After Earth”, “The Lone Ranger” and “Ender’s Game” off their screens after just one week.

It is revenue from films that forms the largest component of IMAX’s earnings these days. As noted by Variety:

Imax said it earned $244 million worldwide during the period, its highest global box office quarter. It earned $727 million during the year.

It averaged $366,300 per screen during the fourth quarter.

“Gravity,” alone, generated around $100 million for the company. Film has earned over $700 million worldwide for Warner Bros.

Given the large-screen spectacle nature of “Gravity”, “Stalingrad” and “Hobbit” it should come as no surprise, but it is still a seizable figure. Other earnings also grew compared to (Q4 2012), but were smaller overall:

  • Sales and sales-type leases – $32.6m ($20.2m);
  • Joint revenue-sharing arrangements – $24.5m ($17m);
  • Production and DMR – $28.6m ($19.2m);

The more interesting and important figure is the number of new screens. From THR:

During the latest quarter, Imax signed contracts for 119 theater systems and installed 58, of which four were upgrades of existing venues. That brought the full-year total of installations to 112 new theater systems across 23 countries.

The most important growth has come in territories such as China, South Korea and India. As told in a separate piece for THR:

Imax is experiencing continued growth for its fast-expanding theater network in China. The giant-screen exhibitor recently expanded its contract with China’s largest theatrical chain, Wanda Cinema Line Corp., so don’t expect more blockbuster deals anytime soon.

“I don’t think you’re going to see another 120-theater deal like we had with Wanda. That’s not going to happen,” Imax CEO Richard Gelfond told analysts Thursday after the release of his company’s fourth-quarter results.

IMAX is thus keen to play down expectations that the good news will roll for ever. The question is whether there are major challenges ahead. Gelfond was upfront about the problems faced in China. Although the previous quota increase benefitted IMAX, the expected additional increase has not happened.

It is also likely that not all IMAX titles will pass the Chinese censors in 2014 and the problems of getting the right type of Chinese blockbusters onto the largest of screens still remains. While IMAX has had an easier time getting Russian epics like “Stalingrad” or Bollywood blockbusters such as “Dhoom 3″ released around the world, getting Chinese films onto Chinese IMAX screens represents the greatest potential and pitfall for IMAX. But that’s not all.

Read More »

Europe’s Cinema Attendance Decline is Greatly Exagerated

No decline to be seen here – cinemagoers in Romania

It is appropriate that the European Audiovisual Observatory (EAO) should release its cinema admissions report at the Berlin Film Festival rather than Cannes, because it appeared not to make for sunny or cheerful reading.

The headline figure of 4.1 per cent decline for EU cinema attendance and the second lowest attendance since 2000 made news beyond the traditional trade press. So does this spell doom and gloom for European exhibition? A more careful and nuanced reading of the underlying data yields a more mixed picture and even positive sector trends.

There is no arguing with the data itself and Screen did a good job of highlighting what it was that was dragging down the market:

The cumulative admissions drop in the EU was driven by the significant decline in four out of the five largest EU markets:

Spain (-15.2m; -16%)
France (-10.8m; -5.3%)
UK (-7m; -4%)
Germany (-5.4m; -4%).

Only Italy withstood the general downward trend with admissions estimated to have grown by 6.6% to 106.7 million tickets sold.

It should come as no surprise that with Spain mired deep in recession caused by a massive property bubble, spending priorities for tickets to those multiplexes that were part of the over-building problem, were not high on people’s agenda.

Cyprus saw an even bigger drop of nearly a quarter (-24.4 per cent), though Greece was surprisingly only down by nine per cent, which is less than Sweden’s -9.6 per cent, despite the Nordic major having weather the Great Recession much better than any southern European country. So why did Sweden do worse than Greece?

This statistic shows that it was not so much a bad year for European cinemas as for Euro cinema, ie films made in European countries. Italy’s Sole a catinelle from Medusa earned a staggering $69,903,094, which was nearly three times as much as the second biggest film of the year (Frozen – $26m) earned.

It was the lack of a Skyfall-size domestic hit that dragged down UK, while the highest placed French film only came 7th. In Germany Fack Ju Gohte came second the The Hobbit 2 while in Spain the highest place local film was a miserable 16th place for Mama. So don’t blame audiences, instead blame directors, producers and distributors.

A Continent of Two Halves

More than anything, the report served to highlight the differences between what Donald Rumsfeld memorably termed Old Europe (West) and New Europe (Central and East). It was in New Europe that, with the significant exception of Poland, it was a story of growth that transcended the popularity of local productions – though these helped.

This fact was reflected in local news headlines related to the EAO report, such as ‘Turkish people break movie attendance record‘ and ‘Romania sees 13.8% jump in cinema admissions, second highest increase in Europe‘. Bulgaria saw the highest increase in admissions(+16.7 percent) followed by Romania and then Lithuania (+6.8 percent).

Read More »

2013 – Bad Year for Film; Great Year for Exhibitor Share Price

It may seem paradoxical, but while 2013 was a bad year for films in terms of growth, it was an excellent year for cinemas. Even with a strong summer at the box office, 2013 was flat or even down compared to the previous year in most western countries. Only emerging markets like China showed strong and significant growth on the back of their multiplex expansions.

It would seem logical that this trend would be reflected in the share price of listed exhibitors, but analysis by CelluloidJunkie.com has found that major exhibitors in the four largest English-speaking territories (USA, Canada, UK and Australia) had one of their best years ever in terms of share price. We will examine this, as well as looking at the possible causes and outlook.

We first have to preface the analysis by noting that it is difficult to make a completely accurate like-for-like comparison. While the majority of the largest exhibitors in the US and Canada are publicly traded (Regal, Cinemark and Cineplex are, while AMC is privately owned by China’s Dalian Wanda Group), the same is not the case in UK, where only one of the Big Three is listed (Cinemaworld; Odeon-UCI and Vue are privately held), whereas in Australia the multiplex chains are privately owned (Hoyts) or have complicated joint ownership or subsidiary status (Village and Greater Union/Event Cinemas).

Even so, it is still possible to get a good idea of how markets value exhibitors and why 2013 was a good year for them, as we will see.

USA and Canada

2013 was a flat year in terms of box office growth. Statistics from BoxOfficeMojo tell us that overall gross was $10.925 billion, compared to $10.823 billion the previous year. While up by $100m year-on-year, this “growth” is effectively cancelled out by inflation. The underlying ticket sales are likely to show a decline when the official statistics are published by the MPAA. Projecting an annualized rate The Numbers sees attendance fall from 1.36bn to 1.19bn between 2012 and 2103.

This decline is in-line with what was predicted ahead of CinemaCon last year. Reported in Deadline:

“Bond analysis firm Fitch Ratings forecasts a “modest” decline in 2013 ticket sales and long-term challenges that should “cause concern” for lenders. Studios will find it “difficult to replicate” the success they had last year with hits including The Avengers and The Dark Knight Rises, analysts Shawn Gannon, Rolando Larrondo and Mike Simonton conclude. In addition the 3D market is “starting to mature.””

All-in-all you would think that it would have been good to short stocks in exhibitors, but you would have been wrong.

Screenshot 2014-02-14 15.07.12

Regal Cinemas went from strength to strength as the share price rose from just under $14 per share in January 2013 to close to $20 per share at the start of 2014, before slipping down closer to $19 recently.

Screenshot 2014-02-14 15.15.21

Meanwhile competitor Cinemark started the year below $27 and ended it above $33, before currently landing just above $30. Not as strong as Regal’s growth, but still significant.

Screenshot 2014-02-14 15.12.09

North of the border, Cineplex pulled off the most impressive stock market feat of them all by increasing from C$32 to coming within a whisker of C$45 before declining to just over C$40.

Read More »

How Kickstarter Helped Save Independent Cinemas from Digital Oblivion

Kickstarter has played a significant role in enabling small independently owned cinemas across the United States to make the transition to digital, a detailed analysis by CelluloidJunkie.com has uncovered. Reviewing 70 campaigns to raise funds to assist with upgrades to digital projection and associated technology improvements (mainly sound), we have found that the crowdfunding platform has been used to save at least 38 cinemas across 20 US states and Canada. Spanning a period from mid-2012 to the present date, the overall success rate of Kickstarter 35mm-to-digital campaigns has been 57.6 per cent, with 38 per cent unsuccessful in hitting their funding target and 4.4 per cent cancelling their campaign, while four campaigns are still active. Digging deeper yields interesting results and lessons for how to use Kickstarter effectively to achieve the fundraising goal for switching from film to digital. With Hollywood studios ending 35mm prints distribution this year we expect to see many more small and single-screen independent cinema turn to community and crowdfunding for support.

Kickstarter has in a few short years become the go-to platform for online fundraising for a variety of projects, ranging from smartphone accessories to the Oscar-nominated documentary The Square. As Digitaltrends recently noted, “More than 3 million people pledged over $480 million to Kickstarter projects last year,’ with a total of 19,911 projects successfully meeting their funding targets.  It is should come as no surprise that small cinemas that are unable to tap VPF (virtual print fee) or other forms of Hollywood studio-supported funding mechanisms have turned to the internet to raise the money needed for buying and installing DCI-grade projectors, servers and sometimes also upgrading their sound systems. Finding all of these projects on Kickstarter is no easy task as they are not grouped together, nor does a search for terms like “digital cinema” or “digital conversion” yield all the relevant campaigns. This is because the campaigns are directed by the creators towards the potential audience and supporters, usually through social media such as Facebook and Twitter, rather than towards cinema analysts. As such, we believe that our sample is comprehensive but possibly not 100 per cent complete. Statistics of Success & Failure

There are many conclusions to be drawn from the completed campaigns, both the ones that achieved their funding target and those that failed or pulled out. In total more than $2.66m was raised from a collective goal of $2.38m by more than 25,000 backers for digitising 42 screens in 38 cinemas, with an average donation of $109. Given that the majority of cinemas that started a campaign are independent single-screen theatres, the cost of a single projector and server is largely fixed, with the amount varying depending on additional upgrades to the theatre. As such we found that the campaigns typically ranged from $35,000 to $80,000, with most asking for around $40,000 to $50,000, though there were a handful of campaigns aiming and achieving more.

In two cases in Colorado targets of no less than $150,000 targets were met, in one campaign for four digital projectors for the Denver Film Society ($176,925), while in the other was for two projectors for the Lyric in Fort Collins ($158,692). The latter also had the largest number of backers of any campaign with 2,324 people pledging their support. Yet the single highest amount raised was $195,043 (for a target of $175,000) for the Village Picture Show, Manchester, VT’s “only movie theatre,” by 1,006 backers. Notably, there was also the “Cinefamily Digital Projection & Theater Restoration!” that raised $158,541 for digitising the former Silent Movie Theatre in West Hollywood.

There were 25 campaigns that were unsuccessful in meeting their campaigns’ funding targets. Of a hoped-for $1.6m only around $200,000 was raised. This highlights the fact that almost all Kickstarter cinema digitisation campaign that failed fell well short of their target, rather than just missing out. Of the 25, only three came close to or just over 50 per cent of their target, with many not even achieving ten per cent of their goal. Interestingly the average contribution for failed campaigns was still $94, putting it very close to the average of $109 for the campaigns that succeeded. A further three campaigns were cancelled before they finished, while four are still active, with two of these looking likely to meet their target.

Read More »

Movie-Hopping – The Lesser Discussed Form of Film Piracy

Movie Hopping Planner

Film piracy or ‘movie theft’ is a well covered subject in exhibition industry circles. The fight is against people recoding films on video cameras in cinemas and uploading them to the internet or selling them on discs is one that unites multiplex operators, film studios, trade bodies like MPAA and FACT as well as law enforcement bodies (FBI et al). But there is a lesser known version of film piracy that is hardly even mentioned in polite cinema circles; the phenomenon of ‘movie-hopping’. Call it the multiplex cinemas equivalent of Netflix’s binge-viewing or movie-marathon. Except those who do it aren’t cinema fans prepared to pay to watch all four Twilight films in a row. They are screen surfers and quite open about it too.

Take this guest column from The Cornell Daily Sun, which is the student newspaper of the Ivy League university, called “Guest Room | Thou Shalt Not Movie-Hop“. But that is exactly what the columnist (one Arielle Cruz) had intended to do:

My plan today was to go movie-hopping with a friend. Take a bus over to Regal Cinema, buy a matinee ticket for the first show of the day, subtly carry in a couple of Subway sandwiches, a bottle of whiskey and some Target-priced movie candy and let the day unfold. It didn’t end up happening today. It turns out I had some other things I had to do. The intense snowfall wasn’t inspiring me to leave my apartment either. But the thing is, I would’ve done it. I had every intention of doing it, and beyond that, I don’t feel any guilt about it.

Arielle sees this as a victimless crime which isn’t hurting the movie industry (cinemas and studios). “It hasn’t so far, and, according to a number of accounts on the Internet, it is even a family tradition in some households.” A quick survey of the net shows just how widespread the phenomenon is. At least in terms of being discussed. First of all there is a step-by-step Wikihow with illustrations and a disclaimer:

Before proceeding, please realize that movie hopping is grounds for being banned from the theater or escorted out. Very rarely you can be arrested for theft of services (similar to shoplifting).

And a helpful list of suggestions at the end, including:

  • Staff changes occur at around 6:00 PM, this is also the longest gap between movies and is the worse time to try and theater hop.
  • Try to not buy concessions. You want as little interaction with the staff as possible.

Read More »

Does Re-Releasing Oscar Nominees in Cinemas Work?

12 Years A Slave

The nominations for the 86th Academy Awards (Oscars, to you and me) have been announced, insta-shared, tweeted, analysed, commented and blogged. The front runners that were all released in the fall will not be out on DVD or Blu-ray for at least a month: Gravity (25 February), 12 Years a Slave (4 March) and American Hustle (18 March), incidentally the same day as Disney’s Frozen. So will it drive people who have not seen them yet to want to catch them on the big screen? For the purpose of this article we will primarily look at North America, as many Oscar contenders such as 12 Years A Slave or Wolf of Wall Street have only just opened overseas.

American Hustle, which has taken over $100m in the US (and Canada) domestic market, is currently doing best with its number two position in the charts behind Lone Survivor and ahead of Frozen. But the film has been going steadily down, as witnessed by this chart from BoxOfficeMojo.com With over 2,600 screens still playing it, there is thus no need to “re-release” the film as it has not gone out of circulation.

12 Years a Slave, which has done extraordinarily well given its tough subject matter, taking in over $39m in the US box office, is currently 22nd in the charts. The film had a classic and steady week-by-week growth in the number of screens showing it: 19 – 123 – 410 – 1,144 – 1,411 – 1,474 (peak) – 1,165 – 1,082 – 497 – 301 – 154 – 151 – 114 and would seem to have largely run its course, as witnessed by the daily chart (same source again).

Gravity is more interesting, sitting three slots below 12 Years in 25th position. It has been out longer than the two above films and largely disappeared from circulation, though at 155 screens it is still ahead of 12 Years a Slave. Gravity displays what is typical for modern blockbusters in terms of spectacular opening ($256m in US to date) and then trailing off, though with more longevity (counted in weeks, not months) than others. It too seems to have largely run its course.

So it is interesting to note that Gravity is getting the biggest push. As reported in The Wrap,

“Warner Bros. will re-release “Gravity” nationwide on Friday, Jan. 17, one day after the Oscar nominations are announced. The exact number of theaters for the re-release will be determined next week, the studio said — though it’s expected to be more robust than a typical limited release. And there will be competition, as it was already shaping up as a crowded weekend.”

Read More »

Cineworld’s Me-Too Eastern Expansion Comes At A Price

Cineworld Logo

UK’s publicly listed exhibitor Cineworld is expanding into Central Europe through £503 cash and equity deal for Warsaw-listed Cinema City International (CCI), which will make it the second largest chain in Europe after Odeon UCI. The deal signals a strategic shift for Cineworld after a small domestic acquisition and and an abandoned south European deal, indicating that future growth lies in Central and Eastern Europe (CEE), as well emerging markets like Turkey and Russia, while box office declines in Western Europe.

The deal, subject to shareholder approval, will see Cineworld pay CCI £503 in cash and shares, of which £272m will be in cash, with a £110m rights issue launched to help fund the purchase, and giving CCI a 24.9 per cent stake in the merged business. CCI currently operates 99 multiplexes with 966 screens (giving it a 9.75 screen/site ration) in six countries in Central and Eastern Europe (Poland, Hungary, Czech Republic, Bulgaria, Romania and Slovakia) as well as in Israel. The combined entity will have  201 sites and 1,852 fully-digital screens (9.21 s/s ratio), indicating that the two are a good match in terms of mostly being new multiplexes. Shares rose by 10.27 and seven per cent for Cineworld and CCI respectively, meaning the markets largely welcomed the merger. The operator will be the largest or second largest in all territories where it is present. But at what price?

Cinema City Territory Map

Competition and change in strategy

Unlike its UK competitors Odeon UCI and Vue, Cineworld has previously been focused exclusively on UK and Ireland , where it operates five of the ten highest grossing sites (though both BBC and Screen claim that it operates all ten of the most profitable sites). Odeon had inherited sites in Spain, Germany and elsewhere through its merger with Odeon in 2004, following the acquisition of both by Guy Hand’s Terra Firma. Odeon UCI abandoned plans for a £1bn+ floatation, settling for a £475 re-financing plan instead two years ago. Reasons cited for this change included “problems in its Spanish markets, where results were weak in the second quarter after a 30 per cent fall in volumes, and a bumper crop of bigger blockbuster films set for release in 2015.” Vue had meanwhile bought Polands second largest cinema operator Multikino, having already established itself in Germany (through the acquisition of CinemaxX), Portugal, Denmark and Taiwan, before being bought by two of Canada’s largest pension funds last year.

Read More »