CJ @ CinemaCon: Q&A Interview With Ymagis’ Jean Mizrahi

By Patrick von Sychowski | April 15, 2015 11:19 pm PDT
Jean Mizrahi Ymagis

In the run-up to CinemaCon 2015 CJ is interviewing and profiling several leading companies, trade bodies and people to capture the mood of the cinema industry as it enters its post-digital era.

Today we talk to Jean Mizrahi, Co-Founder and CEO of Ymagis, the pan-European cinema services company which has just announced that it is extending its cinema distribution services to North America with the launch of a specialized content delivery service in the US and Canada.

In the second part we will be talking to Barry Rebo, MD of Ymagis’ new Direct Cinema North America (DCNA) operation.

Celluloid JunkieWhat aspects of the merger of Ymagis and dcinex are still in the process of being completed?

Jean Mizrahi: One  of  the  aspects  we  are  currently  working  on  is  the  rationalization  of  our  assets  with regard  to  DCP  transfer  via  satellite.

We  now  have  three  established networks  with different technologies  and  different satellites.  It will  be  at  least two  years  before  we have  a  unified network  but it is  unquestionably  well  underway. We  recently  stopped using  one  transponder,  which  will  lead  to  significant savings  for  us  this  year.

We  will now  rationalize  our  content receiver  technologies.  That  is  something  we  are  working  as it will  help  us  reduce  the  number  of  transponders  we  use,  ultimately  making  us  more competitive.

At  the  same  time,  we  are  developing  a  content delivery  solution  via broadband Internet, which will be available notably in the US and Canada.

CJ:  What  were  the  most  significant  overlaps  and  redundancies  between  the  two  organizations  and what hard choices had to be made?

Jean Mizrahi:  The  rationalizations  that were  to  be  implemented following  the  merger  of  our  two groups  are  now  largely  behind  us.

We  needed to  consolidate  our  German  activities, and  that  is  now  done.  Today,  we  have  a  single  operating  entity  for  cinema  exhibitor services  headquartered  in  Düsseldorf,  and  another  overseeing  content  services, now  operating  entirely  out of  Berlin.

There  was  little  overlap  between  the  two organizations’  other  activities,  so  no  further  rationalization  was  needed.  That  was in large part the interest of this merger: our complementarity.   CJ:  The  new  Ymagis  doesn’t  have  an  equal  size  pan-European  competitor,  but  will  being seen as big and international hurt in competition with local service and solutions providers?

Jean Mizrahi:  We  have  now  adopted  a  “glocal”  approach: the  creation  of  a  group  with  central expertise  that  supports  smaller  entities  having  close  relationships  with  their  clients  on a  local  level. In  every  territory  in  which  we  are  present,  the  managers  are  from  the country,  the  teams  are  made  up  of  local  employees,  and  they  are  all  responsible  for  the profitability  and  the  quality  of  their  service  offer.

The  group  level  offers  an  added value:  a  well-managed  supply  chain  organization  and,  more  importantly,  the  ability  to purchase  in  large  volumes,  an  excellent  after-sales  customer  service  &  support;  a technological  hub; software  solutions  developed in-house;  a  NOC  (network  operations center) outfitted  with  the  most advanced  technology;  and  continued  professional training  for  our  expert  staff  to  enhance  their  skills  &  abilities,  ensuring  they  are specialists  in  their  field  and  that  the  same  high-quality  service  offer  is  present throughout our  network.

The  goal  is  to  have  decentralized operational  entities  that  rely on a central support organization.

CJ: With  digital  cinema  installation  roll-out  coming  to  an  end,  what  areas  of  growth  do  you  see  as most important for the exhibition services sector?

Jean Mizrahi:  The  first equipment  phase  is  now  complete  but  the  technological  upgrade  of  first-generation  projectors  has  already  begun.  And  our  service  offer, of  course,  goes  far beyond  just projection  systems: we  provide  audio  systems  and  services  (we  are  the leaders  when  it comes  to  the  installation  of  Dolby  Atmos  systems  in  Europe),  as  well as  in  the  3D  sector  and,  more  generally,  in  all  sectors  that  allow  a  movie  exhibitor  to operate  more  efficiently  by  offering  new experiences  to  its  clients.

We  have  also become  software  publishers,  providing  increasingly  technologically  advanced solutions  that  allow  cinemas  to  be  at  the  forefront of  automation.  We  are  also currently  working  on  the  development  of  new concepts  that  will  change  the businesses  of  movie  exhibitors.

Finally,  the  new  markets  that  are  Central-  and Eastern  Europe  and  Africa are  a  source  of  great  growth,  and  will  allow  us  to  keep  our workforces  intact  before  the  equipment  replacement  phase,  which  we  anticipate  will begin  shortly.

The  arrival  of  4K  in  the  video  market  and  the  progress  made  in  laser projection  are  tremendous  driving  forces  that  should  speed  up  upgrades  across cinemas,  which  are  primarily  still  equipped with  digital  2K  systems  in  Europe.

CJ:  We  will  see  VPF  agreements  coming  to  an  end  over  the  next  few  years,  what  opportunities and challenges will that present for Ymagis?

Jean Mizrahi:  Prior  to  the  merger, both  Ymagis  and  dcinex  had  actively  been  preparing  for  the  phasing out of  the  VPF  model.  And  that  is  what  allows  us  to  offer  an  increasingly  complete  and international  portfolio  of  services.  This  process  will  of  course  continue  through  the  end of  the  VPF,  which  we  anticipate  will  take  place  between  2018  and  2020  in  the  various European  countries.  However, the  end  of  the  VPF  model  does  not mark  the  end  of  our financing  activities.

VPF  was  created  to  limit the  risks  associated with  the  transition  to digital  at  a  time  when the  marketplace  was  not  yet convinced  of  the  technical  viability  of digital  technology.  A door  was  opening  onto  the  unknown,  and  the  VPF  was  the  key  that helped everyone  pass  through  more  easily.  With  that  fear now  behind  us,  we  will  be returning  to  more  traditional  finance  models. Once  the  VPF  no  longer  exists,  movie exhibitors  will  need  to  finance  the  replacement  of  their  equipment.

We  believe  we  are extremely  well  placed  to  accompany  them  and  offer  services  adapted  to  their  needs  at competitive  prices: we  have  the  necessary  financial  power,  know  the  financing mechanisms,  the  products  worth  investing  in,  as  well  as  the  clients. All  this  enables  us to take better calculated risks than traditional banks, much to our clients’ benefit.

CJ:  Content  services  are  seeing  their  margins  squeezed  as  to  become  commoditized  –  how  will Ymagis approach this challenge?

Jean Mizrahi:  This  activity  hasn’t  yet benefited  from  the  various  evolutions  digital  technology  will  bring with  it,  particularly  once  the  VPF  has  been  entirely  phased out.

Firstly,  physical  devices, such  as  hard  drives,  remain  an  important medium  in  the  transfer  of  digital  data  to  cinemas due  in  part to  a  certain  reluctance  shown  by  the  industry  to  go  electronically.  Although well  on  its  way  in  countries  such  as  France,  Italy  and  the  Netherlands,  the  evolution toward  dematerialized  digital  transmission  via  satellite  or  broadband  Internet  is  still  far from  being  a  done  deal.  E-delivery  activities  in  fact  generate  significant fixed  costs  so  a high  volume  is  essential  to  ensuring  profitability,  but we  are  on  the  right path.

On  another level,  we  remain  dependent  on  an  economic  model  significantly  impacted  by  the  legacy  of 35-mm  film  stock.  For  a  long  time,  it was  a  stumbling  block  for  a  lot of  contents  to  getting into  cinemas,  one  that  was  even  insurmountable  for  a  lot of  alternative  content.

The  digital medium  has  begun  to  break  down  that wall,  albeit in  a  limited  manner  due  to  the  VPF, which  remains  an  economic  barrier. The  growing  availability  of  event-based alternative content such  as  operas  and  sports  events  shows  that  digital  technology  can  offer  greater programming  flexibility,  and  therefore  opportunities,  to  movie  exhibitors  as  well  as  to rights  holders.  In  countries  such  as  France  that  are  now  completely  digitized,  we’ve  seen  a return  of  repertory  films  to  the  big  screen,  even in  multiplexes,  simply  because  there  is  no VPF  to  pay  for  that  content!

The  scheduled end  of  the  VPF  will  open up  a  vast universe  of content to  cinemas.

We  are  currently  in  the  infancy  of  the  transformation  of  this  industry, which  will  inevitably  have  a  significant impact  on  the  need  to  transmit an  ever-growing volume of content. We are preparing for all these various evolutions.

CJ:  How  far  beyond  the  core  markets  in  European  Union  and  Europe  can  there  be  a  role  for Ymagis? You are already present in some unexpected markets in the east.

Jean Mizrahi:  Our  objective  is  to  become  as  global  an  entity  as  possible.  In  order  to  do  so,  we  are developing  in  three  major  sectors: the  management of  an  increasingly  complete  portfolio of  products,  the  development  of  our  own  software  solutions  to  provide  our  clients  with original  solutions,  and,  finally,  new concepts  related to  the  cinema  content  “transactions”. And  we  are  advancing  very  quickly.

CJ:  So what is the vision for Ymagis in five or even ten-years’ time?

Jean Mizrahi:  The  5-year  goal  for  our  group  is  to  become  established in  the  largest cinema  marketplaces  around  the  world,  and  particularly  in  rapidly developing  markets.

Above  all,  though,  our  priority  will  always  be  to  remain  available  to our  clients.  We  are  and  always  will  be  a  service  provider  whose  clients’  interests  come first.

Our core values – modesty, innovation, courage, and care – are immutable. We  are  focused entirely  on  cinema.  We  were  born  from  the  digital  wave,  and  our  goal  is to  assist all  our  clients,  whether  movie  exhibitors,  distributors  or  producers,  in  their  daily operations. Serving  our  clients  in  the  film  industry  remains  our  motto. We  continue  to  believe  in  the  future  of  the  movie  theater.  In  fact,  we  believe  that  thanks  to  digital technology,  there  will  be  increased growth.

That is  what  we  are  seeing  in  several countries  where  current  cinemas  are  adding  new auditoriums  to  make  their  film  offer even more  attractive  to  the  public. Digital  technology  brings  with  it a  greater diversity, and  cinemas  will  be  able  to  fully  take  advantage  of  that,  so  long  as  they  have  the  right tools.

The changes that are open to us through digital have only just begun.

CJ:  Lastly, a personal  question:  are you  able  to  go  to  the  cinema  and  just  enjoy  the  movie,  without thinking of the technical and business parameters around you?

Jean Mizrahi:  When I  go  to  the  movies  now,  the  first thing  I  notice,  mostly  despite  myself,  is the  comfort of  the  auditorium,  the  projection  and  sound  quality.  Basically,  I’m engrossed  in  the  technical  aspects  but,  of  course,  thanks  to  the  magic  of cinema,  end  up  being  immersed  in  the  film.

I  often  bring  my  children so  that they  may  also  experience  the  magic  of  movie  theaters,  which  is  how  I  fell  in love  with  the  industry. And,  of  course,  whenever  I  can  fit  it in  while  traveling on business, I always make it a point to visit new cinemas.

CJ: Thank you for taking the time to share your insights.

Patrick von Sychowski
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