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 Junkie: What 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.