This interview with Kim Ludolf Koch, CEO of Cineplex (Germany), was first published in Blickpunkt: Film on 15 April and conducted by Marc Mensch. It is re-published here with their kind permission. The English version is a Google Translation with manual corrections. Any errors are entirely ours.
Cinemas across Germany have been closed for around a month, the pressure is increasing day by day – and when it will be possible to show films again is currently unknown. We spoke to Cineplex Managing Director Kim Ludolf Koch about the situation and inadequate relief measures – and also look forward to the time of the (hopefully soon) reopening.
FOCUS: FILM: The cinemas are closed, for how long nobody knows at the moment. Still, you probably can’t complain about a lack of work at the Cineplex headquarters?
KIM LUDOLF KOCH: Immediately following cinema closures the phone was ringing off the hook, for sure. There were an unbelievable number of questions – because which one of our members had already seriously dealt with topics such as furloughing? How to deal with mini-jobbers and student assistants in such a situation? Given that how do you reduce operating costs as far as possible? I think we were able to give important support here, especially since my colleague Detlef Bell is an excellent labor practices lawyer. But that was just the beginning. We are currently holding two multi-hour conference calls a week with all stakeholders, and the current focus is on how to deal with long-term debt. Of course, rent is at the top of the list as the most important item, but the list goes much longer, all the way to cleaning and maintenance contracts. Of course, the costs can never be reduced to zero, but in the face of a complete loss of sales, of course we have to do everything we can to reduce them as much as possible. The only possible strategy is to survive as long as possible with shallow breathing.
BF: It should be noted in these days of rapidly changing circumstances that we are talking to each other in early April. What is the mood like among your stakeholders at the moment?
KOCH: Of course we all see that the situation is serious. Extremely serious. But we don’t think it’s hopeless. And I’m sometimes amazed at how much energy this situation releases. On the one hand, crisis management is carried out with full energy and great professionalism – and on the other hand, a lot of creativity emerges when dealing with the situation, especially with a view to the audience.
BF: The Internet is full of examples of different ways of keeping in touch with the audience – and some of them seem to be monetizable.
KOCH: The audience has actually shown enormous solidarity with the cinemas, which at one point or another was also expressed financially. Vouchers were purchased, donations were made, dozens of tickets were sometimes sold for so-called “ghost performances”. This is absolutely great – and impressively underlines the importance of cinema to the public. But of course there is nothing in that can go beyond the proverbial “drop in the bucket”. Nevertheless, as cinema operators, we are enormously grateful for every gesture – also simply for encouraging emails, as we have received thousands. In fact, for us cinemas, it is fundamentally about keeping in touch with our guests, communicating with them – even if it is simply a quiz on a Facebook page. The audience responds very well – and that’s important! However, empathy is a very perishable commodity. At the beginning of a crisis, sympathy is always highest, so as time progresses, it will become increasingly difficult to keep people engaged. It is all the more important to take every conceivable route.
BF: Isn’t the flourishing voucher sale by itself a very positive statement about the willingness of the audience to return to the cinema after the restrictions have ended?
KOCH: Well, of course you have to differentiate in terms of “flourishing sales”. Under normal circumstances, we would probably be able to sell almost twice the amount of vouchers currently. Nevertheless, we can of course see that the audience is not turning its back on the cinema. And the willingness to buy vouchers for a service presently, when there is no precise idea of when it can be delivered, shows a close bond with our industry and the confidence of our guests. This gives us a lot of hope for the future. But what it is about now is to survive this time. This cannot be made to work without substantial help. We are still waiting for this today.
BF: Financial support programs were launched early on. From the federal government, the federal states, the banks – and especially individual federal states have recently launched measures specifically for cinemas. Haven’t these measures reached the cinema market?
KOCH: That’s exactly the problem. Because you have to take a closer look at which companies can apply for which type of assistance – and how that works in practice. As far as loans secured by KfW are concerned, developments will now have to hold off until a 100% guarantee has been announced. But what can be said is that the local banks, which the loans haver to go through, have shown themselves to be extremely reluctant, even with 90 percent protection – which, given the tax-financed bank bailouts from the recent past, has caused a stir. At the end of the day, the measures taken by the federal states and the industry-specific funding programs will have to be the decisive lever – and here we actually see a good part of the market completely excluded. Don’t get me wrong: I am happy for every arthouse cinema that receives financial help – and there too it’s definitely not the end of the story when we talk of a downtime of several months. But the selection of beneficiaries sometimes seems arbitrary! Let’s take Bavaria as an example: you simply cannot justify why e.g. Cineplex cinemas in Passau, Neufahrn, Memmingen or Neu-Ulm, a Kinopolis Landshut, a CineStar Erlangen or the Nuremberg Cinecitta are said to be less eligible and worth saving than cinemas that “only” have seven screens. In my view these measures should be extended to include everyone, because all cinemas are important to society. The big mainstream multiplexes too to a significant extent. And it is also about grants, due to the cultural relevance of cinema and the impossibility of making up for the shortfalls occurring during the closure don’t allow repayments of very high-interest loans.
BF: Are you talking about relevance beyond the market share?
KOCH: Yes, because let’s be honest: The socialization for cinema at a young age doesn’t usually take place in a arthouse cinemas – but in regular multiplexes. That already highlights the agebracket of the art house cinemas: that is where audiences go that have already had a long “cinema career” and are a little older. And let’s be honest: without the big cinemas, which provide the majority of box office for German films, a large part of those production would not be economically viable per se. The – undoubtedly extremely important – infrastructure of arthouse cinemas is supported above all by the fact that we have an overall viable market. And what about the related industries? The production companies, distributors, agencies, service providers – and the creatives themselves? This shock waves would trigger the crumbling of an entire market here. That’s why I don’t understand why you would exclude a whole cinema sector per se.
BF: How does Cineplex respond as a group?
KOCH: Through close cooperation with colleagues from other companies who also fall through holes in the support net. We have contacted the relevant ministries directly and tried to make it clear again how important it is to see this industry as a whole. In addition, we recommend each individual operator to support the important work of the associations, to contact their local contacts and to emphasize the dramatic nature of the situation there. Of course, at the end of the day we are talking about aids that outshine what has been made available so far. But you also have to see that saving this part of our culture is actually going to be relatively cheap – and I think that the socio-cultural role of cinemas will increase in importance after the end of this pandemic. If you can get her through then. It is extremely important to us to be able to conduct the discussions on the basis of a really solid and reliable foundation of numbers.
BF: Are you talking about the study carried out by Rinke Treuhand and rmc on behalf of the HDF on the economic impact of the Covid-19 pandemic?
KOCH: Correct. Because the HDF and indirectly the SPIO asked for a calculation that illustrates the actually inevitable burden, i.e. the losses that the cinema industry incurs, taking into account the greatest possible reduction in fixed costs. Thomas Pintzke was responsible for this study, Christine Berg and I closely followed the plan and results. Basically, the survey is based on two steps: First, the forecast of the number of visitors expected under normal circumstances and the potential losses that we suffer during the complete closure and the subsequent “ramp up” phase. This was compared with the cost side – and taking into account all possible adjustments, even those that are still the subject of negotiations e.g. with landlords and banks. At the macro level, there was an average financial gap per missing visitor of around 4.62 euros. Because even if the factories are completely closed, fixed basic costs remain at a considerable amount. A big advantage of our visitor-related calculation method: It can be adapted for different periods.
BF: For the sample calculation, a three-month closure and a loss of visitors of around 40 million was assumed …
KOCH: At this point in time, we still believe that this is a realistic assessment, even if it does not correspond to our worst-case scenario. But based on this calculation alone, we come to unavoidable loss of EUR 186 million at the level of the cinemas alone!
BF: Do you have any hope that such an amount could be offset by state aid?
KOCH: Let’s put it this way: If it doesn’t succeed in getting at least 2.50 to three euros in support per lost visitor, then I don’t see how we could escape a dramatic wave of closures. A wave of closures that would have drastic consequences far beyond the obvious consequences. Especially in the small towns, where the cinema, in addition to its unique cultural role, is also the place that primarily stands for community, for quality of life – in addition to gastronomy, which is currently just as difficult. And from an artistic point of view, I would also like to mention the aesthetic consequences that it would have if it could no longer be produced for the cinema, but only the small screen.
BF: You already mentioned the ramp-up phase. How do you imagine a restart – and what do the experiences in China teach us in this context?
KOCH: I see the example of China as unsuitable for comparison in several ways. On the one hand, their cinemas had to close very quickly after the first attempt; on the other hand, we are talking about a market that is not nearly as dependent on international products as for example Germany. We need a large, attractive program if we want to get significant numbers of visitors again – and that would be even more the case if going to the cinema were initially associated with certain hurdles in the form of safety precautions, such as wearing protective masks. The fundamental problem is that a large part of the worldwide cinema markets must be able to accept new films before the first tentpoles are released. No studio major will bring a new film to the cinema before the situation has normalized at least in the most important countries. And where Asia may be a little ahead in this regard, the situation in the United States is currently much less favorable. At the moment I see ourselves faced with a situation that we would be like a library without books immediately after reopening. Because what was on the screen before the onset of the crisis has long been out in digital release. It will no longer be possible to achieve any significant audience numbers. We can only reduce our losses once we have an attractive film program. That is why I make the urgent appeal, not only to politicians to help us through the crisis with serious support in the form of grants. But also to our partners in the distribution business, to position themselves so that we can greet our visitors with great films as quickly as possible.
BF: In the meantime, a number of films have already been directly directly to VoD, most recently a major title with the example of Artemis Fowl. Is this release strategy only a matter of time for a tentpoles too?
KOCH: To be honest, I don’t see this risk at the moment, although I would like the release strategy of Artemis Fowl to be reconsidered, at least for individual markets like Germany. After all, the cinemas are so indispensable as a platform that large-scale productions would not be economically viable without them. Basically, of course, I’m assuming that we will find our way back to the tried-and-tested framework once the crisis has been overcome. Because the fact that successful film exploitation cannot make do without the cinema is clearly demonstrated at the moment. As sad as it is, by the way, that a number of films have already been postponed to 2021, given the looming production gap, one ought to be quite happy that the rescheduling now also covers a period where there would otherwise be distribution problems due to the production stops.
BF: It is of course a coincidence that the VoD offer “Cineplex Home” was launched at the beginning of the crisis in Germany. But could this offer take hold right now?
KOCH: In this regard, it is difficult to make a statement – because of course we lack any comparison to a “normal” phase. However, we do find that the premises under which we started this service are correct – and one cannot talk about it being a significant source of income. From the outset, Cineplex Home was not set up as a “profit center”, but rather as a measure to get to know our customers better and to be able to propose to them additional offers in the spirit of brand loyalty. The current phase can of course be used to make the service known. But we are far from making money with it.
BF: What about the so-called “solidarity streaming models“, which seem to be gaining ground and in which cinemas should receive up to 50 percent of the revenue? Aren’t they models that should have been cultivated earlier?
KOCH: In contrast to Cineplex Home, where almost all major international and national distributors are represented, we are talking about pure niche offers. And the narrower the niche, the greater the impetus to secure the marketing impact of the cinemas through a high level of participation. I’m really not revealing a major secret when I tell you that that an offer like Cineplex Home would not give you a 50 percent revenue sharing in cinemas, even if the entire cinema landscape was behind it. In this respect, I am of course happy for every gesture of solidarity. But economically, these offers do not play a major role as such for the cinema industry.
BF: Around now you would normally provide a global overview at the Baden-Baden German Cinema Convention to shed some light on differences between Germany and other cinema markets and to formulate recommendations for action.
KOCH: Unfortunately, the lecture got stuck in the preparatory stage due to the postponement of the Convention, but I still want to point out a few abnormalities. Of the eight markets examined, Japan and Germany achieved by far the best development with some margin with 14.4% and 13.9% visitor growth in 2019 – but remained at the bottom with an average annual per-capita visit of 1.53 and 1.45, respectively. And while Japan had the highest number of visitors since 1971, it was the second worst in Germany in 30 years. Or take the example of the United States: going against the global trend, the market there fell by 4.6% and recorded the second lowest numbers since the turn of the century. And yet, with 3.77 visits per capita, this market has by far the best value in the comparison group. What I want to raise awareness of is to look at the audience profiles and demographic ranges precisely and in context – but also to have different measurement methods in mind. Personally, with regards to the GfK evaluation, which only records visitors from the age of ten, I have long advocated a more complete picture. But above all, it is about – and right now – dealing with the question of how to address the factors driving the audiences. “Reach” is the key. We will have to do our utmost to pull the masses of visitors back into our auditoriums as quickly as possible after the crisis. And you should definitely consider whether ideas that you will then develop would also make sense beyond a crisis response. As you know, I am still a big supporter of cheap youth tickets ….
BF: Do you see any measures that could be addressed right now, for which you should use this time?
KOCH: In principle, there would be a whole series of measures that would be best to be carried out during a closure – but in practice, you will currently have to use all the financial means to plug the deeper and deeper holes. Necessity is the mother of invention, as can be seen, so there are now various ideas such as popcorn delivery services or chair sponsorships, with which you can earn even a little bit of money, but which mainly also maintain connections with customers. One of the most striking initiatives was the opening of numerous temporary drive-in cinemas shortly before Easter, including for some of our members. The Cineplex Münster appropriately advertised it as a “methadone program for cinema junkies”. The bottom line, however, is that I would also like to see the time as primarily one in which you collect as many ideas as possible in order to make the resumption of operation as interesting as possible for our guests. And even if the nation-wide cinema festival had to be postponed to 2021 due to the crisis, the work done for it could certainly be re-used used to launch it. There won’t be a worldwide starting signal, but it should ideally be one at least throughout Germany. Because only if the critical mass of the cinemas is big enough will the wheel start to turn again.
BF: Is there a positive message that you would like to convey to your cinema colleagues during these times?
KOCH: Absolutely. Because I think it’s worth it to persevere and not to give up. And holding out doesn’t just mean holding your breath for as long as possible, even if that is of course very important. But it is also very important to get all those who can contribute to the preservation of the cinema in any way to help. People love the cinema, they love the big screen, the community. The crisis does not change that, on the contrary: these needs are currently growing. That is why I am confident that with a sensible restart and business models that have not changed at our expense, we also have a good chance of becoming a strong market again. However, I would like to issue a note of caution: be aware that the dry spell will continue to drag on somewhat after a re-opening. Nobody should think that it will run like clockwork from Day One. But one should consider a potential scenario that we could end 2020 with a loss of visitors of up to 50 percent. If things go better, it would be wonderful. But you should be prepared for the worst – to be able to master it.
(The original Blickpunkt: Film interview was conducted by Marc Mensch.)