Cineplex making a comeback

With video stores on every corner, couch-accessible pay-per-view, and all manner of new in-home, interactive enter- and edu-tainment coming online, exhibitors have had more than popcorn toppings to worry about. While they haven’t yet resorted to reissuing dish sets, the theater chains have been busily retuning the long lines and cholesterol-challenging concession fare into new and alluring out-of-home entertainment experiences, in the hopes of recharging box office returns.

Just four years ago, Cineplex Odeon Corporation was headed for financial ruin. Then came the dinosaurs.

With the phenomenal success of Jurassic Park in 1993, patrons began to return. Other movies like In The Line of Fire, The Firm, Sleepless in Seattle and The Fugitive, helped the company rise from its ashes. 1993 was the first year Cineplex had made a profit – $969,000 – since 1988.

The Toronto-based company, which employs 7,700 people, is one of the largest film exhibitors in North America, and the largest in Canada. After the departure of former president Garth Drabinsky and the overbuilding of screens that took place in the ’80s, the new management team began restructuring the company.

Overly ambitious growth plans and a lack of strategic focus had overextended Cineplex and immersed the company in a $700 million debt by 1988. The restructuring included ridding Cineplex of scattered properties and operations outside of its core operation of film exhibition, and trimming staff and costs considerably.

While Cineplex can’t expect another blockbuster hit like Jurassic Park in the final weeks of 1994, it does expect a number of films to surpass $100 million at the box office level. 184 pictures were slated to be released this year, which is 37 more than in 1993. This should mean that increased product will allow a larger share for the exhibitors.

The latest figures from Cineplex show revenues down from ’93. For the third quarter ended Sept. 30 revenues were us$163.78 million compared to us$166.9 million for the same ’93 period. The lower numbers are attributed to a drop in the Canadian dollar, poor commercial film product and lower popcorn sales.

As a result of a successful box office and new loans, Cineplex built four new theaters with 31 screens this year. In ’95, 24 new theaters with 198 screens go up, at a cost of us$50 million.

In addition, a number of existing theaters were refurbished or expanded to increase capacity.

Almost a quarter of Cineplex’s revenues are generated from concession sales. Surveys show that 30% of movie-goers buy snacks, so Cineplex set out to increase this figure to 40%. With 90 million patrons each year, an increase of 10 cents per patron in concession sales would generate an additional $9 million in annual revenues.

Cineplex decided to pay more attention to this highly profitable side of its business, and launched into a new revenue-generating strategy, code named ‘Project Popcorn.’

The company introduced self-serve bulk candy, nuts, nachos, ice cream, pizza, hotdogs, coffee, trail mix, juices, and bottled water. It also introduced a portable cart service to dispense snacks inside the theater. Many merchandising and service techniques that fast-food restaurants employ are being implemented.

And then there’s the popcorn. Cineplex faced lower popcorn sales after media reports condemned the use of coconut oil in popcorn.

Cineplex’s initial response was to release a pamphlet, The Plain Facts on Popcorn, which defended the use of coconut oil. The public didn’t buy it and the coconut oil was replaced with corn oil. Customers will also have the option of a lightly seasoned, prepackaged, air-popped popcorn.

Vice-president of marketing and communications, Howard Lichtman, believes that once the ‘popcorn health-care hiccup’ subsides, sales will increase.

A recent innovation Cineplex introduced is Cinevision. This is a tv monitor that plays trailers, movie trivia and other advertising messages. It also introduced dts sound systems in 150 of its theaters to coincide with the release of Jurassic Park. The dts system uses a separate cd-rom disk to create a powerful audio-visual experience for the audience.

Cineplex also plans to test interactive kiosks in six Toronto-area theaters in association with Sierra Creative Communications. The kiosks will play movie trailers, and enable patrons to source information and receive discount coupons through a touch screen. This will provide valuable demographic information for advertisers.

There may be some exciting changes for Cineplex in the future. Earlier this year, Cineplex president Allen Karp said the film exhibition industry is consolidating. Last year, the top 10 companies accounted for 47% of the screens in North America, as compared to 29% in 1986. Although Cineplex is alert to possibilities of mergers and acquisitions, there’s nothing on the table right now.

Not only is the corporation planning to build more theaters in North America, but Lichtman indicated that Cineplex is ‘feasting (its) eyes overseas,’ hoping to become a major player abroad.

Cineplex is also aware of the potential of modern movie theater multiplexes becoming greater entertainment centers. These destination complexes would contain location-based entertainment, casual dining, sports bars, video game rooms, food courts, virtual reality centers and other similar facilities.

Some believe the looming ‘500-channel universe’ will have a negative effect on theaters. Not so, according to Lichtman, who believes the technology has no bearing on Cineplex whatsoever, since moviegoing is an ‘out-of-home’ activity. Movie theaters already compete with video, pay-per-view, and cable. Lichtman says going to the movies is an inexpensive social activity and ‘will always have a place in (consumers’) hearts and wallets.’