Cineplex Says Econ Slowdown No Threat To Moviegoing>CGX.UN.T
DOW JONES NEWSWIRES
May 14, 2008 3:10 p.m.
By Andy Georgiades
Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--Cineplex Galaxy Income Fund (CGX.UN.T), Canada's largest film exhibitor, isn't worried that an economic slowdown will hurt people's appetite for going to the movies.
Speaking at the fund's annual meeting Wednesday, President and Chief Executive Ellis Jacob told unitholders that, even in recessionary periods, moviegoing tends to hold up as people shift away from higher-priced entertainment, like live theater, and seek out a less expensive form of "escape."
"My feeling always has been that movies are one of the cheapest forms of entertainment out there," Jacob told Dow Jones in an interview after the meeting. "It's a heck of a lot more affordable to go to a movie than some of the other entertainment options out there. So I feel we're well positioned."
Last week, the company announced record first-quarter results, and announced a 5% increase to its annual distribution to C$1.26 from C$1.20.
All film exhibitors have faced increased competition from home entertainment in the form of video games, Internet use, and home theater. To entice customers to get out of the house, Cineplex has reintroduced the concept of discounted Tuesdays in certain markets, charging just C$4.20 a head, to broaden the audience base and lure people away from their DVD players. It's been tried in such areas as Winnipeg and Ottawa, and has been "extremely successful," he noted.
Jacob desribed 2008 as the year Cineplex will start to reap the benefits of its innovations, such as alternative programming (opera, live sports), and its year-old loyalty program, SCENE, which already has 800,000 members and is poised to reach a million this summer.
The loyalty club, in which members earn points for filmgoing, was launched in partnership with Bank of Nova Scotia (BNS) last May, and was Canada's first national entertainment rewards program. The fund had a target of 500,000 members after the first year, which it easily surpassed.
"Why set up a loyalty program if you have a 70% (market) share? It was all about engaging our guests, and to know what they like or don't like," Jacob said.
The goal of the program wasn't only to increase the frequency of moviegoing, but to accumulate information about its customers. That information will figure prominently in upcoming e-commerce initiatives for the Cineplex Web site. Currently, the site just sells movie tickets (the service charge was recently eliminated), but later this year DVDs, CDs, and film memorabilia will be added. There are also plans to expand it into a social media platform, adding blogs, chats, and user-generated content. And in a year or so, movie downloads could also be a reality.
"For us, it becomes easier to communicate with (customers) from the perspective of buying a DVD, doing a download, purchasing merchandise, bringing them back to the theater," he said. "We can tell you, based on the movie you saw, what DVDs you like, and that's a huge asset to us."
But Cineplex hasn't lost sight of its core exhibition business, and it believes 2008 is shaping up to be another solid year at the box office, with blockbuster names like Indiana Jones, Batman, Harry Potter, and James Bond on tap.
It also has high hopes for 3D films, and is busy upgrading theaters from film to digital projection to prepare for the increasing number of films - 11 are expected next year - in that format. By the end of July, Cineplex sees 47 theaters outfitted with REAL D's 3D delivery technology, and 175 by the end of 2009.
"The more options that the guests have and the more differentiation between the home and the cinema, that's going to create tremendous value for us," Jacob said.
Cineplex's nine Imax Corp. (IMAX) screens are also capable of showing 3D, and Imax's new digital system is being evaluated by the company. However, he said content is a very important part of the equation for Imax, especially in smaller markets where movies tend to run for a shorter period of time. If films aren't being released in close proximity to one another, then that means there are "gaps," which could hurt return on investment for the unitholders, he said.
Still, he said Imax had a banner year at the box office in 2007 and there are some prominent titles on this year's slate as well, including "The Dark Knight," which he predicted would be one of the biggest films of the year. "We do see a significant lift in box office and attendance when a movie is in Imax 2D and 3D," he said.