Five-star experiences: Major Cineplex celebrates 20 years of deluxe locationsThailand's Major Cineplex Group, winner of the 2014 CineAsia "Exhibitor of the Year" Award, has been breaking new ground in many ways since its relatively modest beginnings in 1995--and apparently has quite a few more aces up its sleeves for years to come
Little did Vicha Poolvaraluk, CEO and chairman of Major Cineplex Plc Co. Ltd., suspect as a teenager that he would one day head Thailand’s most successful cinema chain. But the switches were perhaps already set when his father decided several years before Vicha’s birth to take over an already existing standalone movie theatre in a Bangkok suburb, Thonburi.
“I was lucky to grow up with free movies and free popcorn, the envy of all my peers who had to pay for their tickets,” he gloats. “Going to the movies was pretty much the only form of entertainment Thai people had in those days, modern department stores, shopping malls, theme parks, pubs, cafés and nightclubs either being non-existent or very sparse, even in the capital city.”
Over time, his dad added further single-screen theatres to his portfolio. But when he eventually was invited by a newly built shopping mall to establish yet another cinema, he decided to install two screens in it. “In this respect, my dad was a pioneer, because up until then no other theatre in Thailand had more than one screen,” Vicha declares. Continuing with the idea, Vicha’s father step by step expanded his business into a veritable chain of cinemas, each featuring at least two screens. “We called them ‘micro theatres,’ because they were not yet ‘multiplexes,’ which typically have five screens and more,” Vicha explains.
The first real multiplexes were only introduced to Thailand in the early 1990s by an Australian company, Village Entertainment. “That really changed the whole cinema industry, because audiences suddenly had a much wider choice which films they wanted to watch,” Vicha elaborates. Timing couldn’t have been more perfect for Village, which soon partnered with Hong Kong-based Golden Harvest Co. and a local entertainment firm to establish the EGV multiplex brand, as suddenly large shopping malls and department stores began mushrooming all over Bangkok and other large cities. As Vicha recalls, “They were everywhere, took over the entire industry and snuffed out many of the local operators in the process.”
The Advent of a Revolutionary Business Idea
Despite his early exposure to cinema, Vicha had had no intention to follow in his father’s footsteps after graduating from university, perhaps also because he had to witness how his old man’s chain was forced to close down practically entirely under the pressure exerted by EGV. Instead, he got married and established his own real-estate business. Yet fate took an unexpected turn. One day his dad approached him, saying he had a plot of land right opposite Bangkok’s Central Pinklao Department Store and didn’t know what to do with it. “So I suggested off the cuff to perhaps use it to build a ‘cineplex,’ a term that I coined by merging the words ‘cinema’ and ‘entertainment complex,’” Vicha claims. After many discussions, the plan was put into action and resulted in Thailand’s first true cineplex venue, Major Cineplex Pinklao, which opened in 1995 and was the nucleus of what would later develop into Major Cineplex Group.
Vicha’s aim was to create a business model that could stand up to EGV’s almost complete market dominance by offering film lovers substantially more than merely watching a movie. In Vicha’s definition, a “cineplex” is an integrated lifestyle and entertainment complex with a comfortable, casual atmosphere where customers can linger before or after a movie by patronizing a wide range of fast-food joints, restaurants, shops, gaming arcades and other related businesses.
Although the concept proved absolutely revolutionary and once again helped reshape Thailand’s cinema industry, it wasn’t an easy birth. “At first, Dad wasn’t too thrilled about my suggestion. After all, he had just lost out to EGV—and the mall opposite had an EGV multiplex in it! We were the ant, they were the elephant,” he laughs. Eventually Dad gave in and allowed his son to try out his idea. But he had to do it without any family involvement, because nobody believed that it was going to work.
The Trusted Lieutenant
Right from the start, Vicha hooked up with Canadian expat Jim Patterson, who already had a successful career in the restaurant and cinema industries in several countries around the world prior to moving to Thailand. “It was almost ironic, because I had previously worked for Minor Group, a company responsible for developing some of the best-known restaurant and fast-food chains in Thailand. And now I was being asked to begin working with a certain Major Group…!” But Patterson, today the group’s director of business development, has never looked back since. “Vicha and I, we complement each other in an ideal way. He is the creative mind who sees the whole picture and how everything fits together or what’s missing. I am the analytical pragmatic who works out the details and fine-tunes his ideas.”
When Is a Ticket Price Too High?
Another point of disagreement between father and son was the steep ticket price increase Vicha had in mind for his newly opened Major Cineplex Pinklao. The most expensive tickets at that time in standalones typically only were 30 to 40 baht (about $1.20 to $1.60), yet a ticket at Pinklao would cost 70 baht ($2.80). “Are you insane? The audience will never put up with it, and you’ll end up losing your last shirt!” Vicha paraphrases hid dad’s reaction.
The daring young entrepreneur went ahead anyway. Not only that, but the old man’s gloomy prophecy didn’t materialize either. The steep new ticket price–never before attempted in Thailand with its comparatively large low-income population–apparently was readily accepted by moviegoers. There were no complaints and the practice was consequently upheld in the other branches Major Cineplex Group opened over the years.
“I think the key was that a cinema suddenly had become a nice place to go, a place where the entire family could hang out. It was cleaner, the seats were better, the atmosphere more comfortable, the decorations way more luxurious,” Patterson explains, and people were obviously prepared to pay higher ticket prices for that added value. Due to inflation and climbing operating costs, a ticket nowadays can go for anywhere from 150 to 500 baht and more depending on the venue, yet Major Cineplex’s venues continue to enjoy healthy growth in box-office sales year after year.
Let There Be Light!
Providing an inviting environment certainly is an important factor for the success of any modern standalone, multiplex or cineplex, but at least in the case of Thailand there was another aspect that had to be taken into account for the sake of capturing a wider customer base: light, or rather, bright décor. Just like nightclubs and discotheques, Thai cinemas of the past were primarily positioned to appeal to younger people, who generally preferred pitch-dark venues that could ensure their privacy and hide them from strangers’ all-too-inquisitive stares. “Theatres usually had black walls, black carpets, black seats. That was not conducive for attracting older movie fans or families and regardless how diverse their programs might have been,” Vicha observes. So Major Cineplex Group decided from the very start to go in exactly the opposite direction and brighten up their interiors with hues of warm red, soothing pastels, calming blue, and anything in between. As usual, Vicha was spot-on with his assessment, proven by the fact that practically every other competitor has adopted lively color schemes since. Forever gone are the days of pitch-dark Thai cinemas.
Understanding the Thai Soul
Attractive programming, comfortable furnishings and lively colors are one thing, but a deep understanding of the needs and wants of one’s customers is another. To fully comprehend this, we have to first take a closer look at the life circumstances faced by a large part of Thailand’s population and what makes the Thai soul tick a few paces faster. Despite all positive social developments and a growing middle class, the majority of Thais are still restricted in their everyday lifestyles. They may have to live in a tiny one-room apartment without much comfort, commute by train or bus, endure stifling tropical heat, work long hours for often ridiculously low salaries and enjoy only a few free days per year. To compensate, Thais just love to wallow in luxury and comfort once in a while and whenever the opportunity presents itself and is affordable.
That is why shopping malls–with their ice-cold air conditioning and beautiful boutiques–are such an irresistible draw to locals. And that is why Major Cineplex venues with their extensive entertainment offerings from restaurants and fast-food places to fashion and video stores, gaming arcades, posh lobbies with comfortable sitting corners and art displays have become such a phenomenon. While watching a movie may still be the main reason to visit a Major Cineplex outlet, it offers so much more, “an entirely different lifestyle, a way for people to break out for some time and leave their daily grind behind,” as Jim Patterson puts it.
Market Research, Major Cineplex-Style
Thai people also just love visiting five-star hotels, as long as their services, including restaurants and leisure activities, are within their financial means and affordable, which they generally are in Thailand compared to other countries. “So at one point we stopped checking out our competition and instead started going to five-star hotels to observe their operations, how they created and maintained customer loyalty,” says Vicha. “We wanted to emulate that five-star hotel experience in all our Major Cineplex outlets, offering a wholesome range of leisure possibilities for everyone, and beyond our core business of theatrical exhibition.” Some of the group’s outlets today even host Blu-O bowling alleys, something that even most five-star hotels cannot boast.
The Interlocking Cogs of a Well-Calibrated Machine
Major Cineplex Group has over the years developed a total of four channels through which it sets up its cinema outlets. The dedicated, purpose-built Major Cineplex complex with all of its in-house entertainment and shopping infrastructure is still at the very top of the list, because it represents the original idea on which Vicha’s tremendous success is grounded.
But as more department stores and shopping malls sprang up, especially in Bangkok and other big cities, the next logical step was to lease space from those as well, typically an entire floor. “This is a bit more tricky,” Vicha admits, “because we still want to offer entertainment on our premises, but at the same time must be careful that our interests don’t clash with those of the malls or department stores, which also earn income from leasing out space to entertainment places or even run their own restaurants or food chains. We have to coordinate with them and agree on what we can set up and what we cannot.”
Outside Bangkok and the major cities, the group often opts for establishing cinema complexes in hypermarkets, huge all-purpose shopping and service centers that attract large numbers of customers from the surrounding countryside. That is channel three. “We currently operate more than 200 screens in the hypermarkets of two of the biggest players alone, Tesco Lotus and Big C,” Vicha says.
The fourth channel is the most recent addition and concerns the relatively new emergence of community malls in Thailand. Major Cineplex holds a 22 percent share in Siam Future Development Plc, a company that specializes in developing community malls. Notes Vicha, “Establishing cineplexes in their malls gives us access to a further customer segment.” As community malls are invariably located adjacent to residential areas, people who might normally think twice before embarking on a relatively long journey to the next movie theatre now have a venue practically at their doorstep.
Conquering Thailand and Beyond
Thanks to Major Cineplex Group, its passionate and visionary chairman Vicha Poolvaraluk and his faithful and tireless business development director Jim Patterson, Thailand—in many ways still regarded as a developing nation—today arguably boasts some of the most luxuriously appointed and most comfortable movie theatres on the entire planet. The company currently operates 500 screens—all of them digitized since late 2013—and claims a total market share of 75 percent over its competitors. Plans are to increase the total screen number to 1,000 screens by 2020. This task is not at all impossible to achieve, considering that Major Cineplex venues are so far only represented in a mere 32 of Thailand’s 77 provinces. The most recent addition was Hat Yai Major Cineplex at Central Festival shopping mall in the southern city of Hat Yai. It almost goes without saying that the outlet quickly became the city’s undisputed top cinema.
The continued victory run of Major Cineplex Group seems unstoppable, even more so since the company became publicly listed on the Stock Exchange of Thailand in 2000. A mere five years later, in 2005, the former “ant” even bought out EGV, the erstwhile “elephant,” but maintained the EGV brand as an alternative option to its premium brand, Major Cineplex. Says Patterson, “EGV theatres are slightly less luxuriously appointed, their tickets are a little bit cheaper, they offer fewer supplementary entertainment choices and are geared towards a somewhat less affluent customer segment than Major Cineplex, but to tell the truth, they are all still very, very good.”
In June 2014, the group made its debut in a neighboring country when Major Cineplex by Cellcard opened in the newly built, Japanese-financed Aeon Mall in Cambodia’s capital city of Phnom Penh. In those mere five months, the venue has already managed to claim an astonishing 70 percent market share, with Cambodians flocking to the movies like never before.
It may be hard to outscore such an achievement, but we can rest assured that Major Cineplex surely will find a way.
Crunching the Numbers
In 2012, Major Cineplex Group posted a net profit of approximately 846 million Thai baht (roughly $28.2 mil.) compared to 1.052 billion ($35.1 mil.) in 2013, representing a year-on-year increase of around 24.35 percent.
The company’s second-quarter (April to June) net profit in 2013 was 422.89 million baht, while it filed 443.31 million for the corresponding period of 2014, an increase of approximately 4.83 percent.
Second-quarter total revenue in 2013 was reported as 2.39 billion baht, opposed to 2.64 billion in the corresponding time period of 2014, an increase of about 6.21 percent.
By 2013, the group had issued a total of 887.6 million publicly traded shares at a book value per share of 6.87 Thai baht ($0.30). Earnings per share in the same year amounted to 1.18 Thai baht ($0.039), while the dividend per share was one Thai baht ($0.033) at a dividend payout of 85 percent before revised accounting policies.
(Sources: Annual Report 2013, Major Cineplex Group Plc Co. Ltd. / Major Cineplex Group Plc Co. Ltd. corporate website)