Features





Cross-country growth: UCI Cinemas Group expands market shares

June 22, 2011

-By Andreas Fuchs


filmjournal/photos/stylus/1252278-UCI_Feature_Md.jpg
Back in April, leading French circuit UGC sold its Italian and Spanish interests in nine multiplexes and a total of 158 screens to pan-European ODEON & UCI Cinemas Group, owned by Terra Firma, the London, England-based private-equity firm with portfolio businesses that operate in over 60 countries to the tune of €4.5 billion (US$6.34 billion) in annual revenues. Subsequently, the four Italian sites and 66 screens became part of UCI Italia and the remaining five sites and 92 screens were incorporated into the fold of Barcelona, Spain-headquartered Cinesa. Film Journal International had the exclusive opportunity to speak about the deal with José Batlle, chief operating officer, Continental Europe, of UCI Cinemas.

“Our acquisition strategy works in conjunction with building new multiplexes,” Batlle notes. “Since October 2004 when Terra Firma bought us, we completed ten acquisitions of cinema circuits across Continental Europe: Warner Bros. and AMC in Spain; Circuito Coliseo from Bilbao, Spain; Hoyts in Germany; Europlex, Cinestar and Pathé in Italy; and more recently, UGC in Spain and Italy. During the same time, we have also been building new multiplexes in Italy and Spain.” As examples of the latter, at the end of May Cinesa opened a 12-plex in La Coruña, Northern Spain, which was followed in mid-June by UCI Cinemas’ first multiplex on the Italian island of Sardinia, with eight new screens and some 1,500 seats for the town of Cagliari. “We have even taken over some multiplexes when, for one reason or another, the tenants have left the site. Either voluntarily or after they were, let’s call it, ‘invited’ by the landlord to leave the site.”

Within two weeks of our conversation, Batlle and his team agreed on another deal taking over 51 screens at seven cinemas from another Italian exhibitor, which could not be disclosed at press time. “The anticipated market share of 18 to 19% puts us in the same range as Spain.” He confirms 43 sites and 517 screens currently in Spain and 41 locations and 437 screens across Italy after the deal closes, operating from number-one positions in both countries. The other markets that fall under his executive management have garnered equally strong positions. UCI Kinowelt is third in Germany and operates relevant sites in Austria, with the same number up and running at UCI Cinemas Portugal. In the United Kingdom, ODEON is number one as well, and UCI Ireland operates three locations with 25 screens in and around Dublin.

No matter where they are located, Batlle knows what it means to take over existing cinemas. “It’s a big job that we have to do when we acquire theatres. It’s not only a question of changing the brand—although removing the existing name and signage is usually the first step—but also of upgrading the installations. Sometimes we change the seats and/or improve the sound; at other times the projectors are upgraded. But we change the concession areas and pick-and-mix set-ups each and every time. We always re-train the staff as well and adapt all the previously existing procedures to fit with our standard principles. Obviously, we have a lot of experience in how to operate theatres and we apply our established system every time that we acquire a new site.”

One of the biggest upgrades coming involves digital cinema. “UGC, for instance, has about two digital projectors in each of their sites. What we are going to do now is install digital projection into every screen as part of our general rollout plan with NEC, Doremi and RealD 3D.” With integration and equipment solidly settled, models and options for financing nonetheless vary across Europe, Batlle has observed. “There are some differences in every country, but overall we have established our own system and connections with the studios, whereby we are collecting VPFs [virtual print fees] ourselves. Because of the peculiarities of the market, Portugal is an exception where we have commissioned XDC,” he further details. “In the U.K., Germany, Italy and Austria, we are going to do rollout and collection by ourselves. Spain has not been determined yet.”

Of the many other challenges this industry is facing, Batlle finds “the one that applies to all the territories and to every cinema around the world” is release windows. “I can imagine that the intentions of some of the studios to reduce the window even further is going to be one of the main topics at CineEurope. When indeed reducing windows, premium video-on-demand is going to be really, really bad for our industry in general and particularly for exhibition. I have not yet seen any model that shows me that the incremental business that premium VOD might produce for the studios is going to replace the damage that this will cause to the theatrical business.” Not to mention the additional impact on piracy. “The fact that these thieves can now access high-quality files even earlier will make the problem much worse than it already is. Piracy is a big issue everywhere and in some territories it is even bigger than in others.”

In Spain, for instance, the problem is “very, very pronounced” and Batlle believes the power of Telefonica is to blame. “The only people who can really stop piracy are the telecommunications companies. Telefonica has not helped us at all to reduce film theft.”

On a more positive note, this past May, the Spanish government finally passed its first anti-piracy law. “It’s not a very strong one,” Batlle cautions, “but at least it represents the beginning of an understanding how serious the problem of piracy is. I hope that this will start some trend towards curbing theft.” As with all challenges, communication between partners is key, Batlle says. “I hope the industry will be wise enough to sit down and have talks amongst producers and studios, distributors and exhibitors to try and find a way that somewhat protects the theatrical business. Otherwise we are all going to have a big problem.”

On a more positive note, “The rest of the year is going to be better than so far,” Batlle predicts. “We are starting the blockbuster season now and most of the expected hits will be in 3D to boot. So I think the business levels are going to increase. And don’t forget that last year we had the World Cup and the majority of our territories were pretty much involved. So, for that reason alone, we should be doing much better than last year.”

As for UCI’s role, “Our company is very much supporting this industry and we are much involved with its future. Our outlook remains absolutely positive and we’re investing a lot of money into our business. We are acquiring more companies and building up new theatres, including the full rollout of digital projection. We are really confident that this industry will move ahead strongly. But, we need the understanding and support of our partners. Studios and distributors have to understand that if they are going to reduce the windows, it will do big damage to them and to us both.”


Cross-country growth: UCI Cinemas Group expands market shares

June 22, 2011

-By Andreas Fuchs


filmjournal/photos/stylus/1252278-UCI_Feature_Md.jpg

Back in April, leading French circuit UGC sold its Italian and Spanish interests in nine multiplexes and a total of 158 screens to pan-European ODEON & UCI Cinemas Group, owned by Terra Firma, the London, England-based private-equity firm with portfolio businesses that operate in over 60 countries to the tune of €4.5 billion (US$6.34 billion) in annual revenues. Subsequently, the four Italian sites and 66 screens became part of UCI Italia and the remaining five sites and 92 screens were incorporated into the fold of Barcelona, Spain-headquartered Cinesa. Film Journal International had the exclusive opportunity to speak about the deal with José Batlle, chief operating officer, Continental Europe, of UCI Cinemas.

“Our acquisition strategy works in conjunction with building new multiplexes,” Batlle notes. “Since October 2004 when Terra Firma bought us, we completed ten acquisitions of cinema circuits across Continental Europe: Warner Bros. and AMC in Spain; Circuito Coliseo from Bilbao, Spain; Hoyts in Germany; Europlex, Cinestar and Pathé in Italy; and more recently, UGC in Spain and Italy. During the same time, we have also been building new multiplexes in Italy and Spain.” As examples of the latter, at the end of May Cinesa opened a 12-plex in La Coruña, Northern Spain, which was followed in mid-June by UCI Cinemas’ first multiplex on the Italian island of Sardinia, with eight new screens and some 1,500 seats for the town of Cagliari. “We have even taken over some multiplexes when, for one reason or another, the tenants have left the site. Either voluntarily or after they were, let’s call it, ‘invited’ by the landlord to leave the site.”

Within two weeks of our conversation, Batlle and his team agreed on another deal taking over 51 screens at seven cinemas from another Italian exhibitor, which could not be disclosed at press time. “The anticipated market share of 18 to 19% puts us in the same range as Spain.” He confirms 43 sites and 517 screens currently in Spain and 41 locations and 437 screens across Italy after the deal closes, operating from number-one positions in both countries. The other markets that fall under his executive management have garnered equally strong positions. UCI Kinowelt is third in Germany and operates relevant sites in Austria, with the same number up and running at UCI Cinemas Portugal. In the United Kingdom, ODEON is number one as well, and UCI Ireland operates three locations with 25 screens in and around Dublin.

No matter where they are located, Batlle knows what it means to take over existing cinemas. “It’s a big job that we have to do when we acquire theatres. It’s not only a question of changing the brand—although removing the existing name and signage is usually the first step—but also of upgrading the installations. Sometimes we change the seats and/or improve the sound; at other times the projectors are upgraded. But we change the concession areas and pick-and-mix set-ups each and every time. We always re-train the staff as well and adapt all the previously existing procedures to fit with our standard principles. Obviously, we have a lot of experience in how to operate theatres and we apply our established system every time that we acquire a new site.”

One of the biggest upgrades coming involves digital cinema. “UGC, for instance, has about two digital projectors in each of their sites. What we are going to do now is install digital projection into every screen as part of our general rollout plan with NEC, Doremi and RealD 3D.” With integration and equipment solidly settled, models and options for financing nonetheless vary across Europe, Batlle has observed. “There are some differences in every country, but overall we have established our own system and connections with the studios, whereby we are collecting VPFs [virtual print fees] ourselves. Because of the peculiarities of the market, Portugal is an exception where we have commissioned XDC,” he further details. “In the U.K., Germany, Italy and Austria, we are going to do rollout and collection by ourselves. Spain has not been determined yet.”

Of the many other challenges this industry is facing, Batlle finds “the one that applies to all the territories and to every cinema around the world” is release windows. “I can imagine that the intentions of some of the studios to reduce the window even further is going to be one of the main topics at CineEurope. When indeed reducing windows, premium video-on-demand is going to be really, really bad for our industry in general and particularly for exhibition. I have not yet seen any model that shows me that the incremental business that premium VOD might produce for the studios is going to replace the damage that this will cause to the theatrical business.” Not to mention the additional impact on piracy. “The fact that these thieves can now access high-quality files even earlier will make the problem much worse than it already is. Piracy is a big issue everywhere and in some territories it is even bigger than in others.”

In Spain, for instance, the problem is “very, very pronounced” and Batlle believes the power of Telefonica is to blame. “The only people who can really stop piracy are the telecommunications companies. Telefonica has not helped us at all to reduce film theft.”

On a more positive note, this past May, the Spanish government finally passed its first anti-piracy law. “It’s not a very strong one,” Batlle cautions, “but at least it represents the beginning of an understanding how serious the problem of piracy is. I hope that this will start some trend towards curbing theft.” As with all challenges, communication between partners is key, Batlle says. “I hope the industry will be wise enough to sit down and have talks amongst producers and studios, distributors and exhibitors to try and find a way that somewhat protects the theatrical business. Otherwise we are all going to have a big problem.”

On a more positive note, “The rest of the year is going to be better than so far,” Batlle predicts. “We are starting the blockbuster season now and most of the expected hits will be in 3D to boot. So I think the business levels are going to increase. And don’t forget that last year we had the World Cup and the majority of our territories were pretty much involved. So, for that reason alone, we should be doing much better than last year.”

As for UCI’s role, “Our company is very much supporting this industry and we are much involved with its future. Our outlook remains absolutely positive and we’re investing a lot of money into our business. We are acquiring more companies and building up new theatres, including the full rollout of digital projection. We are really confident that this industry will move ahead strongly. But, we need the understanding and support of our partners. Studios and distributors have to understand that if they are going to reduce the windows, it will do big damage to them and to us both.”
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