Since its founding ten years ago, “our company has refined its business model and pursued an aggressive expansion strategy through a combination of targeted acquisitions and strong organic growth. Palace Cinemas is well-positioned to take advantage of the attractive cinema dynamics in Central and Eastern Europe over the next decade and to profit from the digital transition occurring in the exhibition industry worldwide.”
With three more sites to open in the Czech Republic and one in Slovakia over the next two years, it should come as no surprise that Maury believes “the cinema business will continue to be really good for us. We are pleased with 2009 so far, experiencing the best February admissions ever as we anticipate a strong summer.” Country market shares for box office and attendance in 2008 were 31.1% and 24.8% across the Czech Republic; 47.0% and 34.2% in Slovakia; and 54.4% in countrywide sales and 49.6% of cinema visits in Hungary. Looking ahead, “we could see a year with improved performances as we make our way through the worldwide economic malaise.”
Maury and Arthur Goldblatt founded the company in 1999, and in March 2002 opened the first Palace Cinema at MOMPark in Budapest, Hungary. The state-of-the art nine-plex was financed through investment funds managed by Palace’s majority owner, ARGUS Capital Group Limited. Since then, the private-equity firm has invested some €400 million in 13 companies across the Central and Eastern Europe region. “We are very pleased that our long-term partnership with Palace has resulted in the creation of the leading cinema exhibition company in our Central European markets,” attests George Collins, a partner with ARGUS. “We continue to be excited about the opportunities for future growth and expansion.”
Adds Maury, “While ARGUS remains a constant supporter, the biggest change between then and now has been our transformation from a new entrant entrepreneur to a mature leader in a relatively short period of time.” At Palace Cinemas, he explains, “I have always tried to run the company with a limited corporate team designed to have too much to do rather than too little. We placed our CFO David Jelinek in Prague so that we would have upper management presence in both markets. Believe me, he does much more than your typical chief financial officer, playing a key role in negotiating many of the deals for future sites. We also have a great team for IT in Greg Bridle and Mark Waldman, terrific country managers David Horacek in the Czech Republic, Andrea Baisova in Slovakia and Andrea Lovasz in Hungary. Palace would not be possible without all of them.”
Although there have been many milestones shared over the past ten years, Palace is very much grounded in the present. After all, Maury and his team have just come off the market-leading deployment of a dozen 3D systems powered by Barco projectors and with XDC servers—all installed by Germany’s Film-Ton-Technik Rüttgers (FTT). The 11 3D systems featuring Masterimage technology are located in Prague (3), Brno (2), Bratislava (2) and Budapest (4), Maury details, while Palace West End in Budapest, Hungary, will add a second RealD set-up. “It is a revolutionary technology that will radically change the business,” he advised local media at the March launches for Monsters vs. Aliens.
Maury tells FJI, “Palace Cinemas was the first to introduce digital projection to its markets on two screens in 2002. Our experience as an early adopter of digital has given us invaluable experience and we certainly have kept ahead of the curve. We are trying to make a deal and, although we are in advanced stages in the process, I won’t be able to make any announcements before Cinema Expo.” He adds, “3D is very interesting… We believe this will improve our bottom line. I have the feeling the incremental price difference will last for only a few years as the technology becomes more common.” Within a few years, Maury actually foresees “projectors simply having 3D options within the unit rather than requiring an add-on system.”
Also on the technological side, Palace has launched a web-purchasing interface called eticket, powered by the proprietary management software End2End (E2E). “It is doing nicely,” Maury says, despite the fact that “credit card usage in Central Europe remains low…but is growing. We also launched our Palace Movie Card across the region, which provides a discount on most tickets.” With some 60,000 in circulation since having been introduced in late 2008, Maury intends “to build this into something more. We also launched additional services across the region on all websites, for example, featuring trailers and future films, a blog and even a mobile version of the site. We estimate 80% of our customers get their info from the Web. That’s a really big part of the biz.”
Maury expects Palace Cinemas to utilize its proprietary E2E software in an equally major way during the completion of the digital rollout. Already in use for the entire circuit to power the box office, scheduling, CID (customer information display) screens, concessions and websites, “the upgrade is expected to better manage content in a digital environment,” he anticipates. “This applies to movies, trailers, advertising as well as one-off alternative content, specialty films and events. We will manage their input, exhibition and follow-on analysis in real time.” Last but not least, “this will also integrate better the ad sales arm, Palacemedia, and the distribution side, Palace Pictures, into the system overall.”
Palacemedia was launched in 2005 in the Czech Republic and Slovakia and expanded to Hungary in 2008. “This internal on- and off-screen sales group is essential for maximizing our ever-important ad sales revenue streams,” notes Maury. “We can better service a potential client directly, offering special deals and initiatives. We found that third parties could never really represent our interests, especially if carried as part of a portfolio of other cinemas or other advertising outlets. We are the best at representing ourselves.”
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