Red Carpet rising: Cinema architect/owner Ira Stiegler reflects on changing times in China
“Change is not the right word. It’s a different planet,” attests Ira Stiegler about how China has developed since he first came to Shanghai as a student in 1981 and later returned to the People’s Republic as senior VP architecture and construction during the global expansion of Warner Bros. International Cinemas (WBIC). “As students, we’d go to the really big single screens with sloped floors and closely packed-together seats. And propaganda was the only thing shown at that time,” he adds.
“Flash-forward to when I came back in 2002, designing a screening room at the Shanghai Museum in People’s Square. Time Warner was making a donation to them as well as to other institutions. Part of that support was my services to help finish the screening room. By then, some of those old, big cinemas had been cut up into smaller auditoriums, of course. It really took only about another two years [for us to start] building the same modern multiplexes in China that WBIC was building in Europe and elsewhere around the world. It was a different planet even in 2002, but it most certainly is now.”
As managing director of his own architecture and design firm, Stiegler Associates International (SAI), residing in Shanghai since January 2005 and, more recently, having added proprietor of Red Carpet Cinemas to his portfolio (not to mention his 16 years at WBIC), Stiegler has firsthand insight into the exhibition business in China. When Warner Bros. opted to back out, he decided “it was probably time to start my own business.” It was equally clear to him “that the company was not going to stay in China. We had everything nicely set up, which of course in China is not easy. The Warner team was the best equipped to begin changing cinemas in China. Unfortunately, the rules and regulations regarding foreign ownership hadn’t changed in the way we had hoped they would.”
Stiegler continues, “As an architect and a builder of cinemas, I decided that there was opportunity…here in China rather than staying on with Warner Bros. We were already selling our cinemas in other parts of the world. Even though WBIC did not continue with it, our building program continued. So it made perfect sense,” he chuckles, “to step out before I got too old to start my own business.”
And “while it has not been easy,” Stiegler says, “I feel very fortunate” having developed about a dozen cinemas with different partners. “The financial crisis was more or less responsible for grounding my first effort. While we had funding and were developing quite quickly then,” he admits “there was also an issue with not necessarily having found the right partners.”
The second time around, “I worked with a very good friend who had been the head of Wanda’s cinema development, but, sadly, he passed away. Again, we had developed quite a few cinemas already.” Finally, Stiegler set out to “do it on my own.”
On Feb. 12, 2012, he opened his first Red Carpet Cinema in Yangjiang, in the Southern province of Guangdong (seven screens with a total capacity of 1,250 seats and auditorium capacities ranging from 120 to 260 seats, plus all digital projection with four 3D cinemas). “The business is doing great,” he confirms, outlining plans for several additional sites in the red-carpeted pipeline. “It has been quite the experience. Foreign investment in China has certainly been difficult and that’s where I was focused in my first efforts.”
Another U.S.-funded deal that seemed done, assuring Stiegler a partnership and financial backing for some 50 new theatres, did not materialize. “At the last minute, they decided not to move forward. So it goes in the fundraising arena!” Clearly speaking from experience, he adds, “When you are growing organically, the key is to find the right people to work with.”
In operating the Red Carpet Cinema, “I put together the right team that, other than me, is an all-Chinese team. Some co-financing has come from people that I have worked with for a long time in the industry.” Stiegler goes on to name “vendors who are branching out into exhibition now. They have grown along with the industry in general by providing products and services. It’s going to be a very good match.”
At the same time, Stiegler continues to develop and design cinemas for other groups. “We have probably been doing somewhere around 25 to 35 cinemas a year. It’s staggering…” But the pace has slowed down. “Not as many cinemas are opening right now than there were a couple of years back. But it is still somewhere around eight to ten screens per day,” he ventures about the average. “In general, the quality of the cinemas tends to be excellent. Everything we are doing here is as good…” He pauses before correcting himself. “No, we have been improving upon what we have done elsewhere during the multiplex deployment. The cinemas now are better in many ways. One of the reasons is further development of ideas and more innovation, but also that construction costs are at such a discount here by comparison to what has to be spent in other countries. You can do so much more with less of a budget in China. It is really the equipment that is the majority cost of the cinema.”
Given the scale of the market and lack of screen penetration, Stiegler believes that while “a lot of cinemas are going up,” there is room for more. “Many people are saying that the big Chinese cities like Shanghai are already full of cinemas. In fact, they have no more cinemas than my hometown of Minneapolis, Minnesota, which is a small town by comparison. If you look at the population, the income levels and distribution, you probably still need three times as many cinemas as we currently have to attain the same kind of penetration we see in the major areas of Europe and the United States. I believe development will continue for quite some time. Yes, there will be some fallout,” he cautions, “from cinemas that are being built in the wrong places or not in high enough quality. In the rush that has happened thus far, I would guess at least 30% of what has been built will be made redundant in the not-too-distant future.” Stiegler calls it the “natural attrition of everybody rushing into a new industry.”
“You have to be careful where you go,” he notes, providing the example of Starbucks entering the Yang Pu district where his office is located. Explaining their third attempt in seven years, Stiegler says, “Everything is so new that the usage patterns in our cities are not fully known yet, nor are they really established. It just goes to show that even Starbucks, who is generally pretty good at choosing locations, got it wrong twice within the same area,” he opines. (Stiegler has since switched to tea in the afternoon, but still needs his coffee in the morning.) “The same holds true with cinemas. It takes experience to know what areas are risky, which ones will have staying power, where to anticipate the development and, most importantly, where growth will materialize.”
“As you can imagine, the situation in China is always changing and evolving,” he continues. “From the beginning at WBIC, we were fairly aggressive in terms of size because we knew that eventually a certain number of screens would be needed even though they were not all that useful in those early years. There is more and more product available these days. The entire process is becoming more and more liberalized. In the early days, developers were going four, five screens only, which are not enough now. I was always looking to have at least seven to nine screens, like we were doing in Europe and other parts of Asia.”
And indeed, allowing room has been a good choice. 2013 “has been quite the year for China, mostly because—and my cinema in Yangjiang is a testimony to this—the local Chinese films outperformed the blockbusters coming from Hollywood.” He names “the simple love stories and comedies this year that have really carried the business so far. It’s the old saying we had at Warner Bros., that a good local film is always going to be more popular, even more so than imported titles.”
That is the reason why, depending on the market, the size of a cinema “can go up to twelve screens or a few more these days, but not much larger than that.” When it comes to locations, Stiegler says shopping malls are still the preferred partners. “Joining forces with developers such as Wanda started with Warner Bros. and it pretty much stayed that way,” he confirms. “Nowadays, it is beginning to change with different kinds of locations being considered that are not always on top of shopping malls. In many cities, development for cinemas needs to become more creative by no longer following these old prescriptions.”
One of the established formulas is changing. “What is so exciting about the market right now is that the bottom of the pyramid is starting to attract the attention of the industry. Companies are no longer focused on the coastal cities alone as they were during the first five, seven years. Now second- and third-tier cities are all aggressively being built out. Small cities in China mean 500,000 to one million people,” Stiegler qualifies. “As you know, in many European countries that is the majority of their biggest cities.”
“Having gone in a third-tier city with my own cinema has been quite a learning experience,” he adds. “The interest in film is amazing and the buying power, although very different in various parts of the spectrum, is impressive, not to mention looking at the sheer volume of attendance.” Granted that these third-tier cities, which according to Stiegler represent some 80% of the country, are not necessarily the wealthiest parts of the Republic, the average ticket price is around £3 to £4 (US$4.85 to 6.50). “This is what we used to sell them for when we started out in the U.K.,” Stiegler recalls. That young people in the smaller cities of China are actually affording that kind of pricing now is “pretty impressive” to him.
Is that a sign, perhaps, for cinema becoming an integral part of Chinese culture once again? “Absolutely,” he agrees. “There is a strong history of cinema and filmmaking here, which went to sleep for a while, of course. It is waking up and young people, I think, are just as capable of being avid filmgoers as their counterparts in the U.S. or Europe. It’s very much a cultural movement. They are going in droves to see the day-to-day life stories that they are all relating to.”
What about his own life as a cinema builder and owner? Does he have any regrets? Or words of advice to share with our readers? “My friends always wonder, ‘What are you doing in China, why are you not coming home?,’” Stiegler admits. “I am an architect and I like building and creating things. For me, this is the equivalent of being in Rome 2,000 years ago. As a matter of fact, China is much bigger than that. I don’t think the world has seen this scale of development when considering the various Golden Ages. It is just so remarkable how many millions of people will benefit from all this,” he enthuses. “This said, you have to put in your time and learn how things work here and, most importantly, be realistic about each venture. I do encourage people to give China a try, because there is just so much opportunity here. There is a lot more that can be done. Come with your eyes open and be realistic. And this will be very rewarding, as it has been for me."