For sale: State cinemas

U.S. exhibitors and distribs anxious to break into the Hungarian market may soon have their chance.

The City of Budapest recently confirmed plans to sell over half of the city’s government-owned cinemas and privatize Budapest Film, the municipality’s movie distribution and theater-management company.

Ferenc Port, managing director of Budapest Film, told Daily Variety that his firm will complete the privatization process by the end of 1993 and that steps in that direction will begin immediately.

According to Port, Budapest Film’s books will be audited this week to determine the financial health and precise worth of this venture, which currently manages 10 screens in Budapest and employs 180 people.

In addition, a privatization strategy for the firm will reportedly be drawn up with the help of an American consulting firm, and will be presented to the City of Budapest in September for ratification.

According to Budapest Film, the city’s plan to sell a portion of its movie houses will ensure the privatization of 25 of its 44 cinemas. The cinemas marked for sale primarily exhibit commercial U.S. features. The city will retain the remaining 21 theaters, which are either housed in historic buildings or are venues for European art films.

Investors interested

There is speculation that the privatization of these theaters could attract American or Western European investors, leading to an injection of capital and new marketing ideas into Budapest’s aging cinema chain.

But in recent months foreign exhibitors contemplating the murky waters of the Danube have proven themselves skittish at best. In March, Budapest accepted tenders on a plan to install a multiplex cinema system in the Apollo theaters inside the city’s grand Royal Hotel. Numerous firms, including Intercom Hungary, submitted bids for the project, which was ultimately won, according to Budapest Film, by a Canadian and French firm.

The arrangement reportedly fell through last month for reasons yet undisclosed, underscoring the questionable health of Hungary’s exhibition industry, which has experienced marked shrinkage in the post-Communist era.

According to Port, Budapest’s attendance figures have declined from an annual audience of 17 million in 1988 to 5.4 million last year — startling considering Hungary’s population of 10.5 million, and Budapest’s population of 2 million.

Ticket price inflation, 400% over five years, is considered part of the reason for this dramatic drop. But Port also attributes the decline to alternative sources of entertainment — cable TV, satellite dishes, videocassettes — that flowed into Hungary when the nation’s borders opened in 1989.

In light of these harsh statistics, is the Hungarian movie market still a wise investment? “If someone is looking for a long-term investment, yes,” said George Mihaly, general manager of the distrib Intercom Hungary.

“I don’t think a short-term plan would be feasible. This is a market where you have to plan in the long term if you want to be realistic.”

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