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Studios water overseas markets

Warners seeds China; UCI grows Euro garden

Hollywood studios’ interest in operating international movie theaters runs deeper than merely selling popcorn and soft drinks in exotic locales.

In fact, two of the largest international players have divergent interests when it comes to running hardtops overseas.

Warner Bros. Intl. Theaters, which has 1,370 screens in eight countries, is focusing on emerging markets, like China, and is willing to seed those markets with investment dollars so that they might blossom into ripe territories in which a studio can release its movies.

By contrast, United Cinemas Intl. — the international exhibition joint venture of Universal and Paramount which operates 1,102 screens in 11 countries overall — places less emphasis on the Asian market, and more on growing its operations in existing European territories.

Warner Bros. Intl. Theaters topper Millard Ochs says WBIT is looking to create an infrastructure for films overseas. “Our job is to invest in new markets. Right now, we’re trying to get China started — which is a laborious process.”

Warners hopes soon to get a first-ever government approval for a major studio to operate a movie theater in the land of a billion eyeballs.

A Shanghai venue — the nine-screen Grand Gateway — is already open, but the installation of signage and full marketing operations await final licensing expected by the end of August.

UCI makes a long-term commitment to each territory in which it operates, says prexy Joe Peixoto.

“We don’t run the business for the sake of distribution or because we’re owned by two studios,” Peixoto declares. “We try to operate the business on its own two feet, and if we do that right, we will make a return for our shareholders. The ownership question doesn’t come into play.”

That’s not to say the distribs themselves don’t have a mission or two in mind for the joint venture. U’s international marketing and distrib maven Randy Greenberg says the studio originally got involved in global exhibition “because we wanted to help our business to grow.”

The U-Par joint venture, founded more than a decade ago, launched its first theaters in the U.K.

“At the time, the U.K. was grossly underscreened — and the screens that were there were gross,” Greenberg quips. “So, the idea was to take the understanding of multiplexing in the States and apply that internationally.”

China reps a particular point of divergence for the two international exhibs.

While WBIT hopes soon to secure Beijing’s approval on its watershed Shanghai project, UCI is sitting on the sidelines.

UCI gained a toehold in China a few years ago when it bought a 5% stake in the Malaysian-lead Smile consortium, which unveiled grand plans to create a modern circuit in that badly underdeveloped market. But plans stalled after just three theater openings, due to financial woes at Smile.

“China is not something we’re pushing,” Peixoto says. “We’re in a wait-and-see mode.”

Specifically, the exec wants China to allow a much greater influx of U.S. films than the current limit of 20 per year.

But Warners’ Ochs says the Shanghai Grand Gateway could prove a catalyst for raising that number. “We’re trying to act as a seed to grow the market,” he says. “And maybe that limit eventually will be raised to 30 films. It will take time, but we’re willing to take the time to see if that will happen.”

Warners has a joint venture partner in the theater, Shanghai Paradise, which operates some monoscreens and two-screen theaters elsewhere in the market. Another partner, retail operator Hong Kong Broadband, also has a modest interest.

After the venue is fully licensed, Ochs hopes to mount a splashy grand opening for Grand Gateway. Tentative plans include a Hollywood-style preem for an upcoming Warners release. As if to underscore the special challenges of international exhibition, he adds, “It will take some time to get censors’ approval, of course.”

Ochs declines to comment on the profitability of Warners’ worldwide ops.

UCI — which Peixoto calls “profitable” amid a 15% first-half admissions spurt — is much more bullish on European expansion. The circuit is building three multiplexes in Spain and four in Italy, and it’s looking to add two sites in Poland.

“We have not reached critical mass,” Peixoto says. “We want to have a substantial share of the business in those markets.”

UCI also may acquire existing wickets on the Continent. The view is quite different over at WBIT, however.

“I don’t need to go build theaters in Europe,” Ochs demurs. “That’s been done.”

As a result, Warners declared “mission accomplished” in various Euro territories like Germany, Denmark and Holland, and pulled up stakes in recent years.

That’s not to say Warners wouldn’t have stuck around for the longer haul if there were a big profit to be made in those more developed markets.

“I couldn’t make it work,” Ochs shrugs, citing various competitive factors in the countries Warners has exited.

WBIT — which is also believed mulling an exit from its Oz joint venture with Village Roadshow and Greater Union — continues to operate profitably in the U.K. and several other Euro territories. But Asia is where it’s making a full court press.

“Japan is absolutely incredible,” Ochs enthuses.

No argument from UCI’s Peixoto there. His company is looking to add a couple of theaters in Japan after marking a 48% jump in territory sales — twice the market average — over the past six months with its modern, 89-screen loop.

There’s also at least one other situation where WBIT’s and UCI’s agendas merge. In January, UCI and Warner Theaters launched a European joint venture to buy products for their concession stands.

So, perhaps even in international exhibition, all roads do ultimately lead to the popcorn counter.

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