Dire situation gives local players easy entry into market

BERLIN — Germany’s exhib market may be in the doldrums, but you can’t say it’s not dynamic.

Granted, box office revenue slid 9% to e213 million ($252 million) in the first quarter of 2004 — some multiplex chains saw revenue drop 25% in the first three months of the year — after 2003′s full-year 11.5% drop to $1 billion.

Yet the dire situation has given some local players an easy entry into the market.

Herbert Kloiber, whose Tele Munchen group owns licensing, production, distribution and television operations as well as one of the biggest film libraries in Germany, is making a bid for the financially wracked Cinemaxx, Germany’s second biggest multiplex chain.

For Kloiber, it’s an opportune time to buy. Cinemaxx founder and chief exec Hans-Joachim Flebbe, who owns 32% of the exhib group, is reportedly looking to sell; fellow Cinemaxx shareholder Senator Entertainment is in insolvency, making it likely that its 25% stake in the exhib will be sold off as well.

Cinemaxx’s owners are under pressure to divest: Cinemaxx’s main creditor, Dresdner Bank, has written off some $24 million in loans to the exhib and is now looking to transfer that credit to a foreign investment fund, which would welcome a new investor. Cinemaxx, which owns 49 theaters with a total of 356 screens, posted a half-year loss of $11.6 million in 2003. Company is due to release its full 2003 results next month.

Kloiber has not specified which shares he is acquiring, although he could get a majority in the group from Flebbe and Senator.

Meanwhile, Germany’s Ufa Theater, one of the last remnants of the legendary film group of the same name, filed for insolvency May 4. Company was a shareholder in exhib chain Ufa Theater, which went belly up last year. Fellow German rival Kieft & Kieft and Canadian-owned exhib Loews took over 28 Ufa cinemas comprising 173 screens. But Ufa Theater still owns many of the theater buildings leased to Kieft & Kieft.

While it’s now the country’s biggest operator, Kieft & Kieft is also facing difficulties. The group was recently forced to close a 2,500-seat multiplex in Aachen and the Royal Palast, one of Berlin’s most famous cinemas.

The causes for the dire state of the industry are numerous: the multiplex market is saturated after a decade of over-investment. The exhibition sector has been squeezed by high rent prices, low ticket sales and long-term debt. Competition from the rapidly growing DVD industry and illegal piracy hasn’t helped. And a lack of major Hollywood blockbusters has also left exhibs distressed.

Some observers partially blame exhibs for replacing many traditional theaters with ever more multiplexes, which they say cater to teens and young adults while failing to attract older adult auds.

Theater operators are hoping for salvation from a slew of tentpole pics due out in coming weeks, despite the fact that summer is traditionally a difficult time for local exhibs as sun-starved Teutons prefer spending their time outdoors rather than in darkened cinemas.

However, a particularly rich crop of pics may persuade them otherwise. They include “Troy,” “The Day After Tomorrow,” “Harry Potter and the Prisoner of Azkaban” and “Spider-Man 2,” not to mention what promises to be one of this year’s most successful German pics, Michael Herbig’s sci-fi spoof “(T)Raumschiff Surprise — Periode 1.” Herbig wrote and directed Germany’s most successful film to date, 2002′s comedy western “Manitou’s Shoe.”

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