The box office downturn in Latin America is putting a slight crimp in an otherwise dynamic market, where key players have been expanding outside their natural borders and international circuits continue to invest. With the exception of 3,000-screen-plus Mexico, where growth continues apace, the region is in dire need of more screens.
Cinemark Intl. prexy Tim Warner thinks the current slump might make exhibs re-evaluate new projects but won’t have an impact on existing commitments, which were inked years ahead. Texas-based circuit owns 911 screens across the region and will open 25 new screens before year’s end. “We expect to open an additional 160 screens in the next two years,” Warner adds.
“We’re convinced that the slump in attendance is product-related,” he says. Moreover, it is not just the quality of the films but the type of pics: “There have been less family and action-adventure stories which tend to do well in Latin America.”
He is expecting a robust fourth quarter with upcoming titles “Chicken Little,” “King Kong,” the next “Harry Potter” and “The Chronicles of Narnia.” Mediocre fare from domestic producers also has hit attendance. “In 2003, 23% of our attendance in Brazil came from local films,” Warner notes.
“We perceive the box office downturn as something cyclical,” says Miguel Rivera, director of strategic planning at Mexico’s giant exhib Cinepolis. “We are not slowing down our growth plans because of this.”
By March, Cinepolis, which grew from 200 screens in 1995 to 800 in 2000, will have 1,477 screens in operation in Mexico, Panama, Guatemala and Costa Rica. El Salvador is next on its map.
Owned by the Ramirez family, Cinepolis has been investing around $100 million per year in new venues, sourced by profits from its circuit. Cinepolis CEO Miguel Mier says the company took on some debt this year but that it was not a significant amount.
Cinepolis opened more than 100 screens in 2004 and some 150 in 2005. However, construction plans are likely to plateau to an additional 150 screens next year.
A nearly 14% dip in the Mexico City box office in 2005 has prompted leading Mexico City exhib Cinemex to implement some cost-cutting initiatives. The 10-year old circuit has cut back on the number of security guards in each theater and introduced new accounting software that permits it to hire fewer money-crunchers. Company also is using its more energy-efficient emergency diesel generators during peak hours.
“Attendance is not growing at the same rate as the number of screens,” Cinemex CEO Miguel Angel Davila admits. “The rate of return on investments has been slowing down as the market has matured.”
In contrast, attendance in Colombia has remained static at 18 million admissions for the last decade despite strong exhibition growth in recent years. Munir Falah, CEO of market leader Cine Colombia, pins the blame on the economy, rampant piracy and the increase in home theater sales. He is hopeful that as the economy improves, admissions will double in the midfuture.
Cine Colombia, which represents 60% of the market in terms of admissions and 62% in B.O., is investing in new projects during this year and 2006 with three big multiplexes currently under construction in Bogota and second city Medellin to be finished next year.
B.O. drop in Brazil
The news out of Brazil is not as rosy, where this year’s estimated 25% attendance drop is leading exhibitors to reduce their expansion plans. Market research firm Filme B estimates 132 new screens will open in 2005, down from 141 in 2004 and 148 in 2003. As of Dec. 31, 2004, Brazil had 1,997 screens.
The impact will be felt in 2006, says Valmir Fernandes, general manager of Brazil’s top exhib Cinemark: “I believe some small and average-sized exhibitors will be postponing new projects. But the big players will continue to expand at the same rate of the past years.”
Brazil’s multiplex revolution started in 1997 when Cinemark, UCI, Hoyts and local giant Severiano Ribeiro plus other local groups began building plexes around the country.
“Until recently, the market share of Brazilian pics was 6% to 7%,” says Warner. This is expected to rise with the record-busting blockbuster “Two Sons of Francisco,” a Columbia TriStar release.
Argentina’s screens finally ignited, with four domestic pics dominating the box office since mid-September. Those films took an unprecedented 45% of the 371,200 admissions, up from an average 10%-15% share. Toss in the other 14 local releases, and the share rose to 48%, according to Nielsen EDI.
With the economy recovering robustly from the 2001-02 economic crisis, exhibitors are reviving investment plans in Argentina, bolstered by strong ticket sales (down from last year, though), easier access to credit and opportunities to add new screens in less-developed markets. There are 1,000 screens, down from 4,000 in the 1980s.
Village is due to open a 10-plex this month in one of the fast-growing districts of Buenos Aires, where screens are scarce. Concerns still remain, however, including social unrest, crime and poverty. Inflation is rising faster than expected, limiting attendance. That may slow screen expansion.
(Marcelo Cajueiro in Brazil, Charles Newbery in Argentina, Michael O’ Boyle in Mexico and Mark Duffy in Columbia contributed to this report.)