Co. aims to build strong cinema circuit, to tweak theater experience

SYDNEY — Australia’s oldest loop is also one of its best-known cinema brands.

With 353 screens over 38 sites, and another eight sites in New Zealand and a 23% market share, Hoyts is a stayer of the suburban multiplex business, despite a tumultuous recent history.

The Australian biz, like most mature exhibition industries worldwide, is grappling with piracy, shortened release windows and competition for consumer spending from pay TV, gaming and DVDs.

In 2005, the Australian B.O. dipped 10%, a steeper dip than the decline in the U.S. The top 20 box office — the pix that are fodder for Hoyts’ plexes — fell from A$598 million ($446 million) in 2005 to $408 million.

But over its 80-year history, Hoyts has overcome much bigger obstacles than this. When, in the ’80s, the industry appeared washed up, Hoyts was one of the companies that led the multiplex revolution that revitalized the business.

CEO of Hoyts Cinemas, Delfin Fernandez, is resolutely upbeat about the future. He says Hoyts is building a strong cinema circuit, with two new sites in New Zealand, it will continue to tweak the theater experience, as has proven successful in its Melbourne flagship that offers upscale amenities and cutting-edge design.

He also wants to ramp up the connection between candy bar offerings and movies and encourage online bookings. Hoyts Melbourne Central, tailored to appeal to a hip, urban clientele has demonstrated to the company the benefit of customizing sites to their locales. Similarly, the plex in Sydney’s suburban Blacktown boasts a giant screen for blockbuster viewing.

Fernandez is committed to innovation in the chain, with upgrades to enhance seating, screens and sound, lounges, food and beverage, in-foyer interactivity, gift vouchers and promotions while ensuring an effective cost base.

The Australian cinema industry has united to fight some common enemies, such as piracy and the decline in cinemagoing, and Hoyts took a lead role in the ad campaign that was rolled out last Christmas to promote the bigscreen experience.

Hoyts is huge: The company in Australia and New Zealand consists of three divisions: Hoyts Cinemas, Hoyts Distribution and Val Morgan Cinema Advertising.

Hoyts Distribution was launched in 2001 under Rob Slaviero to handle the release of films from affil Nine Films and Television and to buy titles on the open market that would eventually screen on the Nine Network. By end of 2004, it constituted just 5% of Hoyts’ business.

Val Morgan, the country’s largest cinema ad supplier, was resuscitated as a joint venture between Australia’s three big cinema chains: Hoyts, Village and Greater Union. Hoyts took over the company in 2004, and in the following year it constituted 17% of Hoyts’ overall business.

Val Morgan reported zero growth in the second half of 2005 but topper Graeme Yarwood is tubthumping a 5% uptick in the current half.

Hoyts Cinemas has this decade had a new CEO every other year, and the company’s direction has flip-flopped with each new appointment.

Darrin Walters was recruited from outside the film biz, from vitamin company Blackmores in 2004, to give the division a new approach, but he lasted only a year. He had replaced acting CEO Alison Deans and was replaced by another acting CEO, Stuart McInnes, who eventually acceded in December to Delfin Fernandez, whose appointment one competitor refers to as “the quietest appointment of a CEO I’ve never heard of.”

Paul Johnson, Hoyts’ long-serving CEO atop all divisions and the revered “godfather” of the cinema business, has lately stepped aside into a minimal consultancy role.

On a corporate level Hoyts was acquired by Kerry Packer from Peter Ivany in 1999, before being sold a year ago to a joint venture between West Australian Newspapers (WAN) and Packer’s public company Publishing and Broadcasting Ltd.

Packer, who died last December, paid $466 million for Hoyts. He refocused the biz in Oz and New Zealand, sold the company’s cinema assets in the U.K., Germany, Mexico and the U.S. for about $402 million and launched 15 new plexes in Oz.

In 2005 PBL and WAN each paid $129 million for Hoyts Australia and New Zealand. The three Hoyts managers report to a board of WAN and PBL reps.

Hoyts future is assured, though it’s somewhat more corporate and less entrepreneurial than its past but the company has survived much bigger challenges — as has its new CEO Fernandez.

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