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Multiplexes flex muscles in Vietnam

Country's cinema infrastructure undeveloped

HONG KONG — Vietnam has long had a complicated resonance for Americans. For the former Loews and former Columbia exec Ted Shugrue, that holds especially true.

While at Loews he had his eye on the territory as a possible region for cinema building, and made his first application for permission to operate back in 1999. “Happily it didn’t work. It was a great location, but it was too early,” Shugrue says.

Since 2004, the Vietnamese government has stopped trying to do everything in the film biz by itself and has allowed the sector to slowly crawl out of the dark ages.

“With 85 million people and just 86 operating cinema screens, the opportunity just jumps off the page,” Shugrue says today as MegaStar Media, backed by his Envoy Media Partners, opens its fourth multiplex. He also describes Vietnam as the last of the “low-hanging fruit” in that not many other countries have such undeveloped infrastructure.

But infrastructural poverty also means that everything has to be built from scratch — including audiences who have lost the cinemagoing habit. Shugrue tells a scary tale about the week in April 2006 when MegaStar opened its first hardtop in Hanoi. Driven perhaps by curiosity, audience numbers exceeded expectations. The second week, nobody came.

Meaningful returns on investment cannot happen until revenues improve by several orders of magnitude. Nationwide cumulative B.O. this year is estimated to be in the $2 million-$2.5 million range. That compares with the $500,000 per screen that Shugrue says he is investing — or $4 million alone for MegaStar’s most recent Ho Chi Minh city multiplex, the company’s fourth in Vietnam.

If the economics look terrible at this stage, Envoy and its partner Mekong Leisure are not alone in betting on a change in fortunes.

Local group Galaxy Media has opened two complexes in the last year, and there are others operated by the Korean-backed Diamond group and another, Cinebox, with local investors behind it.

Galaxy’s g.m., Tran Vu Hoai says his group is building two or three more plexes that will open next year. Taken together with its competitors’ venues and Vietnam may see a shift from having no modern cinemas in 2005 to 20 or more multiplexes six years later.

Both companies are having to do more than find good locations and install up-to-date equipment. Galaxy and MegaStar have, of necessity, jumped into distribution. Through a relationship with another former Columbia exec Tony Manne, MegaStar Distribution was able to pick up contracts to rep United Intl. Pictures, Disney and Sony titles in the territory. “The country had no distribution infrastructure. We needed one in order to get fed,” Shugrue says. “Even if it means revenue, too, for our competitors.”

Whether they take the next logical plunge into production remains to be seen. A handful of local films from a range of sources have had significant impact, and hits have included comedy “Bar Girls,” actioner “The Rebel,” for which the Weinstein Co. has North America rights, and “Long Legged Beauty,” to which Sony acquired partial rights.

Encouraged by the interest in the sector, the government is mulling screen quotas or similar measures to protect national films. The exhibitors are quietly working to discourage that initiative. While they say that the government is well-intentioned, they fear measures would hurt the market, and cut the number of films in the market from 120 a year back to just 50. Poisonous fruit, not the low-hanging variety.

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