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CinemaCon Honoree Alejandro Ramirez Sees Innovation as Key to Global Growth

Cinepolis topper receives Global Achievement in Exhibition Award

There’s a good reason that CinemaCon tapped Alejandro Ramirez, CEO of Mexico’s Cinepolis, as its honoree for the Global Achievement in Exhibition Award — Cinepolis was the first circuit in Mexico to introduce multiplexes, stadium seating, Imax screens and 3D projection. It’s also the world’s fourth-biggest exhibition chain and its largest luxury cinema operator.

“We’ve always tried to focus a lot on innovation,” says Ramirez, who has overseen the exhib’s most dramatic growth since 2004. “That’s been one of the main success factors of Cinepolis throughout history.”

Latin America lags behind North America, Europe and Asia in digital cinema rollout, with just 40% of its total screens having been converted to digital. Barring a few Brazilian sites, Cinepolis completed d-cinema deployment by April 15, when all of its screens worldwide were to become digital.

Cinepolis was one of the world’s pioneers of luxury cinemas, opening its first Cinepolis VIP theater in a Mexico City Interlomas mall in 1999.

Its 344 cinemas and 3,106 screens range from Mexico to the U.S., India, Brazil, Central America, Peru and Colombia.

The growth of Cinepolis, and precursor Operacion Ramirez, which Ramirez’s grandfather Enrique Ramirez Miguel founded in 1972, is the story of a company shrewdly exploiting new market opportunities in Mexico and consistently innovating.It has seized its market chances with calculated aggression, beginning with Mexico itself.

In 1992, the Mexican government privatized the state-run movie theaters and abolished fixed ticket prices, which gave Operacion Ramirez the incentive to rapidly ramp up a nationwide network of multiplexes.

Operating several five-screen multiplexes since the 1970s, the Ramirezes already knew the value of modern theaters and realized Mexico’s market potential, says Corazon Films’ CEO Eckehardt von Damm.

“The Ramirez family reacted rapidly and radically to change, investing heavily in cinemas and infrastructure,” he adds.

Operacion Ramirez opened its first Cinepolis-labeled multiplex in 1994, and quickly became the country’s biggest circuit.

The company’s moves to expand overseas — unusual for a non-U.S. exhibitor — was fueled by its scale and success at home.

“All countries have grown their cinema markets in the past 20 years, thanks to more screens, more films and richer populations,” says David Hancock at IHS Screen Digest.

Cinepolis has focused on “countries with high growth potential that are severely underscreened,” says Ramirez.

Despite building in underscreened markets, Cinepolis has still moved with caution. When it saw signs of saturation in several Mexican markets, Cinepolis initiated its rollout abroad, opening a theater in Costa Rica in 2003.

Exhibition remains highly capital intensive. A 12-screen multiplex costs $6 million-$10 million to build. “Outside the U.S., few exhibitors have the size to start international expansion,” says Hancock.

Of 500 exhibitors tracked by Screen Digest, only 15, mostly big U.S. chains, have cinemas around the world, he adds.

“Even in small cities in low-cost cinemas we’ll provide full digital projection with 3D capability,” says Ramirez. “Digital is very important because above all the quality of the projection is much better than 35 mm and because of versatility in programming content.”

Cinepolis theaters also screen the kind of alternative content — fare from New York’s Metropolitan Opera House and London’s Royal Opera House, concerts, wrestling, soccer, the Olympics — that is helping U.S. exhibs shore up weekday profits.

It has also adopted the Next Big Thing, 4DX immersive technology, before any U.S. circuit, and now operates 16 4DX screens in Mexico, two in Brazil and one in Peru. More look likely to follow.

“Ninety-eight percent of family businesses only last two generations. In Cinepolis’ case, there’s a true vision that’s evolved down to the third generation, a very shrewd and objective focus on business and technological change, ” says Philip Alexander, managing director, Buena Vista Columbia TriStar Films, Mexico.

WORLD THEATER GROWTH

Cinepolis’ strategy for international growth looks deceptively simple: “We have expanded in markets that need more cinemas,” says CEO Alejandro Ramirez.

Some high-growth markets present the biggest challenges. In the U.S. market, for example, Cinepolis is working a luxury cinema niche that is “still relatively under-developed,” he says.

A breakdown the Cinepolis strategy:

U.S.

“We’re planning to expand in California later in 2013,” Ramirez says.

Cinepolis dipped its toe in U.S. waters in 2011, opening a luxury theater in San Diego.

“If luxury cinemas have worked well in six developing countries, there’s no reason why they shouldn’t work well in a much more affluent country,” Ramirez argues.

Cinepolis currently operates five Californian hardtops. “American audiences have appreciated our concept. Some theaters are very successful, others are warming up,” he says.

U.S. mall developers are inviting Cinepolis to take its luxury model outside California. “We’re open to considering expansion in the U.S. in the next couple of years,” Ramirez says.

INDIA

“We have more than 300 screens in the pipeline that should open in the next four years,” Ramirez says.

Establishing a 2009 beachhead in Punjab’s Amritsar, Cinepolis became the first international exhibition group in India.

It now operates 49 screens in nine cities.

India, however, is a highly complex market. “It is like many countries within one nation state,” Ramirez says.

“Some have huge entertainment taxes representing 50% of box office. Real estate development may take a lot longer than one expects.”

A highly fragmented market, India is ripe for further consolidation: “We will continue to expand, building multiplexes, but also possibly via a merger or acquisition.”

LATIN AMERICA

“Brazilians will go to the movies more as we provide more and more multiplexes,” Ramirez says.

Per IHS Screen Digest, cinema market growth in the BRIC countries — Brazil, Russia, Indie, China — is driven by increasing ticket prices and booming screen construction, linked, especially in Brazil, to new shopping centers.

Brazil’s fourth biggest exhibitor, Cinepolis landed in Brazil in 2010 opening an eight-screen site in Ribeirao Preto. It now operates 174 screens in 17 theaters.

“Despite Brazil’s huge potential, the economics of the business are weaker than in any other Latin American country where we’re present,” Ramirez says.

“There are high import duties for projectors and technology in general. Brazil’s a much more protected economy than others in Latin America.”

Cinepolis aims to still grow in Peru and Colombia. “Their economies are doing well; they’re still under screened,” Ramirez comments.

Cinepolis’ international expansion began in Central America, where it has a 158-screen spread. “There’s probably not much room for growth because of the small population, but Central America has been a very successful, profitable investment.”

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