A forward-looking management team that is proactive rather than reactive, that is creative and has good business sense is the kind of team we want running the companies whose shares we own.
Cineplex Inc.’s (TSX:CGX) management team is one such team, having survived and even thrived in an industry that has been struggling, as technology has given movie watchers more and more choices in terms of how they watch their movies. Here is how Cineplex is dealing with this changing environment.
Box office and concession revenue
Box office revenue per patron was pretty much flat in the latest quarter and the last six months, but concession revenue per patron was up 8.3% in the quarter and 5.7% in the last six months. Cineplex’s offering of “premium” experiences has driven up revenue per box office ticket as well as visits to the theatre.
These experiences include VIP, IMAX and Ultra, and they enable the company to charge premium prices. For example, a VIP ticket is $19.25 per ticket, IMAX is $19.50 per ticket compared to a regular movie ticket of $12.25.
Alternative programming
Another way that management has increased attendance is through alternative programming. The second quarter saw alternative programming that included live and encore performances from the Metropolitan Opera, ethnic film programming, and presentations of The National Theatre Live.
Media
Media revenue increased 13% in the second quarter due to strong advertising sales, particularly in the automotive and telecommunications categories.
Gaming
More gaming locations are being added and there is now a total of 20 locations.
And now, eSports on the big screen
The most recent announcement that demonstrates management’s proactive approach is the entrance into eSports through the $10 million acquisition of WorldGaming’s operating assets, an online gaming platform that facilitates tournaments, leagues, and gaming ladders for the competitive gaming industry.
Cineplex will invest an additional $5 million to create a new competitive gaming league. The online gaming community will be connected with unique in theatre tournament experiences that will be held in Cineplex theatres across the country. Cineplex will be hosting its first eSports competitions as soon as October 2015.
As we can see, Cineplex continues to make smart, strategic decisions that will, in my view, ensure that the company continues to thrive.
Other revenue, which includes gaming, the Cineplex store, screenings, private parties, and media, is expected to represent close to 20% of total revenues by 2016, and long term, the goal is to generate 25-50% of EBITDA from non-Hollywood product. That percentage is currently in the high teens.
In short, the company is continuing to move towards its goal of becoming the go-to source for Canadians’ entertainment needs in theatre, at home, and on the go.
