Oscar Strategy

Interview with Mooky Greidinger, CEO of Cinema City, CEO Magazine, February 2008

Interview with Mooky Greidinger, CEO of Cinema City, CEO Magazine, February 2008

Cinema City International has just announced: we want to become the number one player on the whole European market, not just in Central & Eastern Europe. That is very interesting, also because CCI is a company that is listed only on the Warsaw Stock Exchange. How do you intend to win the leading position in Europe?

- We are active in countries where there is a lot of room for growth - that is the nature of Cinema City International. If the operator of a chain of cinemas would like to open a cinema today in France or the U.K., there are already lots of multiplexes there, and thus the growth potential is fairly limited.

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Our territories of expansion are chiefly Poland, the Czech Republic, Hungary, Bulgaria, Romania and Israel. We are convinced that these are countries where there is great potential for growth. In Poland we built our first multiplex in 2001. In the course of seven years we have opened 25 multiplexes with 256 screens. This demonstrates how big the opportunities for growth are. In Romania we are thinking about 200 new screens; currently there are barely 12. Thus there is a big market to be won.

As CCI succeeds, our financial possibilities for expansion grow. By the end of 2010 we want to have from 950 to 1,000 screens in Central Europe, which on a Continent-wide scale would put us in second or third place among firms with this business profile. The chances of becoming the number one player in Europe are very good, and we like bold challenges. We need to set challenges for ourselves. There are challenges and goals, and later there is execution of plans. We have very big growth potential in territories we have not entered yet. I should remind you, however, that we have not promised CCI investors that we will be the number one player in Europe; we have only told them that these are the dreams we would like to achieve.

CCI began its international expansion in Poland. Then there was the Czech Republic, Hungary, Bulgaria, and most recently Romania....

- Because our entry onto the Polish market turned out to be the biggest success, CCI's expansion is typically associated first and foremost with Poland. But our presence in Europe began with two multiplexes in Hungary.

Were there different strategies for CCI's entry onto the markets of these countries? What was similar? In which countries did expansion prove harder, and why?

- A firm's entry into a new country is not easy. Each time it is different. It only appears on the surface that it's a matter of building the same cinemas, with the same screens and the same seats for the audience. The projectors are the same, and the sound system is the same. From a technical point of view this is duplicating the same model for conquering the market. But the cultural conditions in each country are different. In the U.S. in 2006 the number of cinema admissions per capita was 4.8, in the U.K. around 3, which is close to the EU average (2.50).The statistics in Poland, Hungary and the Czech Republic are 0.84, 1.15 and 1.15 respectively. But when we turn to Bulgaria and Romania, the figure is only a fraction of that. You need to know what kinds of films people like. There are also differences - as to when people like to go to the cinema and when they don't. For example in Hungary, the week between Christmas and New Year's is the best week for the cinema industry; it's While in Poland it is the time for family gatherings what makes it not the strong week. Another aspect particular to Poland: Polish films are very important.

Thus there are important differences, but it would be difficult for me to say which of these countries is the hardest for cinema expansion. In Poland and Hungary our expansion was fast and brought great financial success. The Czech market was one with slower growth for us, because growth of shopping centers was slower in the Czech Republic when we entered that market. In Romania and Bulgaria we are now looking at two new territories; there growth is just starting, but according to our analysis, the growth will be very fast.

Do you want to be the number one player in each of those six Central European countries? Would CCI be satisfied with second place?

- We do not care to be sometimes not on the first position. Even if we are in the third location somewhere we see it as temporary and we will be moving to the top of the list. It's important to us to be the leader, and we aren't then that's a temporary stage for CCI. We are the number one player in the whole Central Europe region; that is our strategic position. In Hungary we were in an unchallenged second-place position on the market for a long time, but right now we are becoming the market leader. It took us more time and required more patience, but we are just now achieving this goal. In Poland we also started from the beginner position in September 2000, but we quickly past competition into the no 1 position. In some cases we could be ranked at a lower position like in the Czech Republic but we believe in our expansion plan on this market.

The ITI Group announced in December that through its cinema network, Multikino, it wants to acquire Silver Screen from the Apollo Real Estate Fund in New York. Negotiations are at an advanced stage. That would make ITI the owner of 19 multiplexes. Is this a threat to the leader, which will have to defend its position?

- Meanwhile the deal need to be approved by the Polish anti-monopoly office (UOKiK). But if it will go through, Multikino will be ranked on the no2 position while CCI will remain no 1 in Poland. We have also grown by acquisition - we bought Ster Century chain and the cinema of Kinepolis in Poland - but we believe in our organic development plan. Cinemas will soon open in Bydgoszcz, Zielona Góra, Rzeszów, Bielsko-Biała,Bytom, Płock, Kraków, Gdansk and Czestochowa. . We are sticking to our announced expansion plans, which will assure us quicker growth than the networks of the market competitors.

CCI's expansion so far onto new markets hasn't led to price wars. Why is that? Are there too many players of comparable strength, with similar financial capabilities? Price wars are costly. Their absence indicates rational behavior by the players.

- It is hard to say how a price war starts. Are ticket prices too high in Poland? I don't think so. Each of the players has its own policy on price differentials and the competition is strong. We say that the highest price is on the weekend evening. But if you go the cinema with the family, tickets for children are cheaper. There're also special prices for students and groups.

Price wars aren't good for any industry in the long run, particularly because of the cost of price wars, which must be carried by all participants.