Interview with Mark Zoradi, Chief Executive Officer, Cinemark
Mark Zoradi succeeded Tim Warner as Cinemark CEO in August 2015. A 30-year veteran at Disney, Zoradi’s most recent posts include tenures as chief operating officer of DreamWorks Animation and president and COO of Dick Cook Studios. Crossing over to exhibition wasn’t a daunting challenge for Zoradi, as he’d already served on the boards of Rave and Cinemark in the years leading up to his current post. Boxoffice spoke with Zoradi in anticipation of Cinemark’s big presence in Las Vegas for CinemaCon 2017.
You’ve spent most of your career in the film industry. How big was the transition to exhibition?
I spent over 30 years at Disney and DreamWorks, so I was very familiar with the exhibition industry. I helped build our worldwide distribution network and worked with exhibitors week in, week out—in fact, I dealt with Cinemark quite a bit in the mid-1990s; we were building our Latin American distribution network while Cinemark was building its exhibition communities in the region. I was also on the Rave board of directors, which led to being on the Cinemark board of directors. [Exhibition] didn’t come as a surprise to me, but I did get some insight on the level of execution required: 28,000 employees in 525 theaters around the world. I gained more appreciation for the operations side of it. I was also very fortunate to come into an organization that was already well run, it wasn’t broken, and it was only a matter of keeping it well run and trying to improve it along the way.
2016 was your first full year at the helm of Cinemark; what were some of your key takeaways from that year?
It was interesting because we were coming off a record year in 2015 when we began budgeting for 2016, and conventional wisdom was that the box office was going to be down somewhere between 4 and 6 percent. That’s what the consensus was. We were a little bit more bullish and it turned out to be a fantastic year. The domestic box office was up 2 percent and Cinemark’s domestic business was up 3 percent. It was a very, very good year and a clear example that if given the right content, consumers will continue going to the movies—even if they’ve got beautiful home entertainment systems they can use to stream at home. The studios continued to provide great content and we continued to upgrade our theaters with all the amenities consumers are asking for. We’ve put a tremendous amount of capital and attention into improving that customer experience because Hollywood has done a great job at providing the product. I think we’ve responded by doing a pretty good job in upgrading our theaters, and as such four of the last five years have been record years at the domestic box office.
Cinemark has increased the footprint of premium seating options across its U.S. circuit. What has been your overall experience implementing the concept?
It has been a huge priority for us. We put in recliner seating in over 600 auditoriums during 2016. We’re now at over 1,000 auditoriums domestically, just over 20 percent of our circuit. I anticipate that we’ll be equally aggressive in 2017 because it stands out in our customer research as the single most important amenity—followed by enhanced food and beverage. We’re seeing attendance lifts of 40 percent when we add recliner seating into a theater. In addition to that lift, it tends to increase use of our reserved-seating feature, meaning people aren’t in as big a hurry to lock down their seat and are more likely to stop by the concessions stand. It’s been a very good concept at returning our investment, and I expect that we’ll continue to expand that rollout in 2017.
Talking about concessions, we’ve seen Cinemark add locations with enhanced menus and alcohol options in recent years. What have been your results with those concepts? Do you believe that trend will continue to grow?
There are parts of the country where we won’t put alcohol, places like Utah where it wouldn’t make sense because our customer base just wouldn’t support it. As we sit here today, we have more than 20 percent of our domestic circuit serving either a full bar or beer, wine, and frozen. I would expect that to grow during 2017 to around 30 percent of our circuit. We’re seeing incremental per caps by doing so—the worry about cannibalizing your other business just hasn’t panned out. In fact, we’ve been able to expand our other business through enhanced food. About 50 percent of our circuit now offers enhanced food, which means options beyond traditional popcorn and candy. It can be anything from a full-on restaurant to flatbread pizzas, chicken wings, hamburgers, and so on. When you offer someone a glass of wine or a beer, you can also offer them something to eat alongside it. That 50 percent of the circuit has been very successful, and I expect us to continue rolling that out in 2017.
Cinemark is a global leader in private-label premium large format with Cinemark XD. Why do you think the concept has proven so successful with audiences across your circuit?
I have to mention that we’re not exclusively XD; we also have 15 very successful IMAX screens. Complementing that are our 225 XD screens in the U.S. and Latin America. XD gives the consumer a wide screen at least 60 feet wide, in some cases over 70 feet, wall-to-wall screen with increased light, and additional speakers around and above the audience. Consumers want to see the big action-adventure movies in our XD screens. XD is about 3.7 percent of our screens and represents 7.7 percent of our total box office; consumers are voting with their ticket purchases by going to these screens. That’s why we’re devoting so much attention to developing this brand.
Your international business is concentrated in Latin America. Has the economic downturn in the region affected your circuit there?
Latin America has been, and continues to be, a very important part of our mix. [Latinos] also add a great level of diversity for us here in the U.S. We have a higher per cap on our Latino customers than any other demographic. Latin America is about 25 percent of our business, and even with Brazil and Argentina undergoing political and economic instability over the last couple of years, we’ve seen an increase in attendance. That’s real growth, not inflationary growth or something that’s caused by raising ticket prices. We’re also seeing growth through increased screens—we had somewhere around 75 new screens last year in the region and we expect to see that continue this year. We offer a very specific, market-adaptive approach in Latin America; in some areas of certain cities we’ll have VIP theaters with recliners where we can increase the price, whereas in more middle-class areas we’ll have a more conventional theater because we need the additional seats. The Latin American business is still our growth engine, growing at 5 to 6 percent per year, versus the U.S. growing at 1 or 2 percent per year on an organic basis.
Do any other regions pique your interest for further international expansion?
I’m more interested in going deep in the 16 countries where we’re already doing business: the United States and our 15 Latin countries. I think we’ve got a great footprint in the U.S. and a very strong one in Central and South America. We’re No. 1 in Brazil and Argentina, No. 2 in Chile and Colombia, and I would see us going deeper in those markets as opposed to expanding into Europe or Asia.
What do you think will emerge as the next big trend in exhibition?
We’re still in the midst of repositioning all of our theaters, so I think there are still a couple of years left before we finish rolling out recliners. I don’t think recliners will go everywhere, but I’m not sure where it will stop yet. I think we’ll see more enhanced food and beverage; I don’t think that will go away anytime soon. We have very beautiful theaters, and there’s no reason why those theaters can’t have additional alternative content. That can be through programming with companies like Fathom Events or even a sector like eSports. We’ve been the leaders, working with Super League gaming, featuring sport leagues for video game players. It’ll also be very interesting to see where virtual reality ends up; it could be in the lobby or even in an auditorium.
How do you believe the moviegoing experience will transform in the next 10 to 15 years?
The quality will continue getting better; more light on the screen, which is great for 3D, and the consistency of what you see and hear in the auditorium will keep on improving. The digital revolution has been incredibly important for us. We have a command center that we operate in three languages—Spanish, English, and Portuguese—that we operate 24/7 so that every theater is running with very minimal downtime. Hollywood product will continue to be the bread and butter of our theaters, but I do think we’re going to crack the code and start to move toward 5 to 10 percent of alternative content. I also think we’ll continue to see the rollout of motion seats—we’ve had a big success with our D-Box installations in this country. Another interesting factor will be what happens to AR [augmented reality], let alone VR, and if filmmakers come up with an AR concept that we can implement into our theaters. It’s exciting to think about, but content has to lead the way. If the content is there, the hardware will step up to make it happen.
What do you believe will be a key part of Cinemark’s success going forward?
If there’s one thing that we’re focused on at Cinemark beyond anything else, it is a maniacal attention to the customer experience. We feel that if we get the customer experience right, they will want to come back to cinemas in general and Cinemark in particular. Everything that we focus our attention on emanates from that core strategy.