Belgium-based Kinepolis became the latest overseas exhibition circuit to enter the North American market with the acquisition of Landmark Cinemas of Canada. The entry of Kinepolis—one of Europe’s leading circuits both in terms of screen count and innovation—into Canada signals the presence of a dynamic new player for audiences in the country. Kinepolis CEO Eddy Duquenne spoke to Cote Cinema, Boxoffice’s colleagues in France, about the recent acquisition of Landmark Cinemas of Canada and what the company’s entry to the North American market means for the future of the company.
Before we get to the acquisition of Canada’s Landmark Cinemas circuit, could you give us a bit of insight into the history and current status of Kinepolis in exhibition?
The Kinepolis story begins in 1960 with a single-screen, family-owned cinema in Harelbeke, Belgium. Albert Bert had plans to build cinemas with more auditoriums and movie choices, as well as offering moviegoers an optimized experience. Auditoriums back then were small and old, TV had already broken through and was making its way to people’s homes—there was talk about cinema being finished, and everyone thought this man was crazy. Albert Bert began to build cinemas with 5 and 10 auditoriums that he called “Pentascopes” and “Decascopes,” pioneering the multiplex concept on a global level, including the first 25-screen complex in 1988—Kinepolis Brussels. I remember being young and going to these theaters, thinking it was copying the American market—but in reality, the opposite was true! The group continued to grow and have the usual share of successes and problems in this business. Today we’re still building cinemas with the aim of creating the best moviegoing experience possible, the so-called “ultimate movie experience.”
What evolutions has Kinepolis gone through since you arrived at the company?
My approach has always been to focus on the customer experience. I call this element the “software” of the business, as opposed to the “hardware,” which is made up of the best projection systems, sound, seating, and so on. The “hardware” is important, but it is not enough. It is necessary to support customers more when it comes to their choice of films. In 2008, we introduced a direct marketing approach that helps us identify our customers. What are they coming to see? With whom? How? Why? The better we know our customers’ preferences, the better we can promote our films to them. The sheer number of films across any type of screen requires a different approach to communicating with customers; distributors can no longer sell movies using traditional marketing practices. The biggest barrier for customers to come to the cinema is not knowing what is playing on our screens. With a powerful database, we can now reach these spectators. In Europe, Kinepolis has six million unique customers, five million e-mail addresses, and about half of them have a full profile on our database. From there, we work on an active approach to programming that consists of identifying the field of interest of our spectators—location by location and country to country.
Secondly, we’ve designed our company as a “self-taught” business. Our employees manage their department autonomously, based on financial and qualitative factors. Each year, we form teams by position and by responsibilities, allowing us a fine and detailed analysis of our circuit. We have therefore become very solid financially, leading us to begin an expansion strategy four years ago. We had already doubled the number of our locations before acquiring Landmark of Canada. We went from having a presence in four countries—Belgium, France, Spain, and Switzerland—to reaching seven territories in Europe with the additions of the Netherlands, Poland, and Luxembourg.
With our approach, the performance of the companies we’ve acquired has improved significantly. We invest a lot in each cinema, and we like to adapt to local markets, both in programming and in product development. Moreover, our circuit carries little debt and has its real estate under control, which strongly solidifies our balance sheet.
Why did you decide to enter the North American market, specifically Canada?
We wanted to expand our group in a careful way, with controlled steps. The acquisition in Canada is not a coincidence. We are interested in macroeconomically stable markets that are growing and with cultures close to ours that we can understand. Canada is a bit like the Scandinavia of the Americas; in terms of population and mentality, it’s rather European. On a whim, I remember lightly asking [Landmark Cinemas of Canada’s] Neil Campbell and Brian McIntosh when they would be ready to sell their circuit. Then, a year ago, I got the response, “Why not? Our corporate cultures would mesh well together.”
What are you looking to bring to the circuit? Do you need a special strategy in a market that is dominated by a circuit the size of Cineplex?
I’m excited by the high-performance management team at Landmark, who helped introduce the concept of recliners. I think we’ll be very complementary. Our way of managing a cinema has proven to be effective, especially when it comes to concessions, where we are among the leaders in per caps among our markets. We also have plans when it comes to financing and investing to making improvements across our auditoriums, on both a medium- and long-term basis. It takes a long time to renovate a movie theater.
In addition to the overlapping of French content across our cinemas, we’ll also be able to bring our passion for the profession. Very few people succeed in a business if their dream is to make money. It’s easier for those who are passionate about a business, when making money isn’t their driving goal.
You qualified this acquisition as “medium sized.” Should we expect more external growth or will you be entering a consolidation phase?
Financially speaking, we are not out of breath. What is important for us is to evaluate the potential we have when it comes to the requirements of managing any further acquisitions. We are interested in other markets because they will always bring new opportunities. In any case, we are not in a race to increase in size at any cost. Size is not necessarily an advantage.
What is your analysis of the current state of the film industry? Are you optimistic about the future despite the recent fluctuations in the stock market?
I am optimistic, provided everyone is able to analyze the situation properly. My first observation is that we are in a crisis of content. The spectators are tired of what they are being shown. It’s not just about having fewer films; Hollywood has to take more risks in exploring new stories and new formats.
My second concern is about release windows: we must be very careful not to find ourselves in a similar situation to the music industry. The added value of a film must always come from the cinema. The distributor’s contribution cannot be the same if we no longer have exclusivity. This is the big debate. That’s what exhibitors are worried about. We are described as dinosaurs who do not want movies to be seen on other media—that’s wrong. In this case, we must redefine the economic model and demonstrate the true value of each platform in the release cycle of a movie. There needs to be a big, open debate.