International -- European Business: BELGIUM
BELGIUM'S KINEPOLIS TAKES THE MEGAPLEX ON THE ROAD
The Bert family aims to spread its vast movie theaters across Europe
Until recently, Colette, a 74-year-old Lille native, had given up the movies in favor of TV. But Chateau du Cinema, a 23-screen, 7,400-seat megaplex that opened late last year just outside this northern French city, may be changing her habits. Colette recently treated her grandson to a showing of Volcano--her first visit to a theater in a decade. Sitting at one of the complex' cafes, she scanned the decor of blond wood, mirrors, and chrome. "This place is grandiose," she observed.
So are its owner's plans. Chateau du Cinema is the latest creation of Brussels-based Kinepolis Group. Having invented the megaplex a decade ago, the theater operator has since built some of the world's largest cinema complexes and has more or less single-handedly revitalized moviegoing in its home country. Now, as the Lille complex suggests, the privately held, family-run company wants to take its formula around Europe. To finance its ambitious expansion, Kinepolis plans an initial public offering on the Brussels stock exchange in November. "This industry needs innovation," says CEO Joost Bert, grandson of the company's founder.
Little room for argument there. Belgian theater operators, even more than others in Europe, were on a slow fade 10 years ago. With one of Europe's highest cable-TV penetrations, Belgians averaged just two movies a year. Most theater owners divided their houses into multiplexes that typically featured cramped theaters with 100 seats or so, 35mm projectors, small screens, and analog sound systems. The approach was minimalist--and so were profits.
The Berts were bolder. In 1988, they built their flagship Kinepolis, a 25-screen, 7,600-seat megaplex on a stretch of the Brussels ring road 10 km from the city center. It offered generous legroom, 75mm projection, and digital sound. "Everybody said, `You're crazy to build so big and so far outside of town,"' recalls Albert Bert, Joost's father and board chairman. "But we thought people were ready for a totally new cinema experience."
They were right. Kinepolis expanded ticket sales in Brussels by 40% within a year and has maintained healthy growth since. "Belgians don't say they're going to the movies anymore, they say they're going to Kinepolis," remarks Renee Mauborgne, a professor at INSEAD Business School in Fontainebleau, France. The company remains small. Its 159 screens hardly compare with United Artists Theatre Circuits Inc.'s 2,320 or the 1,716 operated by AMC Entertainment Inc. And while claiming half the Belgian market, it has only 1% of Europe's. But to Mauborgne the Berts are "value innovators" who, like Ikea in furniture or CNN in TV news, break totally new ground.
Lille's Chateau du Cinema is Kinepolis' next-generation product. The Berts modeled the entry hall on a departure lounge--and even offer "first class" tickets: Pay double the regular $8 admission and you get preferred parking, a special ticket-holders' line, and champagne in a VIP lounge. A supervised playground caters to families. Joost Bert also wants a fitness chain and a restaurant like Hard Rock Cafe to place outlets nearby.
HIGHLY LEVERAGED. The Berts plan up to 10 more megaplexes around Europe by 2000. But future premieres may not wow the critics. French rivals Gaumont and UGC accuse Kinepolis of emptying city centers, and it can be a tough charge to refute: At Lille's cinemas, attendance fell 20% after Chateau du Cinema opened. French law now bars new suburban shopping centers and restricts most cinemas to 1,500 seats. Dutch authorities have so far kept the Berts from building near Amsterdam.
Until now, capital has also braked expansion. A megaplex costs upward of $30 million, and the Berts are highly leveraged. A planned IPO should help. "Our choice was simple," says Joost. "Either we went public and expanded fast, or we sold out."
The Berts love the movie business too much to bow out. On Saturdays, 41-year-old Joost often ushers at one of the complexes. At 69, his father still checks receipts each morning. When the two recently relaxed with champagne in their garden in the Belgian town of Kortrijk, it began to rain. But Albert smiled. "Ticket sales will be good this evening," he explained. With that sort of dedication, don't bet against the Berts and their megaplexes.By William Echikson in Lille, France