Major movement in Central Europe

posted by Ing. Juraj Misun, PhD. on February 3, 2011 at 7:50 am

On January 19, 2011 the multiplex cinema operator Cinema City International announced it acquired its competitor Palace Cinemas (Central Europe) BV. The purchase price for four subsidiaries of Palace Cinemas in three central European markets was € 28 million (€ 21.4 million was paid in cash and € 6.6 million of debt of Palace Cinemas was assumed).

By acquiring the Palace Cinemas chain, Israel based Cinema City becomes the third largest cinema operator in Europe (in terms of the number of theaters and screens, passing UK based Cineworld), without being present on any of the most important European markets (United Kingdom, France, Germany, Italy or Spain).

Parts of deal were 141 screens in 15 multiplexes in Hungary, The Czech Republic and Slovakia. It significantly strengthens Cinema City’s position on the Hungarian and Czech markets and adds Slovakia to Cinema City’s countries of operation.

In The Czech Republic Cinema City added nine sites with 65 screens and 13719 seats, plus one site under development (8 screens, 1208 seats) in the northern Moravian city of Ostrava. The consolidated revenues for 2009 totaled 27830 € (Cinema City generated only 10694 €). The consolidated admissions for 2010 were 4.85 million (Cinema City generated only 1.85 mio. admissions). The market share in terms of admissions will rise from 13 per cent to 40 per cent and in terms of revenues from 15 per cent to 45 per cent. Regarding this, there can be some problems with the Czech and European antitrust institutions.

In Hungary the acquisition excluded a non-profitable part of the Hungarian business. Cinema City International took over the four profitable Budapest multiplexes only. For the other 5 theatres in Budapest and 3 sites in the rest of Hungary, Cinema City will provide selected management services. The consolidated revenues for 2009 amounted to 36785 € (Cinema City solo: 22974 €). The consolidated admissions for 2010 were 7.16 million (Cinema City solo: 4.7 mio. admissions). The market share in terms of admissions will rise from 36 per cent to 62 per cent and in terms of revenues from 31 per cent to 53 per cent.

In Slovakia, there will not be a cinema market concentration, only the owner changes. The market share in Bratislava in terms of admissions and also in terms of revenues will remain at 95 per cent. The market share in the whole of Slovak Republic in terms of admissions is 31 per cent and in terms of revenues 40 per cent.

Cinema City also grabbed top sites in all three countries: Palace Cinemas Aupark is the largest and most visited multiplex cinema in Slovakia, Prague’s Park Hostivar and Novy Smichov are the most popular theaters in The Czech Republic and with more than 2 million visitors per year, Budapest’s West End is the Hungarian number one.

The Palace Cinemas deal will change the importance of the particular markets of the Cinema City chain. Poland will still be the most important market for the company, but The Czech Republic and Hungary will outnumber Israel in terms of admissions. However, with the highest ticket price (average 6,49 € for 9 months ended 30 September 2010), Israel will remain an important part in terms of revenues. Slovakia shall also have a relatively high contribution to revenues as the ticket prices in the capital city, where Palace Cinemas had not a name worthy competitor, are up to 20 per cent higher than in the rest of The Slovak Republic (the average ticket price in Bratislava is over 7 €).

Cinema City International announced in its press release it will rebrand its Czech and Hungarian acquisitions. However, there was not announced if a rebranding will follow in Slovakia or whether Cinema City intends to use the Palace Cinemas brand in the future. The second problem in Slovakia is that a small cinema chain owned by a local film distributor is using a similar name (Tatrafilm’s City Cinemas).

After the Palace Cinemas acquisition Cinema City operates 90 multiplexes with 866 screens and 172000 seats in seven countries. In 9 multiplexes the company also runs an IMAX theater. Besides the countries listed above, the multiplexes are located also in Bulgaria (3 sites, 41 screens) and Romania (9 sites, 88 screens).

Cinema City is one of the fastest growing cinema chains in Europe with 35 sites comprised of around 360 screens currently under binding lease agreements. Most of the future multiplexes are located in Romania (26 theatres).