Everyone told Ellis Jacob he was nuts when he decided to get into the theatre business 25 years ago.
The movie industry was brutally competitive and notoriously volatile. And VCRs were a sure sign that moviegoers would stay home to watch their favourite flicks.
Today, though, the president and chief executive officer of Cineplex Inc. is presiding over an unlikely success story.
After a record-breaking 2011, this year looks to be another blockbuster for the movie chain as box office receipts across North America push toward yet another high on the strength of movies such as The Hunger Games and hits such as The Hobbit and Skyfall playing through the important holiday season.
And Cineplex’s business momentum seems impervious to an economy that remains stubbornly stuck in neutral.
“Movies are just a great social experience,” explains Mr. Jacob. “And when times get tough, this is really affordable escapism.”
Profit is flying at the country’s largest theatre chain, which has battled its way to a 70-per-cent market share, an astonishing achievement for an old business that is open to foreign competition. Through a carefully honed strategy to maximize revenue from every customer, Cineplex has made itself the marquee theatre chain in the industry.
Now, Cineplex is entering an evolving era of movie-watching that brings a host of new challenges. The company is about to launch a new online offering called Ultraviolet that will put it on a competitive footing against a whole new slate of global rivals. You can imagine the skeptics raising their eyebrows once again as Mr. Jacob proclaims that there are no companies in the world better placed than Cineplex when it comes to delivering online movies to Canadians – including Apple Inc. and Amazon Inc.
“The concerns people tend to raise are about us competing with some big giants,” says Mr. Jacob, as he picks at a plate of French fries that he guiltily orders with his lunch in a small bistro beside the company’s Toronto headquarters. “The big difference is we are in the movie business. We can communicate with you – if you’re in our loyalty program, we know your likes and dislikes in a way that nobody else does. Apple is excellent, but it’s not their main business. Movies are our main business.”
There’s no doubt business has been good. Operating profits have been on an upward swing for years, as Cineplex masters the art of upselling at the ticket booth by offering customers enhanced services such as reserved seating and VIP lounges, and finds better ways to pull money out of their wallets at concession stands.
The company is certainly capitalizing on a strong slate of films at its 134 theatres with 1,449 screens. A portion of any theatre company’s success (or failure) is engineered by the Hollywood studios, which have a huge effect on ticket sales through the movies they release.
“I like to say we just set the table – the studios serve the steak,” Mr. Jacob says.
But that’s only half of the story – Mr. Jacob has built the company into a multilayered powerhouse by branching into related businesses, and nowhere is that more clear than in the company’s concession lines. One of his main areas of focus in recent years has been improving and speeding up the chain’s service, because when people see long lineups they go to their seats rather than spend money on popcorn, pop and licorice, where profit margins are mouth-watering.
“One of our analysts went to one of our theatres and saw there were no lineups,” Mr. Jacob says. “He said to me ‘things must be really bad if nobody is lining up at the concessions.’ But that was music to my ears – it’s exactly what I wanted to happen. We have incentivized employees, they are motivated to sell. And what’s good is they compete against each other.”
Cineplex introduced a commission system for all of its front-line employees that allows them to earn bonuses based on the number of customers they serve and how quickly they move them through the concessions and into their seats.