The old lady looks lost. Disoriented, even.
For 83-year-old Katherine O'Hare, all the clacking, chirping and hollering inside SilverCity Oakville, west of Toronto, is more than a distraction; it's an all-out invasion. "Who would want such a thing?" she mutters, pushing her walker past a store hawking T-shirts and DVDs. "Yuck," she says, struggling by a gourmet coffee bar. "Goodness," she mumbles, staring at a bar where exhausted-looking fathers down beer and watch golf on flat-screen TVs.
Normally, this is not O'Hare's kind of place. All she knows about this strange, echoing carnival is that she needs to find Theatre 7. The pimply young man she'd bought her $20 ticket from had said, "Down and to your left." But which left? The left that leads to something called the VIP Lounge? The left toward the pool tables? The left leading to a string of doors labelled "Party Room," whatever that is?
After many wrong turns, she limps toward yet another employee clad in the black-and-blue uniform of Cineplex Entertainment. "Where's the opera?" she demands.
Rather than snickering and telling the misguided old lady that this is no opera house, the usher points to a giant, neon "7." "Right there, ma'am. It starts in 10 minutes."
O'Hare nudges her walker toward the neon beacon. Within minutes, she finds a comfortable perch near dozens of other opera patrons her age-centre seat, right up front. Better than she could ever afford at the Lincoln Center. The lights dim. A fat man appears. The crashing opening lines of the Metropolitan Opera's live staging of Peter Grimes blasts all around her. O'Hare smiles. Here is an aural invasion she can handle.
Similar scenes have unfolded at theatres across the country this opera season, as tens of thousands of mostly grey-haired fans have waded through Cineplex lobbies to watch live feeds from the renowned New York opera house. This year, the Met will play at 80-plus Cineplex theatres across Canada, bringing world-class opera to every town with a population of more than 20,000-Madame Butterfly in Moose Jaw, La Bohème in Belleville, Placido in Prince Rupert. At the Scotiabank Theatre complex in downtown Toronto, these live feeds sell out multiple 550-seat theatres for each performance. After two seasons, the Sheppard Grande theatre in north Toronto has become one of the busiest opera venues in the world (the manager even puts out a wine-and-cheese spread). In Victoria, some patrons wear tuxedoes.
This is just one scene in a much larger story. It starts almost a decade ago, with the rise of DVDs and flat-screen TVs that equipped the average living room with all the sights and sounds of a real theatre, and accelerated with the advent of digital downloading. Suddenly, once-loyal customers were staying home to watch pirated versions of the latest Hollywood blockbusters-often before they were released in theatres. Box-office growth plunged (it's fallen from double digits to just 2% in five years). Pundits eulogized the industry. The end was nigh.
Or so it seemed. Hollywood narratives don't fizzle without some prospect of redemption, and the hero of this tale is Cineplex's Calcutta-born CEO, Ellis Jacob. Both here and abroad, he's known as the man who's not just reviving the flagging theatre industry but reinventing it. The average Cineplex-by far, Canada's largest chain, with more than 1,337 screens at 132 theatres nationwide-moonlights as sports emporium, rock concert venue, arcade, lecture hall, food court and, yes, opera house. In some cases, it's also a bowling alley, a watering hole, a billiards hall and a daycare centre-a cacophonous fusion of high and low culture. Cineplex's strategy is simple: to broaden its audience beyond the acne-and-Red-Bull crowd, and to fill its theatres all day, every day, squeezing every last buck out of each patron who walks through the door. At the same time, the chain is reducing its dependence on the uneven popularity of Hollywood flicks.
Ultimately, though, movies lie at the heart of Cineplex's business, and Jacob has invested heavily in enhancing the experience, building luxurious new theatres, installing versatile digital projectors and bracing for the next big thing in Hollywood (again): 3-D. He has also created a customer loyalty program, SCENE, that is the envy of the industry. It all adds up to one thing: Cineplex is defying the flat attendance numbers plaguing the rest of its peers. Last year, the company's box office receipts were up 6.5%, compared to 1.3% for the rest of Canadian exhibitors, and overall revenue-which includes concessions, ticket sales and its various other entertainment offerings-was up almost 5% in the last quarter, to $209 million.
Chains across North America are testing the same strategy as Cineplex. But none has embraced the whole package as wholeheartedly-or successfully-as Jacob. His efforts have garnered him a certain celebrity in Hollywood. Nikki Rocco, head of distribution for Universal Pictures, calls the quiet Canadian a "dear friend." Jeffrey Katzenberg, co-founder (along with Steven Spielberg and David Geffen) of Hollywood's DreamWorks studio, calls Jacob "a great leader for the entire industry, not just the Canadian industry," and has been known to pull the Cine-plex honcho aside at conferences for long tête-à-têtes.
And Jacob is just getting started. He firmly believes that his movie theatres can offer a product that's as lifelike as if you were sitting in Yankee Stadium or Carnegie Hall. "You go to New York, and two seats cost you 300 bucks, if you can get in," says the man running the curtains at Cineplex. "A lot of people think this is better than the real thing."
If the 1,100 film execs gathered in Las Vegas for ShoWest 2008-the four-day confab that kicks off blockbuster season-were expecting any flash from Ellis Jacob, they were sorely disappointed. Red carpets and movie stars aren't his scene. This is a guy who wears sweater vests to work, who dreams up his best ideas sitting in dark movie theatres with regular folks. Heck, he doesn't even have a Wikipedia entry.
Yet here he was, sharing the spotlight with the likes of Sarah Jessica Parker, Christian Bale, Cameron Diaz and George Lucas, all of whom graced the convention floor, teasing buyers for the National Association of Theater Owners with sneak peeks of their summer fare.
In true Hollywood style, each day was punctuated with awards presentations-director of the year, best theatre display, comedy star of the year. Most anticipated of all, however, was ShoWester of the Year, an honour bestowed on the person who contributed most to the theatre industry in the previous year. At conventions past, the award has gone to such titans as Viacom's Sumner Redstone and Warner Bros.'s Barry Reardon, otherwise known as the "dean of distribution."
Gathered at the luxurious Paris Hotel, the industry's movers watched as Rocco-one of Hollywood's most powerful women-took the stage. The 2008 ShoWester of the Year, she told the crowd, is a man whose "decades of commitment to the motion picture industry changed the face of exhibition in North America."
As she announced Jacob's name, the crowd pounded their manicures in a roar that filled the auditorium-a rare flash of effusion in a room brimming with ego and influence. Jacob blushed, stood and made his way toward the podium. He embraced Rocco, accepted his crystal-star-topped statuette and plunked it down on the podium alongside a speech tucked neatly inside a leather binder. The applause finally died out. "Thank you very much," Jacob began nervously. Sticking stiffly to his text, he worked through the usual platitudes: nods to family, friends, perseverance, luck. The most revealing portion of his speech, he saved for the end: "When I came to North America nearly 40 years ago, I can assure you that I never thought I'd be at an event like this, or that Cineplex would become what it represents today. In fact, I can tell you in candour that there were no visions, no grand dreams."
Jacob didn't exactly bumble his way to the top of the biggest theatre chain in Canada. "Don't let him fool you," says Katzenberg. "He's a bulldog dressed up in sheep's clothing." Indeed, over the past two decades, humble Ellis Jacob has directed three of the most audacious acts in the North American theatre business: wresting Garth Drabinsky's Cineplex Odeon from the brink of bankruptcy in the late '80s; starting a new chain of small-market megaplexes; and pulling off a merger between fierce rivals Cineplex and Famous Players.
Jacob is quick to deflect praise, however-even when it's just about his spacious Toronto office. "It could use some work," he says, pointing to several brown water stains on the wall over the fireplace. "Everything falls apart eventually. The design had nothing to do with me. It was Garth's...back when money was no object."
The youngest of four children, Jacob first travelled to Montreal in August, 1967, for his sister's wedding. "I came to Canada and immediately knew I wanted to stay," he says. "But I didn't have my immigration papers, so I applied for a student visa." He came up short of the cut-off line and was placed on a waiting list. Just as he was packing his bags to return home, a registrar at McGill University called to say that a visa spot had opened up. Did Jacob want it? "I jumped at the chance," he says.
After graduating from McGill in commerce, he got his CA designation and went to work for an auditing firm. Unsatisfied with life as a lowly bean counter, however, he returned to school, earning an MBA from York University, as well as a CMA title. From there, he took up finance jobs at Ford and Motorola. He was happy enough, but he still harboured a boyhood dream of working in motion pictures. Growing up in Calcutta, he'd regularly attended the Globe Theatre, a four-screen venue that hosted everything from Bollywood to live shows. In 1987, he got his entree into the movie biz when he was hired as the VP of finance at Cineplex Odeon, the chain started by Drabinsky in 1979, with a flagship 21-screen multiplex at Toronto's Eaton Centre.
On his first day, Jacob had no desk or telephone. The place was in chaos; Drabinsky was in the midst of a worldwide buying spree that would eventually push the company $750 million into debt. In 1989, shortly after Ellis ascended to CFO, his impresario boss (along with his sidekick, Myron Gottlieb) was ousted. As Drabinsky and Gottlieb mounted an ultimately unsuccessful bid to take the company private, Jacob was left to right the ship. For four years, Cineplex Odeon flirted with bankruptcy. Negotiating day and night, Jacob managed to mollify all 19 banks banging at Cineplex's door, and in 1998, the company completed an arduous path to solvency, merging with the massive Loews chain in the U.S. The combined business offered Jacob a new position outside Canada, but he and his wife, Sharyn, didn't want to leave Toronto.
He had no plan to abandon the movie industry, either. "Every Friday, it's a new business," says Jacob. "Take any other business-say, automotive: When you are in the down-and-out, it takes a lot of time to pull out of it. In our business, all it needs is one big movie and you're back in a big way." Showing some of Drabinsky's brass, Jacob left Cineplex in 1998 to start Galaxy Entertainment. For a decade or so, smaller markets across the country had been ignored as theatre execs focused on constructing big buildings in big markets. Jacob saw the gaping chasm and went looking for investors. "They thought I was crazy," he says. "But working with Garth, I learned that in life and business, you have to take risks. I was an accountant. Risk-taking wasn't part of my thinking."
Jacob had a lot of cred in the industry, and his promise to waive his salary for Galaxy's first two years impressed investors. Former Alliance chairman Robert Lantos and Cineplex exec Steve Brown signed on. So did Onex head Gerry Schwartz, who became majority owner.
In 2001, Loews Cineplex, which by then owned more than 2,800 screens worldwide, filed for Chapter 11. Onex snapped up its Canadian assets. Schwartz persuaded Jacob to merge his 20-theatre Galaxy chain with Cineplex in 2003, and spun the movie assets into the Cineplex Galaxy Income Fund, with Jacob at the helm. Schwartz is lavish in his praise of his handpicked CEO. "I was already of the view that Ellis was an excellent operating executive," he says. "As we developed Galaxy and bought Cineplex,
I came to think he was even better than that-he is one of the very best operating executives I know. It's a unique skill. He's great at watching the pennies, and at the same time, he has the vision to build revenue. Most executives are usually good at cost control or growing revenue, but not both."
Two years later, Onex and Jacob launched a $500-million bid for Canadian rival Famous Players, then owned by Viacom. Today, the combined company-23% owned by Onex-controls two-thirds of the screens in Canada.
It's not hard to see why Schwartz is a fan. Jacob's grey mustache is indicative of his management style: modest, tightly controlled, not a hair out of place. And he knows his product like no one else. Though he makes $2.5 million a year and has a screening room adjacent to his office, Jacob spends several nights a month watching films alongside the other 61 million or so people who stream through his theatres annually. "That's what the business is about-being with other people in a social environment," says Jacob, who cites Ben-Hur and The Shawshank Redemption as a couple of his fave films. "My wife hates it when I go to the theatre with her, because I'm always looking at things that need to be done."
But the exercise helps him understand the desires of filmgoers. At a theatre in Toronto's Yorkville area, he recently struck up a conversation with a teacher who told him that she'd received more Cineplex gift cards from students as Christmas gifts than she knew what to do with. "Sitting in the screening room, I'd never know that our gift card program was really working," says Jacob.
Back at Cineplex HQ, staffers always know when Jacob has spent a night at the movies. "We'll get all sorts of e-mails from him that start, 'I was sitting in the theatre tonight watching XYZ film, and I noticed...'" says Pat Marshall, Cineplex's VP of investor relations. "That's where he comes up with all his ideas." Jacob expects his executive team to follow his example. And everyone at Cineplex, from president on down, puts in a few nights a year manning ticket desks at theatres.
Jacob's knowledge doesn't stop with what's onscreen. Mention a theatre anywhere in the country and he can likely rattle off its specs. When Rocco first met Jacob at ShoWest in the 1980s, they started talking about cinemas in Montreal. "I couldn't believe it," she says. "He was on top of every little theatre, no matter how insignificant it was. He knew every last detail. I could tell right then he had very sharp instincts, and I've had an incredible relationship with Ellis ever since."
Jacob becomes somewhat red-cheeked when you mention such things. One sure way of breaking that reticence is by suggesting-as have both analysts and film execs-that the movie industry is in long-term trouble. Jacob doesn't buy it. "We provide a social experience," he says. "People are social animals. That benefits us. Why else would our best day of the year be Dec. 26? Everybody is with their families, and they all go out to a movie."
He can't deny that attendance is down, but Jacob has a plan to combat that. Unlike most American chains, Cine-plex hasn't raised its ticket prices in five years. "We're focused on increasing 'incidents,'" he says. "It's all about getting people to come more frequently." That's where the opera and other new onscreen content comes in. The chain had been screening closed-circuit wrestling broadcasts for years, but a $5-million investment in a new digital projection system (with more on the way) allowed it to open its doors to live hockey games, golf, concerts and opera. While these events don't always sell out, they're still a "pure margin business," according to RBC Capital Markets analyst Walter Spracklin, because Cineplex doesn't have to pay hefty Hollywood distribution fees. "If you can get anybody through the door on a Sunday afternoon at 2 o'clock," he says, "that's a huge success."
Some of these special screenings also introduce an older generation to the megaplex phenomenon. "These are people who normally don't make it to the movie theatre," says Jacob. "Bringing them back to show them what it's all about will encourage them to come and actually watch a movie like Juno or The Queen."
Going digital has had other profitable effects. For one, there are no material or shipping costs, because prints are delivered electronically. There's no complicated threading of film required, so a megaplex can run with fewer projectionists. And going digital eliminates the chance of the scratched prints that so irk moviegoers. They also make advertisers very happy. Not long ago, they had to ship reels to each theatre to run before shows. Now, they can simply hit "send." Ads can be updated more frequently, and thanks to Cineplex's SCENE rewards program-which collects the ages, buying habits and film preferences of more than one million members-advertisers can target a particular audience with tailored ads. "You can charge a premium for that," says Spracklin. "What Cineplex is essentially doing is upselling the advertisers." And that's given rise to an annual 20% boost in ad revenue.
For such massive properties, megaplexes spend an inordinate amount of time losing money. Depending on the season, says Jacob, weekend evenings comprise between 40% and 80% of a theatre's sales. The rest of the week, bigger theatres generally run at a loss. That's where SilverCity Oakville comes in. Ask anyone at Cine-plex about the future of filmgoing, and they'll repeat the same mantra: "Oakville." Their mouths will curl into an almost demented smile, their eyes will get a far-off look. They'll preface and conclude every conversation, as Jacob recently did, with "You must go to Oakville."
From the highway, the 45,000-square-foot theatre, opened in December, 2007, exhibits the same uninspired geometry as the outlet malls, fast-food outlets and fireworks warehouses that crowd Lake Ontario's western tip. On the inside, it's one of a kind, with everything you, your parents and your kids need to blow an entire evening: bowling, beer, pool tables, video games, babysitting, gourmet food-not to mention 12 theatres with stadium seating. Even Katzenberg, the seen-it-all mogul, is blown away by Jacob's masterpiece. "You've got to check it out," he tells me on the phone from Sun Valley in Idaho, where he's mingling with Rupert Murdoch and Warren Buffett.
This is Jacob's prototype for the cinema of the future. The idea is to turn theatres-until now, grandiose one-trick ponies-into community emporiums encompassing all forms of entertainment. Cineplex won't release attendance numbers for Oakville just yet, but Marshall says they're "delighted with its operating results" and plan to transfer the most successful parts to existing theatres and to the three new ones that will open by year's end.
The next frontier is 3-D. Sure, the technology lost favour in the early 1950s, but it has vastly improved since then. And Hollywood has fallen in love with 3-D all over again. So, it seems, have moviegoers. This summer's Journey to the Center of the Earth, which cost $60 million (U.S.) to make, grossed more than $95 million in less than two months. And a host of 3-D films are set for release in 2009, including James Cameron's Avatar and Steven Spielberg's first instalment of Tintin.
To capitalize on what Katzenberg calls the future of cinema, Jacob announced a deal in July to install at least 175 3-D systems in Cineplex theatres by December, 2009. The technology will be provided by California's Real D 3D, which controls 98% of the market. To test-drive the technology this past winter, Cineplex held 3-D screenings of Hannah Montana/Miley Cyrus: Best of Both Worlds Concert Tour. Response was unprecedented. Tickets were being scalped on Craigslist and Kijiji for five times their face value. During a single showing, one Toronto-area theatre raked in $400,000 on Hannah Montana tickets alone. "3-D will blow you away," says Jacob. "That's where the growth will be. Imagine seeing sporting events-NHL or NBA-in 3-D. That's where it could lead. That's the kind of thing that really gets me excited."
You'd think the economic slowdown would dampen his enthusiasm. Nope. "Recessions don't hurt us as much as they hurt other businesses," says Jacob. In fact, during the 1982 and 2002 recessions in the U.S., attendance went up, 16% and 9% respectively. "We're still the cheapest form of entertainment," he says. "Where else can you have a $100-million experience for 10 or 20 bucks?"
Katherine O'Hare, for one, will be back. As the lights come up after the final act of Peter Grimes, she makes her way to the lobby. "It was splendid," she says. "Do you know if I can buy a subscription?"