Cineplex Inc. is Canada’s dominant exhibitor with a 78% market share but the company is continuing to diversify to lessen its dependence on the Hollywood studios.
Its latest initiative is the Rec Room, a vast entertainment facility which encompasses restaurants, a sports bar, gaming, live acts, a bowling alley, pool, air hockey, table tennis and axe-throwing.
The prototype opened in the South Edmonton Common mall in Edmonton, Alberta last September, four more locations are being built and the plan is to expand to 10-15 centers, each occupying 40,000-60,000 square feet, in the next four to five years. In addition, the company is looking to create a smaller box version for mid-sized markets, with 10-15 across the country, which will have a different brand yet to be revealed.
The 60,000 square feet Edmonton facility clocked revenues of $C5.06 million ($3.75 million) in the first four months. “It has exceeded our expectations on multiple levels and we are very pleased with the results. Most importantly our guests love the concept,” a Cineplex spokesperson said this week.
The firm originally was keen to buy Dave & Buster’s Entertainment, which owns a chain of venues based on a similar concept, in league with an investment bank but pulled out of the bidding when it thought the business was over-valued. Subsequently, Dave & Buster’s owner, private equity firm Oak Hill Capital Partners, opted for an I.P.O.
“We decided that it was a good market and we were looking for ways to diversify to try to reduce our reliance on Hollywood product due to a number of factors including decreasing windows and the studios not producing as many films as they had in the past,” Cineplex chief technology officer Jeff Kent told me.
Showing the benefits of the diversification strategy, box office revenues from the firm’s 1,683 screens accounted for 48.2% of the company’s revenues last year, down from 58.5% in 2012. Total revenues rose by 7.8% to $C1.5 billion, due mainly to the consolidation of the Player One Amusement Group.
The company engaged New Zealand-based Vista Entertainment Solutions to create systems and software for the Rec Room, including table reservations and waitlist functionality. That expanded on Cineplex’s 13-year-long relationship with Vista, which includes providing the software for its 8.1 million-strong loyalty program, ticketing, voucher management and other aspects of cinema operations.
Vista Group CEO Murray Holdaway said, “Working with Cineplex on the Rec Room is a great example of Vista’s commitment to its long-term customers. Cineplex had a brilliant concept that captures the contemporary customer perfectly and we were able to help them create systems and software to support their grand vision.”
Dave Smith, head of customer success at Vista Entertainment Solutions (VES), said up to 50 Vista staff spent five months working on the project in Edmonton. “We designed the software so Cineplex could build their own website on top of it and which enabled them to provide online reservations without using a third-party such as OpenTable,” he said.
Smith and VES project director Tim Mortlock gave a presentation on the Rec Room in Auckland today at the Vista Group’s eighth biennial customer conference for the global cinema industry. More than 200 exhibitors from every continent are attending the conference which includes sessions on the Virtual Reality experience in cinemas; how third-party ticketing, which is helping to drive growth in China, could transfer to the U.S. and other markets; and how to deliver box office results from cinemas faster and more efficiently.
The Rec Room concept is rolling out with another location in Edmonton in the West Edmonton Mall and centers in the Roundhouse in downtown Toronto, London, Ontario and Calgary. Each will operate as a separate business from the cinemas while leveraging on the loyalty program for cross-promotions.
Kent says there are several points of difference between the Rec Room and Dave & Busters including the bowling alley, axe-throwing, more high-end games such as Formula One and the live performance space which is used by bands, comedians, magicians and other acts.
Cineplex’s diversified portfolio includes digital signage business Cineplex Digital Media; Cineplex Media, which sells advertising in its theaters as well as those of its biggest competitor Landmark Cinemas and other exhibitors; and amusement games and online gaming.
“We have a number of irons in the fire that are moving our reliance away from our core product but movies are our bread-and-butter and cash cow at this point,” Kent concluded.