Major Cineplex Group Plc (MAJOR) is Thailand's leading lifestyle entertainment company with core businesses in cinema, bowling, karaoke, ice skating rinks, retail space, film distribution and advertising media. Vicha Poolvaraluck, director, chairman of the executive committee and CEO, discusses the company's strategy and outlook.
Vicha: Thais now demand better films
BUSINESS:
Please explain Major's business model.
Major Cineplex PCL is a lifestyle entertainment company. We began the business by building our own Standalone Cineplex - that is, cinema plus entertainment complex. Besides running the cinema business, we also provided retail rental space for a variety of lifestyle shops. Subsequently, we saw the opportunity to fuse the cinema business with bowling, karaoke and ice skating as well as strategic investments locally into Siam Futures, M Pictures and California Fitness and internationally into PVR India.
Over the past decade, entertainment complexes have become the destination of choice for people to spend their free time. We saw this opportunity to create our own standalone entertainment complexes. With the model of the entertainment complexes proven to be successful, we are looking to have an impact on the movie industry here in Thailand with our investments into film distribution and production.
How does Major plan to have an impact on the Thai movie industry?
In Thailand today, there are only a few main movie production companies. We bought a stake in MPIC, which also has a movie production studio. As you can see over recent years, the quality of Thai movie productions has increased tremendously. This is a direct result of two things: one, movie-goers' demand to see better quality movies and, two, the increased number of cinema screens in Thailand today. Major has about an 80% market share of ticket sales in Thailand. We aim to expand the industry further and through MPIC we will look to produce high quality Thai movies to be distributed throughout Thailand. This should create a strong competitive environment for Thai production companies to create higher quality movies and with the increased number of cinema screens, especially in upcountry areas, their revenue potential will be stronger.
Are Thai movies having more of an impact with regard to ticket sales and advertising revenue?
Definitely. Thailand has a very strong movie culture and today Thai movies represent around 45% of films screened in the country. I believe that in Asia there are three countries that have very strong movie cultures: India, South Korea and Thailand. In India Bollywood represents 95% of the movies versus 5% for Hollywood movies, and in Korea it is 60% to 40%.
Please explain your reasons for investing in PVR India.
The movie culture there is very strong and there is a strong movement by Hollywood to make movies to target India. Remember that India as an Asian country is far easier to market Hollywood movies in. As the predominant language is English, there are no delays in movie releases to create subtitles or to dub the soundtrack. We invested 10% in PVR and we would love to increase that stake in the future.
When will Major plan its next sale to its property fund?
In the third quarter of 2010, together with our JV partner, we plan to sell the Suzuki Avenue to our listed property fund. The asset value is expected to be from 1-1.5 billion baht.
INDUSTRY:
Is the Thai market saturated with limited growth?
People asked the same question regarding the Singapore and Hong Kong market 10 years ago and the number of screens in both those countries continues to grow. So, no, the Thai market is not yet saturated. Thailand still has an "under-screened" situation. There are plenty of growth opportunities upcountry, where we are expanding with modern trade companies such as Tesco and Big C, and in Bangkok we still see opportunities to expand as well.
How do digital and 3D movies affect the industry?
Digital and 3D movies are fantastic for the industry. First, for Thailand we can now bring in the films faster to create subtitles. Second, film distribution is far simpler and cheaper; and, third, ticket prices are higher for 3D movies. One-third of the cinema screens in the US are now digital - i.e. 3D-capable - so things can grow faster. In Thailand we have 26 digital projectors and an IMAX theatre. We will expand on both fronts.FINANCIAL PERFORMANCE:
Major's net earnings have fallen over the past few years. Why is this? And what steps is Major taking to ensure future growth?
Major's core business has remained strong throughout the past few years as average ticket prices are continuing to rise. Last year our media revenue dropped due to the recession and companies were extremely worried and very cautious about advertising spending. It is normal for the marketing budget to be cut first when faced with such a viewpoint. Thankfully, this year we have seen an improvement in media revenue as the economy has rebounded stronger than expected. Our future growth will continue to come from further expansion of our screens and complexes.MISCELLANEOUS:
What do you feel are the biggest risks facing your business today?
The political situation and diseases, such as H1N1. We are very cautious by nature and are constantly aware of any changes in the business or global environment that may affect us here.
Where do you see Major in five years from now?
To be able to deliver movies to as many people in Thailand as we can. Once this is achieved the quality of Thai movies will increase and more Hollywood movies can come to Thailand. This will satisfy our customers' lifestyle.
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