Theater chains merge

In a most worrisome development, two of Thailand's biggest theater chains, Major Cineplex and EGV, will merge.

The immediate worry is that ticket prices will go up. Already, Major is not adverse to charging 140 baht (about $3.50) for new release films on weekends and holidays. With the two biggest players in the multiplex market tied up, there's nothing holding them back from making 140 baht the normal price.

To put this in perspective -- in Thailand, the majority of the population is poor, earning about 100 baht a day. Once in a while, on weekends, rural villages will put up a bedsheet and project movies and have other entertainment for free or for 20 baht at the most. So 80 or 100 baht is actually pretty expensive to most Thais. And it's just about right to cheapskate foreigners residing in Thailand -- like me. I feel indignant about paying 120 baht at the multiplexes and prefer to take my moviegoing business to the older Lido, Siam or Scala theaters that charge 100 baht and offer a more serene cinema experience than the cookiecutter mall places.

Back to the deal. EGV would be merged into Major and delisted from the Stock Exchange of Thailand. The merged entity would then become the country's biggest movie-theatre chain with a market share of over 70 per cent, or 250 theatres.

The merger reunites the feuding brothers cousins of the Poolvaralak family, who split when an inheritance gave most of the family business to one branch. The other went to start his own theatre chain (Major Cineplex) and ended up being more successful with his concept of stand-alone multiplexes that rented out space to stores and restaurants. EGV, meanwhile, coupled itself with existing malls and grew slower. It also lost its Australian financing partner.

While EGV will be delisted, its theatres will continue to operate under the EGV banner.

Major president Vicha Poolvaralak sought to calm concerns about higher ticket prices. "We merge for economy of scale - to make us more attractive to local and foreign investors," Vicha said.

An outsider, Paiboon Damrongchaitham, chairman of GMM Grammy, agreed. "It's a good thing. Despite the bigger share, I believe they are gentlemen enough not to exploit the market,'' he said. "But instead, plans to expand to provinces are likely and that is good for film producers as we would no longer depend on the Bangkok market."

SF Cinema, the next biggest multiplex player (and my No 2 choice in theatregoing with their 80 baht admission prices) anticipates no threat. "It will not effect our operations with fewer players,'' a spokesman said. "Filmgoers' behaviour will not change and they will continue to go to theatres near their home that they are familiar with."

The merger has been met with a mixed industry response.

Anthony Vogels, managing director of United International Pictures (Thailand), said he believed the merger would bring a wider range of films to multiplex theatres, with each film given a longer run.

"The three multiplex-theatre operators [Major, EGV, and SF] try to outdo each other and release as many copies of blockbusters as they can. I'm a bit surprised that state-of-the-art theatres with lots of screens only show two to three films at each complex," he said.

Vogels is optimistic the merger will direct multiplex theatres back to their roots by featuring a great variety of films, saying a film regardless of its budget size will enjoy a longer stay in theatres.

"In Australia, where I come from, there will be 16 movies showing in a 10-screen multiplex during October, which is a school break, while the number of movies released here in Thailand will be only four," he said.

Suparb Rimthepatip, editor of film magazine BioScope, is also optimistic over the merger.

"Who knows? The merger may improve the movie line-ups. The short-lived movies may be able to stay longer in the theatres," Suparb said. Blockbusters dominate multiplex theatres, while smaller-budget and non-mainstream movies have fewer chances to last long in theatres.

Director Prachya Pinkaew (Ong-Bak), who is also managing director of film studio Baa-Ram-Ewe, said Thai films, especially small and medium-budget efforts, would be affected by the merger because theatre-operators were likely to take only the cream of the crop.

But another director, Yongyoot Thongkongtoon (Iron Ladies), does not believe the merger will create a monopoly that will hurt the local film industry.

"I don't think it's possible that the operators will put pressure on Thai films. We [movie-producers and directors] and they [operators] have to cooperate,'' he said. "As a movie-maker, I'd say that if we have a good product, no theatre will say no to us."

On the possibility of ticket prices rising as a result of the merger, industry figures are cautiously optimistic that will not happen.

Suparb and Prachya both said operators could not increase ticket prices as they wished because it could result in a decline in movie-goers.

Meanwhile, one of Thailand's biggest distributors, Sahamongkol, has cut Major Cineplex from its list, according to The Nation and the Bangkok Post, saying the theater chain discriminates against Thai films.

It should be mentioned that Sahamongkol owns is closely allied with SF Cinema, Thailand's No 3 multiplex chain.

From The Nation:

The move was a message that a theatre chain cannot dictate the fate of filmmakers, said Somsak "Sia Jiang" Techaratanaprasert, chairman of Sahamongkol.

"I don't want to quarrel with anyone. I told Khun Vicha [Poolvaralak, president of Major Cineplex] to be prepared for this," said Somsak.

Last year Somsak, as president of the Federation of National Film Associations of Thailand (FNFAT), complained about the high level of control multiplexes had over the screening of Thai films.

"With the share of Thai films [shown in cinemas] at 46 per cent, we can survive any change. But I must do this thing to raise the bargaining power of friends and as president of FNFAT," Somsak said.

Somsak did not anticipate a serious financial impact from leaving Major theatres off the distribution list.

"Major has a 50-per-cent share, and other theatres control the rest. Our revenue could drop by 10 to 20 per cent, but if the movie is good, movie-goers will go see it at non-Major theatres," Somsak added.

From the Post:

Somsak said that over the next four months, after EGV is fully integrated with Major, SFI might stop supplying films to EGV screens as well. Sahamongkol distributes between 40 and 50 titles a year to local cinemas.

Industry executives see Somsak's announcement severing ties with Major as only a threat, as SFI has little or no bargaining power against Major and that its dependence on the cinema group for public marketing was heavy.

But Somsak said that the company would experience a 10- 20% loss in revenues as a result of ending business ties with the Major Cineplex chain.

He admitted that he had no idea what the business impact on SFI would be if both Major and EGV stopped showing its films.

There are other problems. From The Post:

Disagreements between Major Cineplex and Sahamongkol surfaced last month when Major announced that it would import films to screen exclusively at its theatres, a threat to SFI.

And The Nation:

Problems between Major Cineplex and Sahamongkol flared up prior to the merger, beginning when Sahamongkol started its own theatre business, SF Cinema, which now has the third largest share of the business, about 20 per cent.

Sahamongkol controls the distribution of most Thai films, a business that was worth [around ] 800 million baht last year.

Major Cineplex this year purchased films screened at the Cannes Film Festival, including the Palm d'Or award-winner Farenheit 911.

Sahamongkol saw this as a threat to its business, said industry sources.

The Post said the last Sahamongkol film to be screened at Major theatres will be The Letter. It will open on June 23. But The Nation article conflicted with that, saying The Letter, a tear-jerking romance that is sure to be a big draw for dating couples, would be screened at SF Cinema and EGV theatres only.

Expansion plans were hinted at in the articles, and were given as the reason ticket prices won't be raised. The strongest information came from a Bangkok Post article on Friday.

Major Cineplex Group Plc and EGV Entertainment Plc, the country's two largest cinema operators, are merging in order to further consolidate their market share and strengthen their operations for future expansion both in Thailand and abroad ...

Already under consideration are operations in Ho Chi Minh City.
After the merger, plans are afoot to open 100 new cinemas in 2005, 60 in Greater Bangkok and 40 in the provinces, bringing the total number of cinemas in Thailand to 350.

SF Cinema ... which operates 49 screens with 13,000 seats in seven locations, was unfazed. ''Moviegoers like our cinemas. SF will increase its screens to 75 and seats to 20,000 by the end of this year,'' a spokesman said.