CinemaCon 2018: NATO Marquee Award

Alejandro Ramírez Magaña, CEO, Cinépolis

Like many exhibitors, Cinépolis CEO Alejandro Ramírez Magaña was born into the industry. Both his grandfather and father worked to advance the family company in their native Mexico starting in the 1950s. Today, under Ramírez’s leadership, Cinépolis ranks as one of the world’s biggest exhibition circuits. The Cinépolis network extends across more than a dozen countries, with over 647 locations, 5,329 screens, and 37,000 employees on four continents. Cinépolis sold 338 million tickets in 2017, making it one of the world’s most popular moviegoing destinations.

Ramírez holds a BA in economics from Harvard University, an MSc in Development Economics from the University of Oxford, and an MBA from Harvard Business School.

In addition to his exhibition duties, Ramírez also serves as chairman of the Mexican Business Council and of the Morelia International Film Festival. He serves on the board of a number of influential institutions, including BBVA Bancomer, the Mexican Competitiveness Institute, the Sundance Institute, and the Harvard Board of Overseers.

Outside of exhibition, Ramírez has previously served as Mexico’s representative to the Organization for Economic Cooperation and Development (OECD) and technical secretary of the Social Cabinet in the Executive Office of the President of Mexico. He has also held roles at the World Bank and the United Nations Development Program in the areas of poverty and human development. Among his numerous honors are a 2005 appointment as a Young Global Leader by the World Economic Forum and a 2012 appointment as chair of the B20 (the G20’s Business Summit) by Mexican President Felipe Calderon.

Ramírez was named as the inaugural chairman of the Global Cinema Federation (GCF), a worldwide body representing the global interests of exhibitors in more than 90 territories, which launched in the summer of 2017. Boxoffice spoke with Ramírez ahead of CinemaCon to review his lifetime in exhibition, his circuit’s global ambitions, and what the future holds for the Global Cinema Federation.

Cinépolis is, like many exhibition circuits, a family company at its core. How did the Ramírez family name become synonymous with theatrical exhibition in Mexico?

My grandfather opened his first cinema in Morelia in 1956 and started a formal company in partnership with the Alarcón family in 1963. They built the largest independent circuit in Mexico and ran it for eight years. It was independent in that it was not associated with the state-owned enterprise, Cotsa (Compañía Operadora de Teatros S.A. de C.V.).

In 1971, the government asked to purchase the company—they didn’t like to have competition—and the cinemas from the partnership between the Ramírez and Alarcón families were sold to the government. That’s when my father and grandfather started over from scratch, opening their first cinema in Mexico City, Cinema La Raza, in 1971. The company grew steadily from there.

What are your memories of growing up in an exhibition family? 

Cinema has been a part of my life since as far back as I can remember. My parents’ house and grandparents’ house, which were right next to each other, were wall-to-wall with one of our first cinemas in Morelia. It was a two-plex at first and eventually became a four-plex. Movies were a part of growing up; I’d go next door to see something four or five times each week. I would end up seeing the same title over and over because there weren’t that many options back then. I spent my birthdays at that cinema with all my friends.

Growing up and throughout your career, did you always expect to come back to the family business?

I went away twice and did other things in multilateral organizations—the World Bank, the United Nations Development Program, and years later with the Mexican government and the Organization for Economic Cooperation and Development. But I always came back; I wasn’t sure I would come back, but I always did, and I think it was the right decision. I guess the cinema business is in my blood. I am passionate about movies and the moviegoing experience.

Is there a period that marked a transition for the company?

The Mexican cinema industry was deregulated in 1994, which basically entailed privatizing Cotsa, the state-owned enterprise, and that opened the distribution market. Before then, Cotsa had locked up exclusive rights from Universal, Paramount, Warner Bros., Disney, and MGM for decades. We only worked with Columbia and Fox. That came to an end in ’94 with the privatization of Cotsa, and everyone was able to work with each other. That was the same year that the North American Free Trade Agreement came into effect, so a lot of multinational exhibition companies started investing in Mexico—companies like Cinemark and United Artists (which later became General Cinema), with others like Hoyts and CineStar building properties in the north of the country. And of course, that’s when Cinemex was also born. That was the period when Cinépolis was born as a brand. We decided to take advantage of the liberalization of the distribution market to be able to build large-format multiplexes. Before 1994, we could only build up to four-plexes simply because we didn’t have enough content to cover a multiplex of 8, 10, or 12 screens. The deregulation allowed us to work with every distributor and in turn build multiplexes.

Were there any other major factors, apart from the deregulation in the Mexican market and the foreign investment, which served as catalysts for that boom in the mid-’90s?

There were two other major factors during that era that changed the industry. First, was the liberalization of admissions price for cinemas. Up to that point, movie theaters in Mexico were under a price control with certain ceilings that you couldn’t exceed. That resulted in low ticket prices, yes, but it also meant that we couldn’t make large investments into our circuits—it would be very hard to recover with such low ticket prices. The other major factor was that the monopoly of the union came to an end. Exhibitors became able to work with more than one union, creating competition in the market, a critical factor for exhibitors to be able to select and train their employees. Prior to that, the union basically told you who you had to hire and would rotate people without much consideration to the company.

How did these changes to the market transform the company? Why do you think Cinépolis was able to succeed in a market that suddenly became extremely competitive?

These changes in 1994 allowed us to introduce our new brand, Cinépolis, which began to compete with a host of international exhibitors and a new start-up like Cinemex. These companies were much larger than us back then. Cinemark was one of the largest companies in the world in this sector—it still is today—and UA General Cinema was the largest circuit in the world. We competed successfully because we innovated and introduced concepts that the other circuits hadn’t brought to Mexico. For example, in 1997 we introduced stadium seating—which has since become the industry standard in the market. In 1999 we introduced luxury cinemas under the brand Cinépolis VIP. We were pioneers in this concept; it was independently developed in Mexico, and I think it was simultaneously developed elsewhere—Australia—around the same period. Today we are the largest operators of luxury cinemas in the world. We introduced IMAX screens into commercial multiplexes in 2004 with The Polar Express. In 2009 we brought 4DX seating to our cinemas and reserved seating shortly before that. Reserved seating is the norm in Mexico today, but it wasn’t when we introduced it around 10 years ago. We introduced Cinépolis Jr. a few years ago, which features a family-friendly environment that includes a play area, beanbags, and lounge seats—the type of environment where people feel at home. That’s been very successful with families. We have been able to prevail despite the competition because we have always been at the forefront of innovation. That’s why we have our current leadership position in Mexico. Our strength in Mexico allowed us to start exploring other territories in the late ’90s and early 2000s. Today we are already present in 14 markets.

What factors led you to begin considering expanding outside Mexico?

We began seeing signs of maturity in the Mexican market around 10 years ago, with several cities reaching saturation levels. We foresaw that and decided to explore markets outside of Mexico in order to continue our growth. We saw that our most important market, Mexico, would not be able to sustain our growth at the same rate indefinitely. Central America and South America came first, then India, followed by the U.S., India, and Spain. Now we are entering into the United Arab Emirates, Oman, and Bahrain.

Out of all the markets you’ve entered, do any stand out as particularly tricky?

India. The business environment is more challenging; the competition is fierce with local players—we are the only foreign exhibitor building multiplexes in India. Something like contract enforcement is very loose there, so you have to learn to play within the rules of the game in that business environment, which is not the same as it is in the West. You may not know when you will actually have a specific location until you take physical possession. You can sign the contract three or four years in advance, pay key money, and still not get it; the locations are up for grabs until the very last minute. Evidently, if you have a signed contract, you have a stronger position—but we’ve seen that, even with those conditions, someone can still take a site from you. You can try to fight it in court (the system is very slow), or you can try to settle out of court. Additionally, obtaining all the necessary permits can be extremely cumbersome. In general, all the red tape associated with operating a business in India is extraordinary. You also face a lot of taxes; in the 10 years we’ve been there we’ve seen local entertainment taxes that can be as high as 50 percent of the box office—that’s a big burden. Now they’ve been replaced by a GST (general sales tax), which is a big improvement. Overall, however, we’re happy with our incursion to India. We’re doing well and growing rapidly with several hundred screens there already.

Why do you think you’ve been able to break through in a market like India? Many other exhibitors have tried their hand there and faced similar challenges.

The fact that we’ve persevered despite all these obstacles. It might also be because we come from Latin America and aren’t as shocked by a lot of the situations we encounter in India. I think an exhibitor from a developed country would be more surprised by what they could find there. Even though India has a different level of complexity than Mexico or the rest of Latin America, we came into the market having been used to facing a certain sense of unpredictability—doing business in Brazil or Argentina can be challenging. That background gave us the ability to be resilient and endure in a market like India. Having said all that, the administration of Prime Minister Modi has enacted some very good reforms, and we hope they’ll continue to do more.

As we’re approaching the one-year anniversary of the Global Cinema Federation (GCF), can you share some of the GCF’s immediate and long-term objectives and initiatives? What role do you envision the GCF will play in the coming years for exhibitors around the world?

The Global Cinema Federation was formed to advance the interests of the industry in a coordinated and aligned manner. We’re working on a number of fronts with seven key areas of work. One is our fight against movie theft, against piracy, a problem all over the world. Another is music rights, trying to see they are approached across different markets. Accessibility regulations is another. I think there are many things we can learn from what is happening in different environments.

Another very important key issue for us is the protection of theatrical exclusivity. We believe exclusivity is critical to our success and for making the moviegoing experience special. Working with the studios and the creative community is another priority, along with technology and standards. It’s important for exhibitors to have a seat at the table as cinema technology continues to evolve. Finally, we also look at international trade and foreign investment. Unfortunately, there are still countries that have high trade barriers for cinema equipment and associated inputs—that’s something that we work very hard to lower. In Mexico, for example, this includes corn for popcorn and cheese for nachos. Having low trade barriers helps us become more efficient and provide a better moviegoing experience for our customers at a lower cost. Regulations related to foreign investment are also on our radar; some countries still have barriers to foreign investment for exhibition and we are seeing what we can do to reduce those barriers. In a nutshell, those are the areas where we have been working over the past year and will continue to work on in the years to come.

What do you consider to be the biggest threats and opportunities facing the exhibition industry today?

I think piracy continues to be the number one threat to the industry. The increasing penetration of digital devices has contributed to an expansion of illegal movie downloads. That’s something that concerns us very much. In many countries, such as here in Mexico, there is need for tougher legislation against camcording and more protections for intellectual property. The losses the industry incurs every year because of this issue are enormous and it affects distributors and exhibitors around the world. Another big concern we have centers on valuing the moviegoing experience. Our industry has remained relevant throughout the years despite the rise of new technologies because cinema has a magic that no other media can replicate. As exhibitors, we need to work every day to ensure moviegoing remains as valuable and relevant as ever to our customers. Services that devalue the moviegoing experience, such as MoviePass, are distorting our business by offering an out-of-sync value proposition; those services distort the true value of the moviegoing experience.

Among the opportunities, it is important to emphasize that we are moving toward an experience economy. Consumers attach a big value to experiences; it’s no longer just about buying products and services. I think we’re very well positioned to enrich the moviegoing experience through that trend. Something we pioneered nearly 20 years ago, luxury cinemas, is just now beginning to take root in developed markets like the United States and Europe. Cinema technology continues to evolve and improve, differentiating us from home entertainment. Even if you have a nice home theater, you’ll never be able to re-create a top-of-the-line moviegoing experience. Linked to that is that we can build a very loyal customer base with new technology, helping us develop and deepen our relationship with customers. We are able to analyze and assign products and services to specific market segments. These technologies help us understand and serve our customers much better than in the past.

Daniel Loria

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