French Cinemas: Slow Saga, Happy Ending

Unlike the U.S., where multiplex chains are in dire straits, red tape and construction delays have saved French operators from overexpansion

By Benjamin Barnier and Christina W. Passariello

It's date night at the movies at UGC Bercy, a '90s complex in the east end of Paris. For a Friday, lines outside the 18-screen theater move quickly. Add to that the easy parking, fresh popcorn, top-quality screens and sound systems, and it's no surprise that French teens prefer to shell out 8 euros (about $8) to watch Spider-Man here rather than at a classic old-town theater.

The European movie market is booming, and multiplex theaters are cashing in on the demand. French multiplexes, which have grown from 22 in 1996 to 97 last year, now represent 22% of all screens nationwide. But the French will have to proceed carefully to avoid the overexpansion that has created a Hollywood-size disaster in the U.S., where theaters are going belly-up at the rate of one a day.


  The movie-theater biz is in the pits just about everywhere but France. In the U.S., not only are screens going dark, but some major theater operators have declared bankruptcy. A similar crash is hitting much of Europe. Cinemas are shuttering in Britain. And Germany may be headed for a bust, too: New theaters continue to be built, even though the German market is saturated, according to Dodona Research.

France, however, boasts more movie-ticket sales than any other European market -- 186 million admissions last year. That leaves lots of room for growth in a market still dominated by independent operators. By offering better theaters to an eager public and keeping debt at bay, multiplexes in France are proving to be a model success. "We're far from market saturation in France," says Antoine Mesnier, the assistant director of development at UGC in Paris.

Before the multiplexes arrived in France, going to the movies was a guaranteed hassle. Parking was always problem. Then, even arriving early at the theater early didn't guarantee a seat. Admission lines were long, theaters small, and moviegoers often found themselves being turned away. If you scored a ticket, you could expect a hot and stuffy theater with an antiquated screen and sound system. As for snacks, you would seldom find anything for sale.


  Multiplexes solved those headaches and boosted profits for operators, since margins on concessions can run to 500%. "The film is now a driver," says David Hancock, a European movie-industry analyst with Screen Digest. "The idea is to get people into the complex to sell them products."

So far, regulatory red tape has saved France from the overbuilding that has occurred elsewhere. In the U.S., theater owners have found that they can recoup building costs, which may run to $1 million per screen, only in choicest locations.

In France, because of inevitable paperwork and construction delays, multiplexes can't be opened so quickly -- the UGC Bercy in Paris took nine years to complete. As a result, French outfits face less risk of seeing the number of seats outstrip demand. Plus, the two biggest chains, Europalaces and UGC, own only 40% of the screens, so each still has room to grow.


  Another transatlantic difference: U.S. operators are going digital. The trend -- 40 digital theaters have opened so far in the U.S. -- is a big deal. Not only is the on-screen image top-notch but the technology also means customers can be lured for direct broadcasts of sports, concerts, even corporate meetings.

French operators have steered clear of digital projection, preferring to cash in on old-fashioned, less expensive multiplexes. By the time the French movie-theater market is saturated, operators will be ready to replace them with what, by then, will be tried and true digital technology.

When not taking in the latest movies, Barnier and Passariello are editorial assistants in BusinessWeek's Paris bureau.

Edited by Thane Peterson

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