Cinematic scale

Leading position
Helios closed last year with seven new cinema openings and a total of 31 multiplexes in its chain. However, the company is still planning further development. "We want to continue building on our position and become the largest cinema operator in Poland. We are aiming at opening 4-5 cinemas (app. 25 screens) per year," reveals Tomasz Jagiełło, the president of the management board of Helios. In 2013 the company is planning to open new complexes in a number of shopping centres including Trzy Korony in Nowy Sącz, Wzgórze in Gdynia, Galeria Amber in Kalisz, as well as Galeria S in Siedlce and Galeria Jurowiecka in Białystok, both of which are owned by PB Konstanty Strus. As for 2014, Helios cinemas are to be opened in a number of other shopping centres: Sukcesja in Łódź, the extended IKEA retail park in Wrocław's Bielany district, Echo Investment's Metropolis development in Poznań and also in another of Echo's projects in Katowice. All of these cinemas are connected to retail facilities. "I can't think of a single case of a stand-alone facility being opened by a cinema owner. The chains of cinemas opened by local councils, such as NoweKino, are the only exception. Shopping centre developers are eager to work with us because they know that a shopping centre must have a cinema. These days the name ?shopping centre' is simply not enough. What counts now is that it is a ?shopping and entertainment centre', and this extra word is crucial for investors," adds Tomasz Jagiełło. "A cinema generates footfall and attracts potential clients. A lessor who secures a cinema operator in a town of up to 50,000 inhabitants can't lose because they then have control of the market. No operator will open another cinema in this town. However, as far as profits are concerned, developers do not make money on cinemas," adds the president of Helios. But developers are now often forced to ?pay and cry', as including cinemas is becoming increasingly necessary and involves great expenditure at the same time. Lease agreements contain provisions for the full fit-out of the area to be occupied by the cinema, but the rent levels are low. "For us one cinema room is an expense of around PLN 2 mln without the fit-out costs. Of course, everything depends on the location and the project going ahead. These factors also determine the rent level, and this usually ranges from EUR 2 to EUR 10 per sqm. A developer can only get more than this in the best malls," claims Tomasz Jagiełło.

Healthy climate for cinemas
The company chooses towns with a minimum population of 50,000-60,000 inhabitants. "According to our analyses there should be app. 10,000-15,000 inhabitants for each screen. Thus we are planning to invest in four- and five-screen cinemas with digital technology, where app. six titles could be shown. This is enough to present an offer for a small town," reveals the president of Helios. The company's strong position is also related to an improvement in the business outlook for the cinema market. In Q3 Helios registered an increase of over 75 pct in the number of tickets sold on the previous quarter. "In Q3 2012, Helios cinemas registered a 12.5 pct increase in footfall compared to the same period in 2011. In this period the revenue of the company was also more than 12 pct higher than in Q3 last year. This is the result of the continuing growth in the number of our cinemas that have already been converted to digital technology, as well as our plans for new cinemas, mostly in the very promising medium-sized towns sector," adds Tomasz Jagiełło. What challenges does the cinema industry now face? "I see the main threat to our business in the form of the ever extending variety of other entertainment services that are now on offer," concludes Mr Jagiełło.