Cinemas de la República, S.A. de C.V

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Cinemas de la República, S.A. de C.V.

Lic. Enrique Ramirez Miguel 701
Morelia, Michoacán 58270
Mexico
Telephone: (52) (443) 322-0505
Fax: (52) (443) 322-0511
Web site: http://www.cinepolis.com.mx

Private Company
Founded: 1971
Employees: 1,500
Sales: $505 million (2005 est.)
NAIC: 512131 Motion Picture Theaters, Except Drive-in

Cinemas de la República, S.A. de C.V., is the owner of Latin America's largest motion picture exhibitor and the eighth largest in the world, with over 1,300 screens and 70 million tickets sold each year. It is present in every Mexican city of over 250,000 people, in the form of its flagship multiplex chain Cinépolis, which also operates cinemas in Central America. The privately owned company is part of Organización Ramírez, which also has extensive real estate holdings, including the greater part of the lots on which its theaters are located.

THE EARLY YEARS: 1971–92

When Enrique Ramírez Miguel opened his first movie theater, the business in Mexico was dominated by an American, William Jenkins, and his Mexican associates: Manuel Espinosa Yglesias, Gabriel Alarcón, and the heirs of Maximino Ávila Camacho, brother of Mexico's former president. Jenkins controlled about 80 percent of the nation's movie theaters and is said to have paid his associates for the use of their names to comply with laws requiring ownership by Mexican nationals. In 1960 the federal government broke up the Jenkins monopoly by decree, establishing its own virtual monopoly in the form of the Compañia Operadora de Teatros, S.A. (Cotsa). Under government control ticket prices were kept low, since they formed part of the basic consumer-price basket used to calculate the cost of living. The theaters, some of them grand palaces dating from the 1920s and 1930s, were allowed to deteriorate. By 1970 some cities had better appointed theaters showing art films, and the first multiplex theaters had appeared, often in large shopping centers. Some of these independent movie theaters also offered larger screens and better sound and image quality than the Cotsa-owned ones.

Enrique Ramírez Miguel opened his first movie theater, Cine Morales, in Morelia, capital of the state of Michoacán. The year was 1947 according to one source and 1956 according to another. This grew into a chain of theaters in central Mexico, called Cadena de Oro or Circuito Oro, which he operated with Alarcón until 1971, when Alarcón bought out his partner or, according to another account, the chain was bought by Cotsa. Ramírez Miguel and his son Enrique Ramírez Villalón then founded what later became Cinemas de la República, opening their first Mexico City theater, Cine La Raza, in 1972 or 1973. They opened a duplex called Cinemas Gemelos (Twin Cinemas) in Tampico in 1973. A year or two later they opened their first four-screen complex, in Mexico City, under the Multicinemas name. Over the next two decades father and son expanded their reach through both the Multicinemas and Cinemas Gemelos chains.

ADVENT AND RISE OF
CINÉPOLIS: 1993–2003

The era of government control of the movie theaters ended in 1993, when the more than 200 screens owned by Cotsa were privatized. At least half were soon closed. Ticket price controls ended in 1994, and foreign investment was allowed. Three big chains quickly came to dominate the business: Cinemark, Cinemex, and Cinépolis. These chains offered multiple screens at each site, good equipment, comfortable seats, and refreshment stands.

The first Cinépolis theaters opened in 1993, and in January 1994 the chain opened Mexico's first megaplex, a ten-screen site in Tijuana. Three years later there were six Cinépolis megaplexes. In late 1998 there were 30. Organización Ramírez, through Cinemas de la República, operated 511 screens in 1996, far more than any other company. In Guadalajara, it operated 58 of the 74 screens. In order to control costs, the firm tried to avoid land purchases, locating its theaters within new malls. To bring in enough revenue to finance expansion, it was counting heavily on concessions to supplement the box office take. The chain's refreshment stands were responsible for more than 40 percent of its revenues (and about 30 percent for all exhibitors). Many exhibitors, including Cinemas de la República, stopped their movies in the middle for intermission, a practice almost unique to Mexico and interruptive to the audience.

Organización Ramírez was building up the Cinépolis chain from its own resources, intending, in 1996, to open 500 new theaters in the next five years for an investment of $75 million to $100 million. Cinépolis and its competitors were thought to have an average annual profit margin of 20 percent and to be recovering their invested capital in five to eight years, despite economic crisis, double taxation, and an average payment to the film distributors of 45 percent of the box office take, a share that the exhibitors called "abusive." Another problem was the stranglehold on staffing held by the projectionists' union. This body was characterized, according to the theater owners, by excessive bureaucracy, reluctance to change with the times, and resistance to new technology. By 1998, however, Organización Ramírez had cut a deal with the union that allowed the management of Cinemas de la República to hire its own personnel.

Cinemas de la República, which sold 48.7 million tickets in 1997, was moving from multiplexes of two to five screens to megaplexes of between 10 and 20 screens and had decided not to build any new theaters with fewer than ten screens. In addition to presenting customers with better seating, sound systems, and concession stands, the megacomplex concept was deemed to be good, because, as Alejandro Ramírez Magaña, a grandson of the founder, told Baron Levin for a Business Mexico article, it offered a greater variety of films so that "people can come to a megaplex knowing they can always find a film and a suitable time." Moreover, these large complexes had facilities for the disabled and (in at least one Mexico City Cinépolis) a professional child care center so that parents would not have to hire a babysitter in order to attend the movies.

Ramírez Magaña, who joined the firm in 1996 and was its 27-year-old head of operations by late 1998, told Levin that the 20-screen Cinépolis megaplex in Interlomas, a posh part of Mexico City, was the largest in Latin America, and that it was building a 19-screen complex in Guadalajara. (The latter, when completed, featured love seats and two screens in excess of 70 feet in length.) He also said that the company had tightened its procedures, no longer allowing each manager to operate his theater as he saw fit but rather conducting a monthly onsite inspection that rated each facility according to criteria such as projection, maintenance, and cleanliness. In 1999, Cinépolis introduced VIP service. For a price tag of as high as $9, the patron was seated in a reclining chair and served by waiters who offered to fill orders for treats such as sushi, crepes, and gourmet coffee.

KEY DATES

1971:: The predecessor to Cinemas de la República is founded.
1993:: The first Cinépolis theaters are established.
1996:: The company is operating 511 screens, far more than any other exhibitor in Mexico.
1999:: Cinépolis introduces VIP halls, which offer special amenities such as waiter service.
2003:: Cinépolis has more screens than any other movie chain outside the United States.
2006:: Cinépolis has become a major presence in Central America, opening 66 screens since 2004.

At the end of 2000, Cinemas de la República had 760 screens, about one-third of the total in Mexico, plus multiplexes in Guatemala City and Quito, the latter administered for an Ecuadorian bank. Cinépolis alone, as of 2003, had more screens than any other chain outside the United States. (The Multicinemas and Cinemas Gemelos chains remained in existence, but only on a very small scale.) Cinépolis ranked eighth in the world in size and opened its 1,000th screen in that year, when it was present in 59 large and medium sized Mexican cities. However, only 211 were in Mexico City, which accounted for 45 percent of movie admissions in Mexico, and where the chain lagged well behind Cinemex. As a result, Organización Ramírez planned to spend in the capital city half of the $160 million it had earmarked for investment in theaters through 2004. Its debt was zero, said Enrique Ramírez Villalón, the organization's president, and all its investments were being made from its own coffers.

Even without dominating Mexico City, Cinépolis was a formidable presence, selling 205,000 movie tickets each day in Mexico. It was the nation's second largest seller of Coca-Cola, trailing only McDonald's. It was the only chain with VIP halls and screens big enough to show 70 mm films. Its investment plan called for about 120 screens to be added per year, both new and renovated. The new screens would include ones in complexes of up to eight screens in 30 Mexican cities that did not have any. Capping the expansion plan was a 22-screen complex in Guadalajara, the largest in Latin America, scheduled to open in November 2003. The company owned half the theaters that it was operating and, in addition, was the real estate operator of many of the commercial centers that held its theaters, among them centers in Celaya, Culiacán, Morelia, San Luis Potosí, Tampico, and Uruapan.

Organización Ramírez began investing in Mexican films in 1998, when it took part in the making of El cometa. It invested in three others through 2004. In 2003 it began sponsoring an annual international film festival in Morelia for documentaries.

CINEMAS DE LA REPÚBLICA:
2004–06

Cinépolis entered Central America in a major way in 2004, opening 22 screens in Guatemala and eight in Costa Rica. It opened 14 in El Salvador and eight in Panama in 2005, and 14 more in Honduras in 2006. In Central America, however, unlike Mexico, Cinemas de la República was partnering with local investors, who wanted its movie theaters for newly built commercial centers. With an investment of $1.5 million, Cinépolis in 2004 bought the first of three 70 mm Imax screens. By late 2006 there were six: three in Mexico City and one each in Guadalajara, Monterrey, and Veracruz.

Educated at Harvard and Cambridge and long groomed for the top job, the younger Enrique Ramírez's son Alejandro became director general of Cinépolis in 2006. He took over after a year in which theater admissions dipped 7 percent and exhibitors feared that the Mexican market was saturated. The nation had 3,600 screens, of which 36 percent belonged to Cinépolis, which held 1,370 screens and 51.5 percent of the market in 2005. To fill its seats, the movie chain was seeking to expand its role in lower-middle-class areas in order to capture the 70 percent of the population for whom movies were still prohibitively expensive. Mexicans only went to the movies an average of 1.5 times a year, compared to five or six times for Americans. The average price charged by Cinépolis was the equivalent of about $3.50, but prices varied from about $2.50 to $5, according to location.

Organización Ramírez's income from movies was estimated at $505 million in 2005, and movies were believed to account for about 80 percent of its total income. The real estate division was created in 1976 and, 30 years later, included ownership of more than 500 commercial sites, including hotels, shopping centers, and automobile dealerships. In Morelia, where the organization also owned the newspaper La Provincia and a television station, its properties included Plaza Las Americas, a commercial center with offices, boutiques, self-service stores, restaurants, and entertainment; the Palace of Arts for shows and bullfights; and Tres Marias, a resort center.