South Africa’s biggest cinema company Ster-Kinekor Theatres recently completed its section 189 processes and CEO Mark Sardi says that the company is ready to bring the joy of the big screen back to moviegoers.
The company concluded the section 189 and restructuring process at the end of May.
Sardi said, “At Ster-Kinekor’s head office, we have reduced headcount and costs by around 20 to 25%, which is appropriate given, the current economic environment and size of the organisation. We have started to redistribute the workflow among the existing staff complement. We initially assessed that 226 jobs might be affected. However, we ended up retrenching just 52 employees, and these were largely head-office based. A positive outcome is that we managed to mitigate the impact on headcount.”
On cinema closures in the country, nine of them was earmarked to close but the CEO told Business Report that they managed to save seven of them and closed two instead.
He said, “At this stage, only two sites have been impacted – Boardwalk in Richard’s Bay and the Greenstone Mall. Of the remaining sites identified, we are in discussions with landlords and partners to consider different entertainment and education strategies within the cinema space. When sites close, we always look to try and deploy the affected staff into other cinemas within the 42 remaining sites.”
Sardi said, “In March last year, load shedding started to intensify dramatically and the country endured stage six load shedding from stages one or two, up until September. While load shedding has eased in the past few months, the impact of the Hollywood strikes has had a significant impact on attendance.”
In addition to Ster-Kinekor’s load shedding woes, the company was also feeling the effects of the Hollywood writers’ strike, which saw an impact on movies being produced.
The movie boss said, “The impact of the strikes was to halt production of movies and created a 12–18 month delay in the release of titles originally scheduled for release in 2024. This negatively impacted our steps to recovery.”
“For cinemas across the world, this meant the ‘movie factory’ shutting down temporarily. The combination of these two unanticipated events – more intense load shedding and the strikes, resulted in the position that we found ourselves in earlier this year, where we needed to restructure the business in the short term to survive in the medium to long term,” Sardi said.
It is no secret that with the popularity of streaming services such as Netflix, Disney and Amazon to name a few, many consumers have shifted away from going to the movies, opting to have their entertainment delivered to them in the comfort of their own homes.
In retaliation to the streaming wars, Sardi still believes people will get a better experience by going to the movies.
He told Business Report, “Who remembers their first streaming experience? However, everyone's got a story to tell of watching their first movie on the big screen in a cinema. A first date with sweaty palms and holding hands, the first outing with your family, or watching your kids’ enjoyment of consuming a film for the first time in the cinema space. There's something for everyone that streaming simply cannot replace.”
“Coming out of the section 189 process, as tough as it's been, has shown us the goodwill that exists among our partners, the mall landlords, our distributors and others with whom we engage. We are also protected by what we call the theatrical window, where the film is not allowed to be shown on any other format other than our own for a specific period - typically a 40 to 45 days,” he added.
He said the cinema experience was difficult to replicate anywhere else.
“When we can offer titles that resonate across different genres within our consumer base, there is no better place to watch them.”
Another factor that sways South Africans from staying away from the big screen is the cost of living crisis in the country.
Sardi said, “During the section 189 process, we took the opportunity to revisit and rethink our value proposition. Consumers say going to watch a film in cinema is expensive, and that is their reality. Going to a movie in South Africa is around half of what it would cost in the US or UK, but that is immaterial to cinemagoers who, when going to a cinema plus the food and beverages, perceive it to be an expensive outing.”
“We need to demonstrate to our customers that it is a unique and valuable experience. We are currently working on new ideas and concepts that we will start testing at select sites over the next few months. We have to manage this 12-18 month period where the content might be a bit thin in some months, while managing pricing and offering real value to the customer,” he said.
Sardi said when the content was right, people would visit the big screen.
He said, “So, is cinema dying? An emphatic no. Cinema is globally one of the very few industries that has survived both a significant technological disruption event (streaming) and a pandemic and we remain resolute that there's still very much a place for it.”
Coming out of the business rescue process, the balance sheet was structured more optimally with the company’s new investors, the CEO further told Business Report.
“Our investors also have exposure to cinema assets in the US and Europe and therefore have access to global trends and patterns and can implement these learnings within our market and provide very valuable input on strategic initiatives,” Sardi further said.
BUSINESS REPORT