Imagine having to pay RM150 for a seat at your local cinema, or even RM120. As it is seldom that you would watch a movie alone, be prepared to fork out RM240 to RM300 for a movie with your loved ones – girlfriends, wives or anyone you consider worthy of spending two intimate hours with at the Aurum Theatre in The Gardens Mall, next to Mid Valley Megamall.
I was lucky to be invited by Golden Screen Cinemas (GSC) to attend the launch of the Aurum Theatre just two days ago. Watching Star Wars: The Rise of Skywalker was the main incentive to attend.
My wife, an ardent fan of the franchise since the first release, Star Wars: A New Hope in 1977, was ecstatic. She was blown away by the movie, especially the nostalgic final scene of the two moons and was greatly impressed by the extreme comfort and ambience of the newly built Aurum Theatre.
She is already planning to book one screening (30 to 42 seats) for family and friends not fully aware of how much it would cost me.
Well, she is the boss and I am just the lowly cashier. By the way, besides the 7+1 screens, there is a proper bar called Jin Gastrobar incorporated in the vicinity of the theatre. The +1 screen is for private bookings and comes with karaoke facilities. My wife can pre-order food and drinks for her party. She can also book all eight screens at a total capacity of 259 seats, but I will have to say no to her.
Just perfect. After the movie, my wife and her friends can sing themselves silly while I will be at the bar drowning my sorrow. After a few drinks, the total bill would seem lighter and I hope that I will remember my PIN number or risk getting a call from the CEO of GSC.
In her welcoming speech, the CEO of GSC, Koh Mei Lee (Mei Koh to her friends), mentioned that Aurum in Latin means gold. This resonates with Golden Screen and has taken over the mantle of the most premium cinema seat from the Gold Class seats (about RM60-RM80 per seat).
To analogise it to a full-service airline, GSC now has the Aurum (First Class), the Gold Class (Business Class), the Premier (the premium economy) and the economy seats.
Mei Koh and her team have taken a major leap of faith by launching Aurum Theatre. As GSC is the market leader and the most profitable cinema operator in the country, the petite Mei Koh has started to reposition GSC for the future.
The possible future scenario would be fewer viewers per screen for a higher average revenue per user. As more screens are added on to an already saturated supply, moviegoers would be spread thinly across the many locations. Improved streaming services would pose a major challenge too.
In 2018, GSC raked in a revenue of RM538mil, contributing a RM63mil net profit to its parent company PPB (Perlis Plantations Bhd). Besides cinemas in Malaysia, GSC has a presence in Vietnam via a 40% joint-venture company. It is also involved in film distribution. Assuming a RM500mil revenue is generated by its cinema chain which has 55,784 seats, a simple calculation will see an average revenue of RM24 per seat per day and that includes food and beverage (F&B), which according to TGV Cinemas, is 50% of its revenue.
Managing cinemas is a tough business. Like the airline business, a high capital expenditure is required and the operating cost of rental, energy and staffing is fixed no matter how many seats are sold throughout the day.
Selling perishable seats is the name of the game. Increase revenue per seat by pushing F&B items and increase advertising revenue on the screens. Most other cinema operators have little or zero profit margins, although they are EBITDA-positive, so the performance of GSC is even more remarkable.
But the road ahead is fraught with an oversupply of new seats. New neighbourhood malls are offering cinema operators almost free rental to set up new screens. This can only dilute a market that is not growing in the number of eyeballs. So, growing revenue per seat would seem to be the logical solution for survival. Reducing non-sellable perishable seats should remain a key strategic consideration for cinema operators.
The setting up of Aurum Theatre in The Gardens Mall does make sense for GSC. Gardens is the premium mall next to Mid Valley Megamall. GSC already has the biggest cinema operations in Mid Valley with 21 screens and 2,763 seats. Perhaps in the future, the configuration will comprise economy, premium economy and business class seats.
To young entrepreneurs, it would be wise to study the actions of the market leaders in your industry. Market leaders are where they are because they are two to three steps ahead of their competitors. Market leaders make brave decisions, calculated moves and make things happen.
They set industry standards for others to follow.
To convert one out of 36 locations to test the viability of offering a first-class cinematic experience at 10 times the normal price is a brave move. Even though there will be fewer perishable seats to sell, it is still a major challenge to find customers willing to pay RM120 to watch a movie. When you have six shows a day with a total of 259 seats running 365 days a year at RM120, then the potential sales is RM68mil a year from Aurum Theatre.
If GSC can achieve 30% sales, then it would be getting a RM20mil contribution from Aurum Theatre next year. This compares with its average RM13mil-RM14mil per annum contribution from each of its 36 locations. The average revenue per seat will go up.
We need trailblazers to transform industries. Don’t just leave it to market leaders to lead the way.
If you need tips on how to trailblaze, go watch Rey Skywalker at the Aurum Theatre. You will feel her full force in the comfort of the most luxurious reclining leather chairs in the galaxy.
“Mei” the force be with GSC to hit golden heights with the Aurum Theatre.