People in the Know: Kinomax for a Kinoman

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At the end of the 1980s Boris Asriev, a student of the S. Ordzhonikidze Moscow Aviation Institute did not think at all, that his profession would be in the film business and that he would become the main owner of a company which has about 9 per cent of the cinema chain market in Russia. Everything started with small sales of photo goods in the 1990s until fate brought the young businessman together with foreigners who had a burning desire to revive the Russian cinema industry. So the story of Kinomax and lots of other Russian cinema brands started.

The Kinomax chain already includes 20 cinemas in Russia. They say that if the head of the Russian representative office of Kodak Tom Garman had not opened the Kodak Kinomir cinema on Nastasyinsky pereulok in the 1990s then there also would be no Kinomax chain?

It is possible to say that. The first cinema that became the stimulus for the creation of our chain was really Kinomir. Everything started with strategic cooperation with Tekhsoyuz, of which I am one of the founders, together with the Russian division of Kodak. In 1994, Tekhsoyuz became the leading distributor of photo and video production and was the world leader in this sphere.

But the idea to open a cinema really belonged to Garman, who unfortunately, is not alive today. Kodak at that time was already the world leader in the issue of 35-mm film. Russia could become a huge market, but for this purpose it was necessary to generate demand and non-standard ways of advancing production in an unformed market. One method became the opening of a new format of cinema - Garman decided to try to give impetus to film showings in all post-Soviet space. Of course, in addition to his business talent Garman also had a passion for cinema.

It is necessary to note that it was rather difficult to decide to create a modern cinema in the middle of the 1990s after the disintegration of the Soviet Union, on a background of a decrease in the general standard of living. The film industry, let alone civilized film showing, in Russia had fallen into decay. Films rolled in primitive video shops by means of video recorders for one ruble per showing. Nevertheless we had a burning desire for the idea. It was decided that Kodak would open a cinema in Moscow and Kinomax was specially created in the regions.

Unfortunately, Kinomir became the only cinema opened by Kodak in Russia. After Garman, the management of the company changed, and in Russia there was the 1998 crisis. At this turning point we, with our partner Igor Anisimov, nevertheless decided that we would continue to develop the movie theater business, and included Kinomir in our chain project.

From what did you start to build your cinema business?

We started to build modern cinemas in the regions of Russia together with the State Cinema within the limits of the Novoye Kino project. We wanted to create a chain of movie theaters that completely met world standards of quality in film showing and service. It is possible to consider the Kinomax-Ural complex in Chelyabinsk as the first independent project of the chain. The opening of the movie theater after reconstruction of the old building required $2.5 million in investment, and happened in 1998, right after the crisis. After Chelyabinsk we went to Tyumen (Kinomax-Kosmos), and then to other cities.

How did the heads of the administrations in the regions react to your initiative?

When we came and showed them the successfully realized Kinomir project in Moscow and suggested constructing a similar cinema complex, local authorities reacted rather positively to the suggestion. In the provinces there was a huge number of abandoned Soviet cinemas. Of course, we also quite often met mistrust. The head of administrations could not imagine that it was possible to build a profitable business connected with film showing, and were afraid that, presenting a movie theater project, we would subsequently open a nightclub. But we only had to realize several movie theater projects before the company began to get numerous offers from other cities.

How many years did it take to recoup your costs of these first projects?

The Chelyabinsk complex paid back after approximately three years – a rather short period. A market as such did not exist yet, and it is possible to say that we stood at the roots of the cinema business. Now we only dream about such recoupment.

Your company has, probably, taken a foreign model of a cinema for a standard?

We adopted a core concept from the foreign market. Everything is simple - a cinema should be modern: without rough plastic seats, without walls covered with writing, with a good exterior and interior, with a big entertainment zone, and with a cozy atmosphere like a holiday for all the family. Of course, our marketing solutions have also come from the West, for example technologies in attracting and keeping visitors.

Were you successful in attracting the attention of inhabitants in the regions?

I admit that initially it seemed like it would be easier as we judged the cinema business on the success of Kinomir. All the same, the Chelyabinsk cinema was not simple at all for us, in a literal sense we were forming a new culture of leisure.

Cinema in Russia began to bring in money and thanks to that played in fashionable movie theaters. But at the same time in the country an abundance of obscure production was gushing out. Classics of jazz say that art ceases to be art when it turns into a commercial project. Do you share the same feeling?

This is a rhetorical question. In my opinion, it is necessary to draw a scale - cinema as art and cinema as a form of entertainment. Today the majority films on the world screen are not art in the classical understanding, but entertainment that can be consumed with popcorn in hand. Creation and promotion of mainstream (main trend - Vedomosti) is the primary goal of the film business. In fact for film studios it is important that the film, on which worked more than 100 people and required millions of investments to produce and promote, reaches the mass viewer. This is another matter. In my opinion, a film should be qualitatively made, interesting and at the same time profitable. Of course, it is difficult to find a golden balance, but in trying to create a quality, profitable film there is the producer and director.

As for Russian cinema here it is necessary to note positive tendencies. The number of Russian films annually appearing on screens is increasing, and accordingly so is their quality, and box-office takings. Recently Russian directors every year are bringing home awards from world film festivals. But, of course, for the further active development of the Russian film industry, participation of the government and the market is necessary. Without global investments in the development of the technological base, in educating a new generation of strong experts, it is not possible. You should see the centuries-old equipment the students at the S.A.Gerasimov All-Russia State Institute of Cinematography learn with!

What films do you show at Kinomax cinemas?

Any national chain has a special division that forms the listings in cinemas in so far as it is the main product of the cinema complex, even if there are other entertainment services. Drawing up the show listings is a complex and labor-intensive process on which a large share of profit depends on.

Do your listings strongly differ from what other chain operators show?

If we talk about mainstream then no. You will find the most profitable films in every listing. But it is necessary to understand that well-known premiers are infrequent, and the daily listing, of course, differs.

How much do tickets cost?

The pricing policy is flexible; it depends on the region where the cinema complex is located, the level of income of the population, the location in the city (in the center or a quiet area) and its attendance. Plus there are marketing schemes, which are actively applied in pricing, to attract and retain regular customers, for work with various target audiences. On the whole we think our cinemas are centers of family leisure, and we are guided by the middle class. Nevertheless we aspire to involve all categories of viewers.

Do you plan to create a kind of “elite” format using something unusual demanding more money from visitors for it?

I understand what you’re talking about. VIP cinemas with small luxury cinema halls and transcendental prices for tickets are located mainly in the northern and southern capitals (St. Petersburg and Sochi). Such a business model does not seem successful to me for several reasons. I will say only that it is easier to arrange exclusive viewing at home, having bought an inexpensive home cinema.

And what do you think about so-called alternative cinema, such cinemas as Moscow’s Muzei Kino and Illyuzion, where they show the best of world cinema in the last 100-odd years?

Art house cinemas are also not our format. Do you know why there are so few of such projects? It is unprofitable for developers and chain operators to work at a loss, renting space somewhere in the center of Moscow and selling tickets for masterpieces of world cinema for a limited number of connoisseurs for 20 rubles. Although every large businessman has the ability to make a retrospective show, or a festival of cinema which you are talking about. Kinomax also periodically organizes activities in Russian cities. For example, the annual New Russian Cinema festival in Chelyabinsk at Kinomax-Ural. We hold a parade in Yekaterinburg on Film Day, and we are also in constant cooperation with Sema Klebanov's Kino Bez Granits (Cinema without borders).

What would you think if the mayor of Moscow decides to start a program with the cooperation of a private firm for the development of inexpensive cinemas for film gourmets. Would Kinomax agree to take part?

I think yes. Such private-state cooperation with competent marketing support may be a profitable project.

Let's talk about real estate for cinema. Does Kinomax prefer to rent or buy premises? When the film showing business first started to develop chains rented or bought old Soviet cinemas and reconstructed them according to the concept of the movie theater. With the advent of shopping and entertainment complexes, the most optimum place for movie theatres became space in such complexes as it is provided them with an additional stream of visitors. The format of co-investment appeared: a large operator at the stage of constructing a shopping and entertainment complex invested in the project, and redeemed part of the area. Basically, all formats of cooperation are viable, and each company selects the optimal model for its own development. Now film showing operators often rent areas in shopping and entertainment complexes under long-term rental conditions, from 10 to 15 years.

Although there are also disadvantages of such cooperation with a shopping and entertainment complex. A cinema has a rather complex design from a technological point of view. The required height of ceilings, the steps of the bearing columns, and the necessary power capacities and communications should be considered.

However developers at times still offer absolutely unacceptable variants, trying to economize on the cinema, in spite of the fact that it attracts people to a shopping and entertainment complex. Sometimes the developer incorrectly calculates the necessary volume of electro-capacities for a cinema, and expenditures on building additional power units are subsequently put on the shoulders of the tenants. We make a complaint and developers start to reconstruct premises. But who needs these difficulties? For this reason we, as a rule, prefer to enter a shopping and entertainment project at the layout stage or during initial construction.

What about you building cinema and entertainment complexes?

This is also a variant. It is possible to independently create cinemas with various additional entertainment functions. It is possible to build a shopping and entertainment complex. Or to build a high-grade entertainment center with a multiplex anchor. We have such a project in Volgograd where we have acted in the role of the developer. In addition to cinema halls there is also a restaurant courtyard and an extensive games zone for rent. And in Chelyabinsk together with our partners we are building a 30,000-sq.m shopping and entertainment center. There will be everything - from McDonald's and bowling to a boutique zone. As practice shows, the construction of a premises from zero is very costly: the land is expensive, the process of registration is complex, and construction will take two to six years while in a shopping and entertainment complex it is 1.5-2 years less. In addition there is the variant of opening of a cinema complex on a franchise basis. It is important to note that with any form it is necessary to have strong, approved partners. As for Kinomax, in the next few years we will be actively developing the concept of separately standing entertainment complexes.

Do accompanying services such as a caf? or slot machines bring a main part of the profit to a cinema?

Public catering does bring a large part of profit of course. As for volumes of turnover this parameter is obtained from film-display. But in a cinema and other entertainment complex a synergetic effect is created allowing operators to receive the maximum amount of profit. People have already got used to the fact that having come to a cinema, they can count on receiving a full spectrum of services, and a cinema has become not simply a place to watch the next new film, but also a high-grade cultural-leisure center.

Talking about the technical equipment of multiplex cinemas, what stage is Russia at?

The most widespread sound system is DTS (Digital Telecommunication System) Dolby Digital. Digital format audio systems have been installed in all cinema chains of the country for a long time. As for the reproduction of a film, 35-mm projectors reigned here until recently. Now the era of digital cinema is approaching where film equipment in digital format as a whole will work. In Russia prices for digital equipment are already more or less acceptable: a standard film projector costs about 20,000 euros, and a digital one costs about 90,000 euros. The main stumbling block is adjusting the process of release by world film manufacturers to films in digital format. This year there have only been 15 films released so far.

What format of cinema is most popular now in Moscow and in the regions?

Of course, multi-screen cinemas in shopping centers. Today the main requirements for these premises are that the multiplex zone within the structure of the shopping and entertainment complex should be not less than 4,000 sq.m for the placement of 6 to 12 cinema halls. Such a format gives the optimum number of screens for a visitor who has come to a movie theater, and within half an hour can be watching a film he wants. Who knows, maybe cinema in Russia will soon become such a demanded kind of entertainment that the public will ask for multiplex formats with more than 12 halls. By the way, the term "multiplex" in Russia began to be used in reference to 4-hall cinemas, maybe because of an absence of demand for huge cinemas (actually classic multiplexes have six halls). I have even come across the term miniplex. In our chain the largest complex is Kinomax in Kazan with nine halls. It, of course, does not compare with some of the mega cinemas in Europe, but for Kazan and even for Russia it is a big premises. This year we will open a ten-hall cinema in Yekaterinburg.

How would you measure the volume of the Russian film business?

From box office takings, today it is only almost $200 million a year. But analysts have estimated Russian box office takings in 2006 at $400 million. Kinomax has approximately a 8-9 per cent share of the market. In comparison, in the US with a premier of one film alone, chain operators can earn $20 million. This is the answer to the recently often asked question: why do foreign investors not invest in the Russian cinema business? $400 million a year is not a figure that is interesting to them. But with the present growth rates of the film industry, I think, in several years our market may become attractive.

In the Russian market in all sectors the term "chain operator" is popular. How would you explain the essence of the concept of an "operating chain of cinemas" or "film display operator"?

I would say that it’s a company which, firstly has 6-10 cinemas, a more or less wide geographical scope, has a certain share - 5-10 per cent – of the general market and, of course, has a centralized control system of the whole chain.

What divisions do you have within the Kinomax structure?

We currently have 20 cinema establishments and an operating company within which there are also functional divisions. For example, an advertising department and a development department, which searches for areas for future cinema complexes. The operating company as a whole accumulates all the monetary streams, keeps an eye on the turnover of the chain and maintains the quality operation of existing complexes, and is also responsible for forming and realizing the strategy of development of the company. For the solution of some problems and for carrying out design work we outsource to experts. These are, first of all, building contractors. For the realization of projects in the regions we involve local companies, the majority with which we have had long partner relations.

What banks do you cooperate with?

How many cinemas do you have in Moscow?

Four: Kinomir, Kinomax-XL, Solaris and Kinomax-Oktyabr. Incidentally, we aim in the next few years to expand in the capital, and plan to open here not less than eight complexes within the next five years. You have probably heard about our participation in the Freestyle Park project (the company has signed an agreement with MT Development, which is developing the project. Vedomosti). Here a 12-hall Kinomax multiplex will be located and will open in 2009.

Freestyle Park will become the largest resort center in Europe with a covered mountain-ski slope. Alexander Timofeyev and Vladimir Muromov, the heads at MT Development, have already established one well-known company - InvestKinoProekt, and now are going to unite several kinds of entertainment in one place. It is planned to measure 200,000 sq.m and be located along Kievskoye shosse, near the MKAD. There will be mountain-ski slopes, an aquapark, a wellness and SPA center, and both office and hotel sectors. Kinomax will be one of the main anchors. It is not inconceivable that we will increase the number of halls to 14 and of course they will be equipped with digital film projection equipment. This multiplex for us will cost not less than $6 million (the Freestyle Park project is estimated at $200 million), such special equipment as automatic ticket sales machines and a stock-taking system on the number of visitors to the halls will be introduced.

Which cities in the immediate future are most interesting for your company?

By the end of 2007 we want to open a cinema complex in Yekaterinburg with nine halls. In 2008 we will construct a complex in Chelyabinsk. In the next few years we plan to be develop more widely in the Ural cities: Perm, Tyumen, Saransk, Nizhny Tagil, Yekaterinburg, Izhevsk. In 2008, cinemas will open in Krasnoyarsk and Novosibirsk with seven halls, in Yaroslavl with six, and in Saratov with nine. In Krasnodar and Astrakhan we will build complexes with eight halls.

Boris Asriev was born on April 1, 1968, in Moscow. In 1985 he joined the S. Ordzhonikidze Moscow Aviation Institute, and after a year of training was called up for the Armed forces. In 1989 he transferred to the engineering-technology faculty of the Plekhanov Moscow Institute of the National Economy (the Plekhanov Modern Russian Economics Academy) and graduated in 1993, receiving a diploma that specialized in trade and manufacturing management. In 1998 he defended his master's thesis. In April 1993, he became the co-founder of Tekhsoyuz whose main branches of business were distribution and retail trade of photo goods. In 1996 he created Kinomax. In 2005 he was the winner of the 4th National Awards for achievements in the film business, and as part of the 7th International Kino Expo 2005 Forum and Exhibition was nominated for his contribution to the development of national film services.

Kinomax was established in 1996. The chain has 20 cinemas in Moscow, the Moscow region, St. Petersburg, Vladimir, Volgograd, Rostov-on-Don, Chelyabinsk, Perm, Tyumen, Saransk, Nizhny Tagil, Yekaterinburg, Tambov, Kazan, Voronezh and Tomsk.

The main shareholder is the president of the company Boris Asriev. The activities of the company include a full cycle of work from the creation of the concept of premises to operating management of multiplexes. The strategy of development of the company consists of the development of the demanded market concept of multi-screen cinemas combined with a wide spectrum of additional services. In April 2004 Kinomax became one of the founders of the non-commercial organization Film-Alliance. In 2006, the company was included in the Union of Film Industrialists of Russia.