CINEPOLIS: CHANGES TO A FAMILY-OWNED COMPANY

FAMILY-OWNED COMPANY

No art passes our conscience in the way film does and goes directly to our feelings, deep down

into the dark rooms of our souls.

—Ingrid Bergman

INTRODUCTION

Alejandro Ramirez, the CEO of Cinepolis, the largest film exhibitor in Latin America, stepped

into the company’s flagship movie theatre in Mexico City one evening in June 2005. The

company had recently rolled out an expensive new IT platform that streamlined box office,

concession stand and warehouse operations. Despite resistance from some senior managers,

Cinepolis had instituted a thorough (and costly) training program on the software for all 10,000

customer-facing employees. Ramirez wanted to see for himself whether the company’s

investment in its staff looked as though it was paying off.

CINEMA EXHIBITORS IN MEXICO

During the 1950s, Mexico enjoyed a “golden age of film.” Stars like Pedro Infante and Maria

Felix brought charro1 movies and melodramas to life. High quality cinema was screened in

beautiful theatres around the country and particularly within the capital city. However, in a bid

to support artists, workers and consumers, the government then began to tightly regulate the

industry, stifling competition and innovation with stringent measures, including price caps on

tickets. For the next four decades, going to the movies was more affordable for the typical

viewer, but also far less enjoyable than it had previously been. "Theaters were in really bad

condition," said Christopher Albi, a moviegoer in Mexico City. "They stunk, the picture quality

was terrible, water would fall on you, and [theatre employees] would break the feature in half for

Note: Some details in this case have been fictionalized or disguised.

1 Charro movies are akin to the Hollywood Western genre.

Cinepolis E-278

p. 2

an intermission to sell you more popcorn."2 In many locations, patrons had to stand in one line

for soft drinks and another for popcorn because onerous union rules prohibited concession stand

workers from multi-tasking.3 Dilapidated facilities, poor service and terrible sound and picture

quality led to a sharp drop in attendance

By 1992, only a few players were left in the market. The government operated a string of movie

houses to provide an outlet for Mexican films. However, flagging public interest forced the state

theatre owner COTSA to close 140 of the 320 cinemas it owned.4 Organizacion Ramirez ran the

only other large chain of theatres in the country and small, independent venues comprised the

rest of the movie houses. That year, President Carlos Salinas reformed the country’s cinema law,

removing the controls that had fixed ticket prices at four pesos (about 50 cents) and cutting the

tax on box office grosses from an average of 20 percent across Mexico to 6 percent in the capital

and 8 percent in the provinces.5 He also allowed new entrants to partner with a more progressive

union than STIC, the union that had dominated the industry for the last 70 years.

By the mid-1990s, new competition had invested tens of millions of dollars into the industry,

compelling existing players to follow suit or lose customers. Within a few years, new or newly

renovated Mexican movie houses were once again among the best in the world. Despite the

accompanying rise in ticket prices, the Mexican middle class returned to the movies by the

millions.6

CINEPOLIS: THE EVOLUTION OF A FAMILY-OWNED BUSINESS

Enrique Ramirez Miguel founded Cinepolis in 1947 in the city of Morelia, Michoacan, as a

subsidiary of his family-owned company Organizacion Ramirez.7 The theatre chain grew

modestly for the next five decades, expanding to Mexico City in 1971, introducing duplex movie

theatres in 1972, and opening the first 10-screen Cinepolis cineplex8 in Tijuana in 1994. That

year started a period of rapid expansion and innovation. Cinepolis was the first film exhibition

company to introduce stadium seating (see Exhibit 1). It also featured VIP movie halls,9 IMAX

technology and creative food and beverage concepts (e.g. Cinecafe, Dulcipolis and Baguis10).

2 Matthew Doman, The Hollywood Reporter, New Players Revitalize the Neglected Mexican Exhibition Market,

April 28, 1998.

3 Marla Dickerson, The Los Angeles Times, Mexico’s showcases; The country’s cinemas offer a luxurious escape to

patrons in a case of privatization done right, February 18, 2007.

4 Andrew Paxman, Business Mexico, “New Stars of the Mexican Cinema,” July 1992.

5 Ibid.

6 Ed Morales, The Village Voice, Pulp Nonfiction, March 26, 2001.

Note: Certain names, facts and details have been fictionalized in this case.

7 Organizacion Ramirez also operated a real estate division (e.g. malls, hotels, office buildings and entertainment

centers), an automobile division (e.g. Ford and Mercedes Benz dealerships) and the daily newspaper “Provincia” in

the state of Michoacan.

8 A cineplex, or multiplex, is a movie house with four or more screens.

9 VIP benefits included leather reclining seats, exclusive lobbies and in-house restaurant service in your seat.

10 Cinecafe: A comfortable café to wait in for the movie to start while enjoying a variety of hot or cold beverages,

desserts, crepes and bakery products. Dulcipolis: Offered a variety of sweet and spicy dried fruit, chocolates, bulk

candies, soft drinks and updated takes on traditional popcorn. Baguis: Featured baguettes, croissants and French

fries.

Cinepolis E-278

p. 3

Moreover, the exhibitor started a program that guaranteed customers would enjoy movies at their

theatres – or they could see another one for free.11 The perks came with a price - tickets to

movies screened at Cinepolis theatres were three times the national average and roughly equal to

a day’s pay of minimum wage. Yet, the company was targeting an upwardly mobile market. As

Enrique Ramirez’ grandson, Alejandro, commented, the upgrades enabled Cinepolis to, “charge

a premium price for a premium experience.”12 He said:

As part of our strategy to reach middle- and higher-income audiences, we have

tried to change from a company based on multiplexes of between two and five

screens to a company based on megaplexes of between 10 and 20 screens. We

have the largest megaplex in Latin America, the Interlomas house

...