Ster-Kinekor may franchise cinemas in SA

Ster-Kinekor, South Africa's largest cinema operator, was mulling the roll-out of a franchising model that it had piloted in Lesotho, chief executive Fiaz Mahomed said last week. By Asha Speckman

The company, owned by previously listed media group Primedia, had developed the model for rural areas, Mahomed said, but its execution was possible in South Africa.

It will probably take another good year to finalise, Mahomed added.

The model has been tested and finalised in Lesotho and Ster-Kinekor has approached a government department in Lesotho to partner the initiative over the next few years. In South Africa, details such as where to roll out the model and how are being finalised internally, according to Mahomed.

Doug Place, the marketing executive, said a management-style contract where Ster-Kinekor derived a fee for managing the cinema on behalf of the owners was an option. This was the model in Lesotho but he added every new cinema has its own business case .

Ster-Kinekor operates 53 sites in South Africa, two in Zimbabwe and one each in Lesotho, Namibia and Zambia.

The company is pressed to remain relevant in a market that is being forced into the digital era by the growing scarcity of 35mm film globally and challenged by movie piracy and the presence of options such DStv's Box Office video-on-demand portal.

The past 12 months have been characterised by slower audience growth at Ster-Kinekor as the scarcity of 35mm print film has resulted in an increased production of movies digitally, which deprived cinemas sites that lack digital technology from screening the movies.

Ster-Kinekor confirmed last week that it was on track to convert 418 screens in South Africa to digital technology by mid-December. The project would continue into next year.

Nu-Metro cinemas, owned by JSE-listed Times Media Group, operates 22 sites. Luke Roberts, the general manager of Nu-Metro Cinemas, said the company had converted 38 cinema screens to digital technology and by December 1 it intended to have converted all 149 screens to digital. Nu-Metro was in the early stages of investigating a franchise model. But Roberts added: The cost of entry into a cinema is a lot more expensive. It limits the amount of people that can buy into it.

Eastman Kodak, which applied for bankruptcy protection last year, and Fujifilm - which are the world's largest and oldest producers of film - are unlikely to continue production as digital technology grows.

But we're seeing [that] cinemas that were deprived of these prints are starting to turn round, Mahomed said.

The expanding middle class, even in historically affluent areas such as Sandton, is fuelling audience growth, according to Mahomed.

Ster-Kinekor has improved its offering to include specialised venues such as Cine Prestige, where movie viewing takes place from the comfort of rows of large reclining armchairs. And self-booking options, including an application for cellphones, cut out the need to queue for tickets.

Consulting firm PwC, in its latest South African Media and Entertainment Outlook 2012 to 2016, projected a 4.2 percent compound annual growth rate in revenue from film entertainment in South Africa to R3.6 billion in 2016 from 2011.

Conversion of cinema screens to digital format would enable screening of more 3D content and enhance the appeal of the movies, PwC said.

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