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Maximize Your Investment by Evolving Your Brand: How Cineplex is redesigning entertainment in Canada

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Webinar November 10, 2014
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Maximize Your Investment by Evolving Your Brand: How Cineplex is redesigning entertainment in Canada

Ellis Jacob, President and CEO of Cineplex Entertainment and Canadian Business magazine’s 2013 Most Innovative CEO, and Jean-Pierre Lacroix, President of Shikatani Lacroix discuss how brands can remain relevant in these disruptive times by innovating and focusing on the needs of their customers.

Join Ellis Jacob and Jean-Pierre Lacroix for this Professional Development Lunch and Learn presented by CVCA (Canadian Venture Capital and Private Equity Association) and hosted by PwC Canada.

Find out:

  • how to embrace trends and innovate
  • how to understand the needs of today’s consumers
  • how your brand can remain relevant amid an industry in constant flux

Fill out the form below to watch the webinar.

Webinar Transcript

Richard: Good afternoon, my name is Richard Pay, I’m a partner in PwC’s deals practice based here in Toronto and it’s my great pleasure to welcome you all to this CVCA professional development seminar this afternoon, Maximizing Your Investment by evolving Your Brand: How Cineplex is Redesigning Entertainment in Canada. On behalf of the CVCA, I’d like to than Shikatani Lacroix, a leading branding and design agency in Canada for all the work they’ve done with the CVCA setting up this event today on behalf of PricewaterhouseCoopers and my colleagues both Leatham and Chris Dulny over there. I’d like to welcome you all here today, it’s our great pleasure to continue our involvement with the CVCA, which is a long-standing relationship we greatly value. It’s also a great pleasure for us to see a number of the people that we work with, we work with lots of clients in the private equity and venture capital community both the funds themselves and also in their investing companies, providing a number of services from audit through tax consulting and cooperate finance and transactions-related. Before we get on with the session today, what I’d like to do is just introduce the esteem panelists that we have who will be joining us on the desk [SP] here in a few minutes for a discussion, how brands can remain relevant in the current disruptive times.

The panelists are just down here to my immediate left, Mr. Ellis Jacob. Mr. Jacob is the president and CEO of Cineplex, he’s held that position since 2005 and his 25 years of experience and leadership roles certainly transformed the movie going experience for Canadians in addition to as extensive industry experience and involvements in numerous industry organizations and boards, he sits on a number of high profiled corporate boards and has extensive philanthropic and volunteer commitments. Indeed in 2010, he was accepted into the Order of Canada for his services to the entertainment industry in Canada and also his volunteering and philanthropic endeavors. Immediately in front of me to my left is Jean-Pierre Lacroix. Jean-Pierre is president of Shikatani Lacroix leading branding and design agency and he specializes in providing brand strategy for corporate, packaging and retail clients. And for the past 35 years he’s been providing results-oriented guidance and strategy advice to clients in that sector. He has a blue chip [SP] client list, which anyone in this room would die for including Cineplex, PepsiCo, TD Bank, Office Max, The Toronto Blue Jays, and has succeeded, as we were discussing at lunch time, in a way that many of us haven’t of actually working with a number of those clients at the same time and bringing those clients together, which is really quite a skill. He’s much quoted in his sector as published [inaudible 00:03:13] leadership and indeed a couple of books on design. So I would like to ask you to welcome the panelist as they come to the desk, we look forward to a great discussion this afternoon.

Ellis: Good afternoon all, thank you for coming out this afternoon to listen to our Cineplex story and, Richard, thank you so much for that wonderful introduction. And when I was approached to speak today, one of the topics I was asked to address was how has Cineplex prospered and remained relevant during these tumultuous times and destructive times in the whole industry as we see it. And experts have predicted the demise of the movie exhibition business for the last 40 years. I started in this business 27 years ago and most friends of mine said, “I don’t think you’ll be in this business for more than 1 or 2 years because, you know, with the VCR and all these changes taking place, I don’t think this business is gonna last,” and Blu-ray and now we have a Netflix that we’re dealing with also. So each time they predicted that, you know, we’ve always found different ways to continue and get stronger. And, you know, our movie exhibition in Canada is still overall a very vibrant business even though this year the summer’s been a little bit soft, but it’s a cyclical business and it’s all dependent on the product that’s out there.

And last year we had our highest EBIDA ever and our highest revenue for the exhibition business, and over 72 million Canadians visited our theaters in 2013, so that’s nearly twice the Canadian population that came to our theaters that year. When we go down to the U.S. and we present to investors down there and they watch this reel and they say, “Oh my God, we didn’t know you were in all these different businesses,” because in the U.S., most of the exhibitors there have basically stayed pure to just the movie theater and the food services within the theater. And we’ve gone way beyond that to the point where when you think about movies in Canada, we want you to think about Cineplex. So today we’ve got 162 theaters with 1,638 screens from coast to coast, we have theaters in every province in Canada and we have about a 77% market share of the movie exhibition business in Canada.

And looking at the history of Cineplex, it dates back to 1912 when Adolf Zukor founded the Famous Players film corporation, but Cineplex itself really started later than that in 1979. And I started back at Cineplex in 1987 at height of acquisitions that we were doing in Canada and the U.S. We loaded ourselves with a lot of dept and eventually sold out to a U.S. company called Loews, which eventually renamed it Loews Cineplex. Then in 1999 basically when the U.S. took it over, there were a lot of Canadian executives that basically were let go and I was one of them and I said, “What the heck am I gonna do?” I was a young guy with two young kids and I said, “Well, I gotta figure it out.” So what we decided to do is another Cineplex employee and myself, we co-founded a company called Galaxy Entertainment. And again, like back in 1987 when I stated in the business, everybody said, “Why would people in small towns go to movies? They don’t go to movies anymore, the theaters are a forgotten commodity.” So we went into that business and the first locations we opened were two locations in Sault Ste. Marie and Peterborough. And what was amazing is I’d sit in the theaters or stand in the lobby in Peterborough all the cottage people around there would say, “Wow, this experience is actually better than what we get in Toronto.”

So we created a business that within 3 years we were able to build a business that was about $100 million in revenue. We had 20 theaters in these small and medium markets across Canada and with that success in 2003, we basically merged Galaxy and Cineplex together and went out as an income trust. And that put us in a footing where we were able to better compete with our other chain in Canada, which was owned by a U.S. company, Viacom, which was called Famous Players. But 2 years later in 2005, things really turned around when we found out that Famous Players was actually up for sale and decided that we were gonna take a run at Famous and I remember when I took my first flight to Ottawa I told my wife, I said, “Well I’m gonna try and buy Famous Players.” She looked at me and she says, “Are you mad, the government’s never gonna let yo do that.” So it was seven months of extremely hard work for our whole team, the government forced us to sell $100 million worth of theaters, which kinda broke my heart because that was like creating Galaxy and giving it away in one fell swoop, but we ended up creating a great entity in 2005, which today is Cineplex Entertainment. And subsequent to that, we took over AMC about 24 months ago and last year we became a national chain when we took over the Empire Theatres from the Sobi [SP] group. So that’s how we got to where we are today with our market share.

And people ask me all the time is, “What’s the reason that Cineplex is so far ahead of everybody else around the world when it comes to exhibition?” And to me, I base it on our passion and being relevant all the time. And you have to stay ahead of the curve in this business, you can’t go with your old assets and expect to be milking them. And people will say, you know, “Well, you know, you got that market share, what do you need to keep spending money?” But it is all about the guest and making sure that guest can have the best experience in the world in our theaters and that’s been our focus. You know, and when we hire employees, it’s not how technically smart they are, it’s what’s their passion and how can they deliver for us in our different lines of business that we have today. Our strategy, you know, we’ve outlined this and it’s a full, full strategy where we look to enhancing the experience. And when you look at our circuit today compared to 2005 when we merged the two companies, it’s really a different business. We’ve got a lotta premium offerings today, we have things like 3D experiences, we’ve got UltraAVX, which is a brand today that now exceeds IMAX in Canada, we’ve got D-BOX, which is basically a digital simulator where you can sit and watch the movie while the seats actually move to the movie itself. So there’s a lot of choices that we give the guest as to the experience that they can have in our theaters.

We’ve also created a huge media business today. We represent 93% of all the box office in Canada in the media space. So if you wanna get on a screen in Canada, you pretty much have to basically come to Cineplex. But we haven’t stopped there with media, we’ve gone way beyond that and today we have companies that are both in the digital space when it comes to service and it’s also in the digital space when it comes to location-based displays that you see. So when you walk into a Scotiabank or a Rogers store, a Royal Bank, all of those screens are all powered by Cineplex and you wouldn’t think of that, that we would be behind these. We’ve also signed a big deal with the Oxford shopping mall to do all of their large shopping centers, including Yokedale for digital signage because the old days, the fountain was the center point of a mall, today it’s the digital locations that people get together with. And eventually you’ll be walking in with your phone into the mall and it’ll send you a message saying, “Okay, Banana Republic, 30% off,” that’s the kinda stuff that we are developing for the future of the business.

The other business that we are looking at is the Cineplex store. This is where you can go online, you can rent a movie to watch or you can basically download it and own it in the cloud. It’s an extension to what we do at the theater, so basically you can watch movies anywhere and everywhere when it comes to Cineplex. And we will continue to look at acquisitions as we move forward into these different spaces within our businesses. When it comes to the theaters itself in Canada, there’s really no more room to acquire so it’s more about how do we grow our media and some of these other businesses. Then a question that I normally get asked is, you know, “What are the challenges in your business,” and actually this is a perfect week because this has been a really challenging month from the perspective of our box office is really taken a bit of a whammy and the fact that the movies aren’t performing like we’d like them to. But again, I tell everybody we set the table, we don’t serve the steak. So we set the environment to watch the movies, but the studios actually, you know, create the content. And there have been cycles before in 2005 when we were in the process of buying Famous Players. There were seven competitors bidding against us, they had a quarter like we’re having now, they all gave up. They thought business was gone and we knew that this cyclical so it made us the only player at the end of the day and it allowed us to acquire the assets, because it was an asset where the company selling it didn’t want us to buy it, the government didn’t want us to have it and the employees didn’t want to be a part of it, so we had lots of strikes against us, but what happened is the cyclicality of the business really helped us create the transaction.

The other thing is piracy. Piracy is a big threat in this business that, you know, a number of years ago we had to get the laws in Canada changed because Canada had one of the weakest piracy laws when it came to movies. You could technically in the old days walk into the theater, record a movie and there’s nothing we as Cineplex could do. Today, if you record a movie in a theater, it’s a criminal offense and Canada from being the worst country, today is one of the lowest piracy risk in the world from that perspective and that’s really a matter of working between the government and business to get that done. And finally the challenge is always continuing to stay relevant because you’ve got so many competing voices and noises in our business that continues to evolve. And Netflix has been a big focus of people when they say, “Well, why do I want to go to the movies if I can rent Netflix for 7.99?” The content’s a lot different, the experience is a lot different and what we offer on an overall basis is still a social experience that you can’t get sitting in front of your TV.

As far as our innovative priorities, I talked a lot about premium experiences in the theater itself, but we’ve gone beyond that and also gone into the food business and the fact that I don’t know if most of you are aware that we are one of the 20 largest food service companies in Canada. And we’ve created some of our own brands, like you saw on the clip, like Poptopia and Yoyos. And those brands, we are now starting to take outside the theater. With the millions of people that we have visiting us, we can really create these brands and start to market them outside our four walls and we’re just starting to do that and create a whole concession-related business. On the gaming side when you walk into some of our theaters you see games. We have a 50-50 JV on games and we have the largest gaming company in Canada. We supply pretty much every gaming facility. I’m not talking gambling gaming, I’m talking fun gaming. So I wish we could do gambling gaming because we’d be holders[SP].

The other thing is alternative programming. We do opera, we do sporting events, we do a lot of different, you know, delivery mechanisms from Bollywood to, you know, Korean movies, to all the different ethnic movies. And what’s interesting, there’re some parts of Canada where the Bollywood movies actually outgross the Hollywood movies. So you have places like [inaudible 00:16:18] British Colombia where a Bollywood movie, you know, consistently outgrosses the Hollywood movies. And the e-commerce, I talked about that a little bit as far as the digital rentals that you could get and also the cloud-based technology, but one of the biggest changes we came up with was last year we were the first company in the world to do this, where you could buy what we call a SuperTicket, which allowed you to go and watch the movie and at the same time you could purchase the digital download, which would be put into your locker after the three month waiting period. And that starting to evolve nicely, and what’s happening now is other exhibitors around the world are starting to copy that. And what we’ve done is we’ve created interest by, for example, The Hobbit, we would deposit it in your locker the first Hobbit that came out two years ago, we would let you watch the movie at the theater and then we deposit the new Hobbit into your cloud when it was available. And the take up on that, we started about a year ago and every one we do continues to increase as far as the transactions that we have developed through that.

So when you look at our customer-centric focus, we…basically the guest is the most important to us and those around the circle are the businesses that we’re in today from exhibition to media to loyalty. And loyalty, as I’m sure everyone of you know about seen today, we’ve got close to 5.7 million members now. I was just trying to remember what the screen had on it, but we continue to grow on a regular basis. The program is seven years old. If you asked me seven years ago what I would have expected seven years from then, I said, “If we had two million members I’d be happy.” Today we are one of the top five loyalty programs in Canada, we’re the fastest growing program in Canada and the most liked loyalty program. So it’s really taken on a significant life and I remember this was a situation where why did we end up with this program was when we bought the assets from Famous Players and Viacom, there were theaters across Canada that said “Paramount” on them and [inaudible 00:18:39] at this time who basically is still very involved with Viacom said to me, he says, “I don’t want you using my name, take them all off.” So we were sitting there thinking, “Well what the heck are we gonna do with this because now it’s gonna cost us millions, take the names down, put new names up.” We approached a number of banks and, you know, we got some lukewarm interest and then I sat down with Scotiabank and they said, “Well, it’s a tough sell for us because banking and movies, they just don’t go together.”

Today, if you ask Scotia, it’s one of the most successful programs they’ve ever done. It’s improved their brand significantly, it helped us considerably at the time because instead of having to pay to put new signs up, they paid for the signs and they pay us for the signs staying there, so it was a win-win for us. So for us it’s always been about being innovative, thinking outside the box and trying to figure out, you know, how we can do things better and also, you know, source [SP] it better. And a couple of years ago, we started a program called Transformation Cineplex where we invited every employee across the company to provide us with ideas. We distilled them down to 500 different ideas and then from there we started and continued to execute on those ideas as we move forward. And one of the key elements of everything we do is basically our suppliers. And when I look at J-P, J-P was there for me when I started Galaxy. I was, you know, a company with six employees and went to J-P and said, you know, “We need to develop a name and a brand.” And to us, I don’t look like at suppliers as somebody just giving you a service, we look at them as partners. And that’s the way it’s been and it’s been like that with a number of our suppliers from when we were that little Galaxy to where we are today. And that’s kind of the relationship we’ve had as, you know, different companies across all of the spectrums that we work in. And J-P, you were involved with Galaxy, you’re involved with VIP, you’ve been involved with many of our brands and the changing that we’ve had over the past number of years.

And if you look at some of the other examples, I don’t know if you’re familiar with these brands, but again Poptopia is basically a gourmet popcorn brand. The first store we just took outside our theaters is at Yonge-Dundas and there’s also one in Guelph, Ontario, so there’s a brand that we will continue to build. And when we started this brand, the first call I got was from the CEO of Kernels, he says, “Why are you doing this, why don’t you have Kernels?” I said, “Why would I have Kernels if I’ve got 70 odd million people that are marketing to today, why would I use your brand if I can use my own brand?” So those are the kinds of things that we’ve evolved in. UltraAVX is another opportunity that we had. We looked at it and said, “Why don’t we do what IMAX does, but try and do it better?” And so we created this UltraAVX auditorium, which has the best sound system in the world, it’s a Dolby Atmos system. We have the most systems of any company in the world, and yes we did have to spend a considerable amount of money to put these systems in, but it makes a difference in when you’re going and having that movie experience. If you saw Life of Pi for example and Dolby Atmos, when the person’s in the ocean and it’s raining, you want to pull out your umbrella because you feel the rains above you because the speakers are overhead, on the sides, behind the screen, behind you, so it’s about immersing you in that experience.

So here are a couple of the other brands that I talked about, you know. Then VIP, again that’s become our latest go-to and the fact that it’s become one of our most popular locations to visit. And in the next month, we’ll be opening the single standalone VIP in Canada at the Don Mills shopping centers, so they’ll be five VIP screens, it’s adult only, you can eat, you can drink, you don’t have to worry about kids kicking your seat. And since we’ve opened about, this will be our 11th one, Pat? Yeah. And I remember when we opened one in Edmonton and I asked them after the weekend was over, I said, “So how was business?” They said, “Well we ran outta food, we ran outta booze and everybody’s complaining the wine’s too cheap.” So I said, “We can solve all of those.” So hopefully that happens in Don mills too.

And as a company over the years, it’s all about engaging our employees. And in 2012, we won the Canada’s Most Admired Corporate Cultures, which is a reflection of the 11,000 people that we have working for us and their drive and passion. Last year we were recognized for Canada’s Passion Capitalist and also one of Canada’s 50 Most Engaged Workplaces. And you can say, “Well, you know, that’s not such a big deal,” but it is a big deal because when you look at our company, it’s a consolidation of five different companies with totally different cultures. Like if you ask an employee today, “Who do you work for,” they wouldn’t even think about the fact that they work for Famous Players eight years a go or AMC three years ago or even Empire even last year. And that’s all about communicating and, you know, making sure they feel part of your culture and making their culture your culture, where you want to pick up those benefits, and that to us is really, really important and hiring those passionate people to continue going forward.

So what do we think about the future? I think I mentioned SuperTicket, I think that will continue to grow, the movie destination will continue to be more than just about films, they’ll be much more than that. Today at Yonge-Dundas for example, Ryerson [SP] uses our theaters for classes, Miguel [SP] uses our theaters for exams at the end of their terms. You know, we use it for promoting all kinds of events including annual meetings, a lot of companies rent the theaters and then you’ve also got things like wrestling, opera, Bollywood, all of these other alternatives that we show at the theater. I think 3D glasses, some people don’t like them, I think the technology’s gonna change where you won’t need glasses and we’ll probably get to 4D movies in the next five years. Today the projectors are digital, I think tomorrow they’re gonna be laser, which will also be a further refinement. The frame rates on movies are gonna change, so the clarity levels will increase dramatically. You’ll have more VIP formats because a lot of our demographics are saying that’s what we want to do. We want to see a movie and we don’t mind paying a little bit more if we can get that luxury. And one important thing is if you…you know, when we went to Ottawa and we did each and every one of the deals we did, one of the charts we always put up is the ticket price from when we acquired Famous Players nine years ago to today on a base movie is actually low. And you may say, “Well that doesn’t sound right because I go to the movie theater and it costs a lot more.” It’s because every time we charge you for something, we’re giving you value, it’s either 3D, it’s either UltraAVX, it’s either VIP, it’s either IMAX.

So what we’ve done is people are very, very much availing themselves of that opportunity to spend there money as long as they feel they are getting value for it and it takes them out of there homes and brings them to our theaters. And our biggest competition is not you going to another movie theater circuit, it’s about what you’re doing with your leisure time and that’s really our focus. When we look at our media business, just quickly, as you saw on the clip, we’ve got a magazine which is, you know, 3.3 million copies per issue, we’ve got our in-theater lobby show, preshow, show time, time play which is an interactive activity that you have before the movie starts with your cellphone and then you’ve got the cineplex.com and the mobile app. And today our mobile app as you saw, it’s the seventh most popular app today after Facebook, Twitter, the weather and sports, and over close to 10 million people have downloaded that app, and in the last 2 years, we have close to 350 million app sessions. So people use our app for so many different things from buying tickets, watching trailers, looking at content and that’s been a huge interactive business for us. And finally I talked about, you know, the digital media, which space will continue to grow in our business.

So going back to, you know, what I mentioned at the beginning where I said people were predicting the demise of our business, I think, you know, as an organization, we’ve taken smart calculated risks and that’s allowed us to continue to grow. We’ve been innovative in where we needed to be, it’s been important to focus on the guest and the customer and deliver what their expectations are. Like I said before, we don’t create the movies, but if you go into a theater and it’s got gum on the floor and the seats are squeaking, you’re not gonna go back even if the movie was fantastic. But if the movie isn’t so good, at least you’ll say to yourself, “Well I had a good experience even though I didn’t enjoy the film.” And it’s cheaper to see a movie in downtown Toronto than it cost you to park your car practically. So from a value perspective, you’re getting this $200 million experience on the screen for an average price of less than $10, which is quite a significant thing. And I think part of our success is been our passion for the business. When people ask me, you know, “What’s the main thing that you think has been important to you,” is I have a team of executives that report to me, I’ve been working for 45 years or 42 years, sorry, not one single executive has ever quit on me, number one. And number two, my IT persons who work for me for 30 years, my CEO 27 years, my CFO 26 years. So for us, it’s a family and building a team together. And the only person who ever left me is now my closest friend and I invest with him everywhere because he started Galaxy with me and he didn’t want to be part of a public company so, you know, we work together.

So hopefully I’ve given you a good background on the company. I think I’ll turn it back to J-P and then you can probably ask us some questions or do you want to do questions now? Okay, perfect, thank you.

Jean-Pierre: So, design innovation, what you’ve seen in this presentation and for me, the most frustrating thing and, you know, two things, one is that we’re Canadians and we’re humble, right, we’re humble. You know, the success of Cineplex, one of the key reasons is they’re humble people, they have a collaborative culture, they think big, but they stay humble. And I think that’s a fantastic DNA, but it sometimes works against us. It works against us because I’m tired of hearing Apple at every conference being the most innovative company. There is the conference that I can’t go to that I go to now that all I hear is Apple, Apple, Apple. Guess what, there’s a new kid on the block, it’s called Cineplex Entertainment, they’re as innovative if not more innovatice than you are, Apple, and they’re definitely humbler when it comes to bragging about the success they’ve done. But you have to ask yourself, you know, why has Cineplex been successful? And the reason for that is that they really understand the path to purchase, they really understand the consumer behavior, they understand that innovation’s about creating an equal system, about creating an environment where they control all of the consumer touch points.

If you look at, you know, Elsa’s map where you had the consumer in the center and you had all of these services around, really they’ve created, you know, a network and we call that, you know, basically an ecosystem because they own every part of that relationship. They own the part where they’re attracting the customer, they’re…you’re right, your mobile app, I use it everyday, absolutely. I don’t go to the movie without checking my mobile app. It tells me what theater and, you know, kudos to you guys, it’s just not Cineplex theaters, it’s every single theater and it was that before you bought Empire and before you bought AMC. It became the central point. If I wanted to look at a movie, that was the first place I went to. You know, that’s powerful, you know, you’ve started that relationship in the consumers’ home when they’re debating going to watching a Netflix movie or an iTune movie or getting in their car and driving to a Cineplex Entertainment theater, right? And so it’s building that ecosystem, it’s, you know, those digital screens that are happening in the malls, that’s delivery mechanism building that relationship with the consumers, the transact is all about owning that at-purchase. The VIP’s all about elevating that transact moment, getting more dollars. You know, the population’s not getting bigger faster in Canada, you’ve saturated the market from a stand point of growth, I mean I’m sure there will be some markets we will still find some opportunities, but the reality is it’s getting more dollars from the visits that’s gonna generate the revenue and Cineplex have done that phenomenally well, they really understand that the path to purchase and that at-purchase moment.

And then they’ve got the [inaudible 00:33:04] card that’s about retention, right, it’s about building that loyalty for their brand, right, making that brand indispensable wherever the consumer is and building the online store continues that relationship. So they’ve truly are an example of a fantastic world class example of disruptive innovation. They’ve disrupted themselves and the industry by staying relevant. And then you ask yourself, “Well how does that happen from a design standpoint?” Well, from our perspective, we always look at a physical space in three lenses, we look at where’s the messages, you know, where is, you know, Cineplex media delivering that message, where is it relevant to the audience, you know, and very often you’ll see digital signing where they keep getting a message after the purchase or they communicated a message to far early in that purchase. You know, Cinepelx had perfected that messaging strategy. And you look at structure, VIP, AVX, those are all structural transformations in the industry. Now, you gotta remember that Cineplex DNA was innovation, right, they invented the multiplex, right, and that was invented here in this country. They invented the multiplex that the world imitated. And Cineplex is now reinventing again, the industry through VIP, AVX, extending their brand in the malls through their food service platform, Poptopia, Yoyo, these are all great brands, Outtakes is another great brand that they’re taking to the mall. Why not? What a great way of creating a platform to build relationships with the consumers. And obviously service, yes. You know, what is that sales choreography, the systems that are in place that are gonna deliver?

They put a lot of attention… Look at all the great brands in Canada, look at TD, one of our other clients, they win the J.D. Powers awards every year. Why? Because they put a lot of attention to how employees are treated, how they’re motivated, how they’re trained, the respect they get from the management team, the importance. And when I see Ellis going to openings, you know, we get invited at every opening as part of the family, he spends as much time to talking to every single employee because he knows deep down that those are representing the brand, that they deliver the brand promise every single day, every single purchase moment, they’re there for the brand, and if they’re engaged, the consumer’s engaged and the brand succeeds, and they’ve been very good at that.

So looking at those three is how we look at brands and our job is how do you create a physical environment, the leverage is all these insights and all of these moments of truth, so that we create the perfect experience. And obviously VIP was a great experience. You know, the first VIP was at the Varsity [SP], which is still my favorite, needs to be renovated, but it’s still my favorite…yeah I know, we oughtta start with the landlord. It’s still our favorite theater, but I’m just waiting for the shops in Don Mills because that will now become my favorite theater. But you know, how do you create that experience and where does that experience start, you know, the attract, where does that start? Well it actually happens along the road, you know, how do we communicate that this is a different Cinepelx experience, right, that this is a different experience? Well you need to architecturally differentiate. You need to make sure that when they come into the lobby that it’s something very different, the expectation.

No matter where we do a VIP, there’s an entry way that happens for this space. There’s a sense of separation between conventional theater and the new VIP and we purposely create that transaction because we wanna elevate that experience for the consumers. And here’s examples of some of the ideas that the design team, Richard [inaudible 00:36:54] who’s been working at Cineplex business from our office for close to 20 years. You know, the fastest way to get into a consumer’s heart is through pictures. You know, we’re very much visually stimulated, and so being able to share visuals with the leadership team at Cineplex about ideas. You know, everything we do as consumers is learned behavior, right? You learn your behavior from going to an [inaudible 00:37:22] or an airport, like your self check-in kiosk, you learned at, you know, it applied at the VIP and at Cineplex, your self check-in because it’s a learned behavior. So where can we take these insights from the industry and apply to Cineplex and innovate through learned behavior, and these are some examples of some of the ideas that we had, image boards, you know, the vestibule, we have these…we want to create the vestibule, the entry way iconic. We want something that carries from location, location, it becomes iconic. In this case, these are small cubes with photographs of actors behind it, but it creates a mosaic that says “VIP”. So it’s very much theatrical entertainment-based, but also talks a lot about the brand and the brand experience.

You know, we look at seating is very important, VIP lounge, you know, it’s a lounge, it’s a place where people drink, they socialize before they go to the meet, [SP] they stay after the movie, right, we want them to stay there, we want this place to be a place where you hang out, right? It’s a place you want to hang out because we know that if you’re hanging out, it becomes your place, it becomes a place you socialize with people. So we want to make sure that the environment allows people to hang out, so the seating plays an important role. You know, the whole structural experience we call the consumer journey in that experience, you know, where do we put the LCD screens? Where do we put the entertainment? Where’s the bar located? What kind of food gets presented? How do we elevate the beverage platform? How do we elevate the experience in the theater itself? These are all consumer touch points that we need to leverage as we design the space. Every one of these builds the brand. Every one of these communicates something different, but what you should expect from this experience verses traditional theaters.

Then we get into materials. You know, the beauty of our business is it’s a sensory experience. We have sound, we have smell, we have sight, we have touch, you know, we have all of the sensory experiences and how we leverage those. You know, touching real wood verses touching laminate, that creates a whole different experience, having real granite verses laminate, that’s a different experience, having comfortable carpet verses concrete that’s an experience. So all of these things play… Having the right music playing, having the right video playing, having the right smell of foods, you know, nothing worse than going into a Tim Hortons and they burnt the toast, right, you’ve got that…or burnt the coffee, it really…it’s a turn off, right, the immediate reaction when you walk in the door is something negative. So we want to make sure that everything we do in this space, you know, from the location of the digital screens, you know, so Cineplex media are very much focused on delivering a digital experience for their customers. Well where do we put those messaging and those screens and how does that work with, you know, the trailers and then how does that VIP work within the entire theater space environment? Where do we fit it? Where’s the entrance to this space? What’s the site lines when you’re looking from the theater because we wanna entice people that may not have tried the VIP in the past, wanna entice them to come in, go through the threshold, experience VIP, right?

We’re all creatures of habit, how do we brake those habits? And obviously as Ellis mentioned, they’ve got 11 VIPs centers locations across Canada and here are some examples of some of the VIPs that we’ve accomplished. You can see the identity is very distinct, we use black, separated from Cineplex’s blue. Black is sexy color, it say’s premium for consumers, we call it the blink [SP] factor. Forty percent of our communication is visual, 80% is color and shape, so we want to [inaudible 00:40:58] color for VIP, which is black. Lexus dealerships, which we did across Canada was black because it says premium, it say’s different, but it still fits within the Cineplex brand equity and brand cultures. Then the whole seating package, where people sit down. You know, the amount of attention that Cineplex put to the food, so how many of you here have been at a VIP? Well it’s time that you go to a VIP really, guys. You gotta try the food. You will be blown away especially when Don Mills’ open, you have to try the food. I think you will be happily shocked at how they’ve elevated the whole food experience and the beverage experience.

Here’s the bar. You would find this bar in a hip place downtown, you would find this at a disco, a place where we go dancing, you know, a place where people wanna meet and congregate and socialize, right? It’s not just about..,you heard Ellis, it’s not just about entertainment, it’s both socializing and we want to create the perfect social environment where you feel comfortable to stay…arrive an hour before or stay an hour after, you know? And concession’s really important, still is. It’s still a significant revenue generating vehicle, so how do you elevate concessions in this environment, the finishes, the materials and obviously Cineplex put a lot of attention… I can’t remember how many means [SP] we had on the digital projecting systems and the seating. You still didn’t get your loveseat in there [inaudible 00:42:25]. But then again, the seating, you know, the…nothing more says comfort than your seating and the more comfortable the seating. And what’s interesting is typically the first seats in front of the screen or we call them the dead seats or the seats that no one really gets, the overflow, but these seats are actually the coveted seats, because they actually recline and you can actually fall asleep if you’re not careful, but they’re very comfortable. And so every square footage of this space… Because obviously you need to understand that if we’re reducing the number of seats in the theater and giving customers more space, it’s like flying business class, boy you need to generate a lot of economical revenue to pay for that space, right, because basically, you know, we’re into the space rental, you know, where cost per square foot’s very important and so how do we get those incremental dollars to justify all this space is really important.

Mike: Good afternoon everyone, my name’s Mike Wollat, I’m the CEO of the CVCA and I want to thank Jean-Pierre and Ellis for joining us today and bringing us some very interesting insights in how to innovate a business and how to innovate a brand. From what I’ve heard here today, I think it’s all about understanding trends and embracing the consumer’s needs, it’s about engaging the customer and about creating an experience, an experience that will build a lasting impression and a lasting relationship with the customer. On behalf of the CVCA, PwC, Cinepelx and Shikatana Lacroix, I want to thank you all for joining us and we look forward to meeting you soon in our upcoming events.

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