Cineplex looks to expand beyond movie theatres; wants to grow arcade business

TORONTO - Movie exhibitor Cineplex Inc. (TSX:CGX) sees a future in arcade games as it looks for ways to boost revenues beyond movie theatres.

"Gaming presents a real opportunity for Cineplex," chief executive Ellis Jacob told shareholders at the company's annual meeting on Wednesday.

The renewed focus on arcades comes after a report in the Wall Street Journal last month said that Cineplex has partnered with private equity firm Onex Corp. (TSX:OCX) to submit an offer for restaurant and arcade chain Dave and Buster's, valued at US$1 billion.

While Jacob declined to discuss whether Cineplex had made a bid for Dave and Buster's, he said Cineplex is interested in operating arcades outside movie theatres.

The company already has a joint venture in Cineplex Starburst, which operates the Playdium family entertainment centre in Mississauga, Ont., and supplies equipment to other arcades, amusement centres, bowling alleys and amusement parks across the country.

"You can expand into more than just Playdium. You can make it a sports bar concept, which I think has a lot of runway in the future," Jacob said after the meeting.

Arcade games have been a part of Cineplex's business for well over a decade, with token-operated gaming centres tucked into many of its movie theatres.

More recently, the company opened bigger gaming spaces under the Xscape brand, with popular arcade games and billiards. Some of the locations also have lounges with liquor licences.

By the end of the year Cineplex aims to have 16 Xscape arcades at cinemas across the country, an increase from the current 10 locations. For now, it doesn't have any further expansion plans, Jacob said.

"We're going to roll them out into our theatres, build up the brand and then look at taking them outside," he said.

"It all depends on the performance of the arcades as to whether we continue to build them attached to a theatre or whether we build a stand-alone."

The presentation to shareholders outlined other ways that Cineplex is reaching beyond the volatile movie business, which is only as lucrative as its last run of blockbuster films.

On Tuesday, Cineplex announced a partnership with mall operator Group Oxford Properties that will have the company install high-definition video screens and mall directories at 10 shopping centres across the country.

The agreement also integrates marketing materials across various platforms, including mobile phones, which will provide retailers with analytics about local shoppers.

Also, Cineplex will soon launch a test program in Toronto that allows moviegoers to pay a premium price for the best seats in the house — the two rows in the centre of a theatre that are considered the sweet spot for cinephiles.

Earlier this month, Cineplex reported that bad winter weather and several Hollywood flops hurt its results in the first quarter. Quarterly profits dropped 42.5 per cent to $5.1 million from $8.8 million a year earlier.

However, revenues increased 12.9 per cent to $280 million, mainly due to the acquisition of 24 Empire theatres and digital signage company EK3 Technologies last year.