Your Movie Theatre

-An Investment Opportunity

Submitted by-
Bhavay Jain
INVESTOR OPPORTUNITY
INDUSTRY OUTLOOK
2600 screens $950 Million 2.9% to 6% $17.6 Ticket Price 7.0 Screens
In Combined Increase in household Highest average Per 1,00,000 people
Target by 2030 Revenue spending in price in Middle
entertainment East region

KSA VISION 2030

TARGET LOCATION
• Securing good locations is imperative for cinemas to succeed. Cinemas are largely a catchment play and cinemas in malls/areas with
strong footfall are likely to witness higher visitation.
• More number of Westerners (about 1,00,00) live in private compounds in the major cities such as Riyadh, Jeddah, Yanbu and
Dhahran. The establishment of the General Authority for Entertainment (GAE) and theatres in such urban cities will see less resistance
from the local people.
• Investors can deter from opening cinema halls in Mecca and Medinah where the government prohibits entering non Muslims.
• Turkish films can be screened without any government intervention. Many places like Khobar at the Sultan Bin Abdulaziz Science and
Technology Center can screen only education films. Targeted places for screening must be chosen considering the government
restriction.
• A mix of Hollywood, regional, Bollywood and local content is likely to appeal to audiences with adaptation to local culture and
geography.
 THE MARKET
CUSTOMER SEGMENTATION

66% 33% 56% 95% 90%

Local Residents Expatriates Under Age 30 Literacy Rate Sunni Muslims

• Saudi Arabia this year (2020) has overtaken the United Arab Emirates and is currently the region’s top-grossing territory, with more than $73
million in theatrical movie ticket sales.
• With Saudi Arabia’s population forecast to be 39.5 million by 2030, the Kingdom has the potential to absorb up to 2,600 screens.
• Saudi Arabia is viewed as a high growth market because it combines a large population base with growing purchasing power.
• This resulted in an increase in disposable income, which reflects positively on retailers the past 40 weeks — a roughly $2 million increase in box
office returns compared with the same period in 2019.
 MODES OF ENTRY
Foreign Investment Regulation Act,2000
• Initially only nationals are privileged to do
business in the KSA
• With the formation of SAGIA, foreign
investors are getting permission to invest in
the country, as well.
• Getting an investment license is the most
difficult.
Franchising in the KSA
• Franchising market is increasing rapidly for the
last couple of years.
• The KSA does not follow any strict guidelines for
the franchise business operations.
• Commercial company law is being used as a
baseline for the franchise business model.
• A foreign investor investing in the service sector
in the KSA can establish either a branch office or
a 100 per cent owned LLC.
Joint Venture
• Currently, the KSA Government has
allowed wholesale and retail trade in the
country and has also allowed foreign
partners to poses 75 per cent ownership
in a joint venture partnership model.
Paid Up Capital through Equity
• A foreign investor investing in the
service sector in the KSA can establish
either a branch office or a 100 per cent
owned Limited Liability Company (LLC).
• Investment license is granted by the
SAGIA in cases of sophisticated
technologies, expertise, patents,
scientific content, and IPRs (intellectual
property rights), which are documented
and authenticated by recognized
organizations, and licenses are granted
to applicants who are residing in the
KSA.
REVENUE MODEL
FAMILY & FRIENDS PRIVATE CINEMA FORMATS
FAMILY & LIKE 3-D, PRIVATE
FRIENDS DINE-IN,CINEMA
VIP ETC.

• The four screens in Riyadh are divided into “family” • In the initial years, cinema demand is expected to far

and “bachelor” venues, and films are chosen to be outstrip the supply.

suitable for the particular audience. • Cinemas are evolving from vanilla movie-going into

• Pricing varies from different packages based on the experiences and industry would need to cater for

experience and number of people. The two famous different tastes and preferences (e.g. dine-in,

packages are Gold package and VIP package. platinum/ VIP, IMAX, 3D/4D).

• The average price is about 3000 SAR with 15 people • For long term sustenance of the sector, industry

as number of viewers. players would need to adopt/experiment with

• Family, Spouse, Single Moviegoers/Alone, Kids-Only, different pricing models that are appealing to its

and other sections are the primary source of audiences (such as movie passes, pricing by time of

revenue. day/day of week, seat configurations, types of

screens, etc.)
 REGULATIONS IN THE INDUSTRY
• There are two main bodies for regulating and supervising cinema industry in Saudi Arabia namely, the General Commission for Audiovisual
Media (GCAM) and the General Entertainment Authority (GEA).
• The task of GCAM is to regulate the cinemas, licenses and media content whereas GEA’s mission focuses on licensing of events.

New Cinema Regime

• The cinema licensing regulations cover three types of licences: cinema venue development, exhibitor, and cinema venue operating.
• Under new regime, the cinemas get divided into two categories; temporary and permanent. The temporary cinemas can get a license for
one year while permanent cinemas can get license for three years.
• An applicant for a cinema license must hold a relevant commercial license. Along with the official application form, the applicant must
also submit an economic feasibility study, with evidence of its experience in operating cinemas.
• Besides the fixed official fees for operating a cinema, it is generally necessary for the operator to pay GCAM an equivalent of 25% of the
value of tickets sold.
• Operators also need to respect intellectual property rights and to comply with Saudi law with regard to media content and age
classifications.

Censorship
• Sex, nudity, and anything critical about the monarchy will be banned/censored.
• Children under the age of 12 years will be barred from watching movies that contain scenes that are not fit for their age. According to the
regulations, they will not be allowed to enter theaters unless they are accompanied by an adult guardian.
• The screening and classifying of film content include six categories depending on the age of the audience.
• Existing moral and cultural values have to be followed under new cinema regime.
COMPETITIVE LANDSCAPE
Vox Cinemas
• VOX Cinemas parent company Majid Al Futtaim, the leading shopping mall, communities, retail and leisure pioneer
across the Middle East, Africa and Asia is an active supporter of the Kingdom’s Vision 2030.
• VOX Cinemas is investing an additional SAR 2bn to open 600 screens in the next five years in Saudi Arabia.
• VOX has obtained permission to keep its venues in Riyadh, Jeddah and Dammam open 24 hours a day in November
2020.
• Vox projecting there will be 340 screens in operation in the country by year’s end, and close to 700 by the end of 2021.

Cinepolis

• Cinepolis, the largest cinema exhibitor in Latin America and fourth largest exhibition circuit in the world, in June
2019 announced the locations of six new movie theaters in Saudi Arabia.
• Cinepolis introduced its world-class cinema-going experience through high-touch theater concepts, including Luxury,
Premium, Macro XE, 4D Emotion and kid-approved Cinépolis Junior auditoriums to the country that is home to over
39.5 million potential moviegoers.

AMC Cinemas
• AMC Cinemas is the first cinema operator in Saudi Arabia delivering the best movie going experience.
• AMC, backed by its majority shareholder The Wanda Group, entered into a partnership with Saudi Entertainment
Ventures Company (SEVEN), a subsidiary of the Public Investment Fund of Saudi Arabia (PIF).