South African broadcasting and cinema group Primedia, owners of distributor/exhibitor Ster-Kinekor has announced improved figures with revenue up 15.1% to $135m (R898.6m) and pre-tax profit growing 39% to $20m.
The film division lifted revenue 5.6% to $13.6m thanks to a higher contribution from Ster-Kinekor Home Entertainment.
But overall operating profits were down for the division because of lower than expected attendance at Ster-Kinekor cinemas and increased marketing costs as the group tries to grow black cinema attendance.
The company is realising that it can do better by focusing on local growth opportunities rather than overseas expansion.
Over the past five years profits have been hit by expansion in Europe through its Ster-Century operations, which have now been largely sold off.
Now Ster-Kinekor is concentrating on building up the black audience share of South Africa's cinema-going public.
CEO Ferdi Gazendam said the company realises the critical importance that the black consumer market has for Ster-Kinekor's future growth.
Gazendam and the Ster-Kinekor team have been able to "convince" leading South African distributors such as Ster-Kinekor Pictures and Nu Metro Distribution to invest additional money into marketing to this group.
"All this additional spend is carefully spent on media consumed by black consumers," said Gazendam.
In the six months to 31 December 2003, Ster-Kinekor Theatres spent an additional R3 million on promotional activities exclusively concentrated on black consumers. "The three year project focuses on getting black consumers to our current cinemas, obviously at current ticket prices."
With the support of the distributors and studios, Ster-Kinekor is also 'experimenting' with price elasticity in selected cinemas. These are cinemas closer to residential areas with a predominantly black 'middle class' population. Reports indicate a 600% boost in average weekly attendances in these malls at the "lower" price points.
"We are now doing the financial models to see whether we, including our partners the distributors and studios, can actually run commercially viable cinemas at these price points. We believe a model exists to achieve that," said Gazendam.
He added: "Given the fantastic attendances figures at the "lower" price point in the selected sites and that these cinemas are accessible to the black middle class consumer, we want to 'pilot' a project that in essence takes cinema to this market. So we're planning to build some cinemas in residential areas mainly populated by 'black middle class' consumers. We are evaluating a number of different ways to 'build' at as low a cost as possible without compromising on the glamour of a Ster-Kinekor cinema."