News Column

Return of the Mexican Cinema

October 2005, HISPANIC BUSINESS Magazine

Janet Perez

film guy

Some of Moctesuma Esparza's fondest memories recall his youth when he sat inside magnificent movie palaces of the 1950s and watched the epic films of Hollywood and Mexico's golden era. "I loved the Mexican cinema. It gave me a deep sense of cultural identification, a sense of who I am," says Mr. Esparza, the producer of such films as Selena, Introducing Dorothy Dandridge, and The Milagro Beanfield War.

But soon the old movie palaces were gone, along with the theaters serving Hispanic neighborhoods. That reality came home to Mr. Esparza in 1997, when he held 20 benefit premieres for Selena in cities with large Hispanic populations. There were no modern multiplex theaters in any of those Hispanic locations, and his target audience would have to drive substantial distances to see his film about the slain Tejano singer.

Bringing the movie-going experience back to Hispanic communities became a mission for Mr. Esparza. In July 2005, the 14-screen, $21 million Maya Cinemas opened its doors in Salinas, California. It's the first of what Mr. Esparza, CEO of Maya Cinemas, hopes will eventually grow into 500 screens in 40 cities over five years.

Maya Cinemas enters a crowded marketplace still recovering from a recent meltdown. During 2000 and 2001, exhibition giants such as Carmike Cinemas, Edwards Theatres, Loews Cineplex Entertainment, and United Artists Theatres all filed Chapter 11 bankruptcies. Most of these chains made the mistake of building too many screens for a slow-growing audience.

Slow times still linger. While moviegoers cite the quality of films as a reason for staying away from multiplexes, polls show an even bigger turnoff is the theater experience itself. "The industry seems to be in a bit of a malaise, but somebody has to be willing to take the risk and say ... '[W]e're actually going to make the theater-going experience even more enjoyable,' " says Paul Dergarabedian, president of box office tracker Exhibitor Relations Co. in Los Angeles. "That will hold us in good stead and create bigger box office by bringing people back to the movie theaters, by giving them something they can't get anywhere else."

Mr. Esparza points to growth in his specific audience. "Movie-going is a particularly [young] phenomenon," he says. "It's the 14- to 24-year-old that has to get out of the house and wants to go out on a date. They'll go every weekend. The average American goes to the movies five times a year. The average American immigrant goes five times a year. The average Latino native born goes 15 times a year. Even when you average the native-born with the immigrant Latino, it's still 10 times a year double the national average."

With Salinas up and running, Maya Cinemas has its sights set on Bakersfield, California; Santa Fe and Albuquerque in New Mexico; Chicago; Dallas; and the Bronx in New York. The company now has experience in building cinemas in a downtown neighborhood, a process that involves mastering both "real estate development and the exhibition business," according to Mr. Esparza.

Raising money for the project proved a major headache, given the industry-wide slump and post-9/11 caution. Some private equity firms have prohibitions on investing in real estate-based projects, and others refuse to invest in "pre-revenue" (or start-up) companies. Maya Cinemas obtained capital from Syndicated Communications, Pacesetter Capital Group, Medallion Capital, Milestone Capital, and wealthy private individuals. "The people who invested in me were people who knew me and had invested in me in the past," says Mr. Esparza.

Dealing with local economic development proved even more complex. At first Maya tried to lease land, but lost out to other developers. Then the company decided to buy land directly from the City of Salinas. The city had offered to donate the land, but based on California regulations, accepting land from the city would have made construction subject to the state government's prevailing wage laws, increasing building costs significantly. Instead, Maya bought the land in exchange for the city build-ing a $14 million, five-story parking garage to benefit the entire downtown Salinas economy.

The city couldn't be happier. "In a lot of ways it's been like a dream come true for us," says Don Reynolds, project manager for the Salinas Redevelopment Agency. "The theater is designed in a really neat way because it invites people to a downtown experience. It's more of a theater that would accommodate a night out on the town, compared to the cookie-cutter model of some of the commercial development chains."

The Salinas cinemas evoke the feeling of old-time movie houses with their plush seats and art deco touches. But Maya has greater ambitions than improving the movie-going experience. The company seeks to create a viable Spanish-language film circuit.

From the 1930s to the early 1980s, a thriving system exhibited Spanish-language (mostly Mexican) films in the United States, with 700 screens full time and another 300 part time. According to Mr. Esparza, it was a half-billion dollar business at a time of much lower ticket prices than today.

But by 1990, the only venues in the United States playing Mexican or Spanish-language movies were a few art houses. The movement of cinemas from downtown to suburban malls, the rise of video rental stores, and a collapse of quality in the Mexican film industry contributed to the decline.

Maya Cinemas plans to showcase Spanish-language films, although because of business imperatives about 90 percent of Maya's screens will feature first-run, mainstream Hollywood films that appeal to Hispanics under 18. Along with the theaters, the company has launched Maya Pictures to produce and distribute films that are commercial and appeal to young Hispanics. A private equity fund has signed up to act as lead investor in the $30 million finance plan. The first film from Maya Pictures is Walkout, directed by Edward James Olmos for HBO.

"What [Maya] is doing here is a good idea," says Mr. Dergarabedian. " If [Mr. Esparza] can pack them in, bring in the audience, it's good for the industry. I think it's these visionaries that are ultimately going to help the industry and save the day by taking the risks and spending the money, and I think audiences will respond."



Source: HISPANIC BUSINESS Magazine


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