Movie theatres exert pulling power on Sky City

Evan Davies

Sky City Entertainment is seeking to lift traffic through its cinema operation by buying out its joint-venture partner, Australia's Village Roadshow, for just under $50 million.

Sky City will take full control of the New Zealand venture. It will lift its stake in the Rialto venture from 25 per cent to 50 per cent and its stake in its Fijian venture from 33 per cent to 66.7 per cent.

It shares the Rialto chain with Rialto Entertainment and the Fijian venture with local interests.

It will fund the deal with the proceeds from the planned sale of the Sky City Metro Centre on Aotea Square in central Auckland, where it will continue to operate the multiplex.

The three ventures operate 101 cinemas and Skycity plans to open a further 15 this year.

"This is a logical consolidation of our investment, adding a solid revenue stream," said Skycity managing director Evan Davies. "Skycity customers are entertainment customers. Moviegoers are entertainment customers. It is logical to expect that there will be synergies, and opportunities exist to offer customers enhanced experiences."

Sky City's shares rose 3c to $5.32.

Observers said the move could help Sky City to cross-sell the casino to moviegoers with offers that were not well exploited in the existing joint venture. These offers could include free car-parking at the Auckland casino complex to moviegoers with a view to boosting casino visits.

They said the cinema business was not a spectacular investment as it was facing tougher competition from sophisticated home-entertainment systems as well as an explosion of other entertainment offerings.

"It is a net positive but it is a pretty small deal," said Forsyth Barr analyst Jeremy Simpson.

Sky City is selling the Metro Centre because it believes the funds are better deployed in its operations. The sale process has just begun.

Davies said Skycity's regional cinemas were performing well. A nine-screen complex at Queensgate in Lower Hutt is expected to open in August and a six-screen cinema complex is expected to open in Auckland in December.

Village, Australia's biggest cinema chain, is selling to reduce its dependence on box office sales.

It yesterday forecast a full-year loss of about A$35 million ($42 million).

- Additional reporting: Agencies