Tim Richards
Tim Richards' theater chain was just sold for a whopping $1.5 billion, and the former Warner Bros. international chief still is running the show -- setting standards (better seats, smarter pricing) for all of Europe.
Tim Richards didn't set out to run a wildly successful U.K.-based theater circuit. Back in 1994, the Canada-born Richards, who had been living in London, agreed to take a job with Warner Bros. International Cinemas that required him to relocate to Los Angeles. The plan changed abruptly with the Northridge earthquake. The building on the studio's Burbank lot where Richards had been assigned was destroyed, and so the company sent him to its New York City offices, where he spent the better part of a year. Several years later, once he and his family had settled in L.A., Richards got an even bigger jolt: Reading the annual report for Time Warner, Warners' parent company, he learned that its cinema division was considered a "noncore" asset. It was time, he decided, to strike out on his own.
And so, in 1998, the diplomat's son and former ski champion left Warners. Working out of the garage of his Hollywood Hills home, he began hunting for seed money to buy his own theater chain. A year later, armed with private-equity funds from Boston Ventures, Richards moved back to London and, setting up shop in a cramped office above a Greek restaurant in the suburb of Chiswick, laid the groundwork for what would become Vue Entertainment.
A decade later, Richards, 54, is the central figure in one of the biggest success stories in the global exhibition business. Vue has developed a reputation for refining the art of the multiplex and for its extremely friendly customer relations -- its varying array of ticket prices is testament to how closely it monitors the habits of moviegoers. With 146 theaters primarily located in the U.K., Germany and Poland, all thriving markets, it has become the second-largest Pan-European exhibitor, behind only Odeon Cinemas.
And as it marks its 10th anniversary this year, Vue suddenly has even more reason to celebrate. In early June, it was purchased by Canadian pension fund OMERS and Alberta Management Corp. for $1.5 billion, a staggering sum for a circuit of its size (by comparison, China's Wanda Group acquired U.S. giant AMC Entertainment for $2.6 billion in 2012). Richards and his two compatriots, Vue CFO and deputy CEO Alan McNair and COO Steve Knibbs, will continue to run Vue.
There are 80 Vue locations in the U.K., which makes the circuit third in terms of sheer size behind Odeon and Cineworld but second or third in terms of admissions. And Vue's spacious, state-of-the-art multiplex in the upscale Westfield London mall is the busiest movie theater in the city.
"There's a newfound optimism in our industry," says Richards, who resides in London with his wife and three children and is reported to have made upward of $50 million from the sale to OMERS. "The importance of film and the importance of the big screen is reflected by the level of investment being made."
Vue began its dizzying run by first building six theaters and then buying 36 Warner Village Cinemas scattered across the U.K. from Richards' former employer. In 2006, Richards and his team orchestrated a management buyout with backing from the Bank of Scotland and, in 2010, they sold Vue -- which by then was operating 70 theaters, nearly all of them in the U.K. -- to private-equity firm Doughty Hanson & Co. for $730 million. Doughty more than doubled its investment with the sale to OMERS after first helping to double Vue's footprint.
"Tim and his team are absolutely the top at their game, and when we acquired the business, we saw enormous potential to make acquisitions and start consolidation of the European exhibition business," says Julian Huxtable, a senior principal at Doughty.
In 2012, Vue made its first major foray into continental Europe by buying a majority stake in CinemaxX, with more than 30 locations the second-largest circuit in Germany. The deal was valued at $180 million. And, in May, Vue bought Multikino, the second-largest circuit in Poland, with 30 locations, including two in the Baltics.
In recent days, there have been rumblings that Vue's next conquest might be Odeon itself. That circuit operates 236 locations in seven European countries. Odeon is owned by Terra Firma Capital Partners Ltd., which, in 2004, combined Odeon and UCI (the former joint international cinema venture of Paramount and Universal). Another likely suitor for Odeon is Wanda. Industry observers say that just as the U.S. exhibition business has consolidated in a major way the past decade, Europe's theater circuits are undergoing a similar transformation.
"We are pursuing an organic growth strategy. We look at every single circuit that comes up because quality for us is absolutely paramount," says Richards. "You hear about the ones we do buy, but you don't hear about the ones we've walked away from. And we've walked away from quite a few."
Richards says he's not consumed with entering the Asian marketplace despite the explosive growth in China and throughout Southeast Asia.
"I'm going to be in business for a very long time, but right now there are enough opportunities to last three to five years, and our goal is to build out in Europe first and then we will absolutely be looking offshore," he says.
OMERS had wanted to buy Vue in 2010 but lost out to Doughty. Mark Redman, senior managing director at OMERS, said he and his group now have happily fulfilled that wish. He seconds Richards' view of the future, pointing out that the European box office reached a record $8.5 billion in 2012. "There is always volatility in the exhibition space, but if you look at attendance across Europe over the past decade, you see steady growth. You have a nice combination of mature markets, such as the U.K., coupled with the opportunity to grow the business," says Redman.
When asked about the possibility of an Odeon acquisition, Redman says: "We will look at all opportunities in the space. My own view is that the most exciting future is in continental Europe."
Of course, Vue relies heavily on Hollywood tentpoles, but Hollywood studios rely just as much on Vue. Says Paul Hanneman, co-president of 20th Century Fox International, "Under Tim Richards' leadership, the management team at Vue has not only built a first-class circuit of state-of-the-art cinemas, but they have used extensive analytics to understand their consumer and strategically market to them."
Looking back, Richards is surprised to find himself in his current position. Well-traveled, he moved to Brazil as a boy when his father was assigned to the Canadian embassy there. He returned to Canada years later to attend McGill University. After graduating from law school, he moved to New York to work in mergers and acquisitions but fled to London when work dried up and took a position with Freshfields, one of London's most prestigious law firms. But the recession that gripped the U.S. soon hit London. "Things were tough and I was bored, so I answered an ad for a business development position for a Hollywood studio. It didn't say which one, but it turned out to be for UCI. They wanted someone with a legal background to help open up new markets," says Richards.
The friendships Richards struck while working at UCI persist to this day -- case in point being McNair and Knibbs, who helped Richards build Vue from the ground up. The trio has worked tirelessly to define Vue as a consumer-friendly multiplex chain. Every theater is equipped with stadium seating -- a first for a European circuit -- and Vue constantly is experimenting with new approaches, including creating a separate pricing category for teenagers and for families of four (moves competitors Odeon and Cineworld have copied).
Another popular invention has been a special category of luxury seats positioned midway through Vue theaters, which are almost always sold-out.
Not all experiments have worked. One flop was the introduction of bean bags at the front of theaters, though one or two locations still offer them. Knibbs also tried to introduce new menus."We tried fresh pasta with great sauce. We couldn't give it away. People said, 'It was really nice of you to try, but we want our popcorn and hot dogs," he says.
An area of growth for Vue is live broadcasts of special events, such as London's National Theater and New York's Metropolitan Opera. The circuit also has shown live broadcasts of Formula One races and even Queen Elizabeth's Diamond Jubilee in 2012.
"If there was a live feed of the birth of Duchess Kate's baby, we'd probably do that as well," quips Knibbs. "But I doubt there will be."
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