CMX MARKET RESEARCH

FOR MOVIE THEATER

INDUSTRY : SAUDI ARABIA
By : Yedhukrishnan P as a part of Market research
Team of AMR Agency
 COUNTRY OVERVIEW

Saudi Arabia, officially known as the Kingdom of Saudi Arabia, is the largest Arab state in Western Asia by land area approximately 830,000 square miles, constituting
the bulk of the Arabian Peninsula and the second largest in the Arab world, after Algeria. It shares its borders with Jordan and Iraq to the north, Kuwait to the
northeast, Qatar, Bahrain and the United Arab Emirates to the east, Oman to the southeast, and Yemen in the south.

Saudi Arabia is estimated to have population of 34.545 million in the year 2020 and expected to reach 37.392 million by 2024, growing at a CAGR of 1.99%.

Saudi Arabia’s real gross domestic product (GDP) was SAR 2639.797 billion in 2019 and due to COVID-19 outbreak it is estimated to shrink by 6.8% to be around SAR
2460.291 billion in 2020.

Saudi Arabia’s per capita GDP was estimated at USD 22,507.13 whereas purchasing power parity (PPP) based per capita GDP is estimated to be at USD 56,817.18 for
the year 2019.
In 2019, Saudi Arabia government’s revenue was estimated to be SAR 893.457 billion whereas the expenditure is estimated to be SAR 1,120.29 billion. This is
expected to result in Saudi Arabia government’s net lending / borrowing negative at SAR 226.835 billion in 2019 indicating that not enough financial resources were
made available by the government to boost economic growth.

The current account balance for Saudi Arabia was estimated to be at USD 27.043 billion for the year 2019 and is expected to further decrease at a CAGR of 21.01%
and reach USD -8.315 billion by 2024. This negative current account balance indicates that Saudi Arabia will become a net borrower from the rest of the world by
2024.

In World Bank’s ease of doing business ranking Saudi Arabia was ranked 62 out of 190 countries in 2019. Saudi Arabia’s ease of doing business ranking improved
from 92nd position in 2018.
Content Diversity and Localization Market Opportunity
With Saudi Arabia’s population forecast to be 39.5 million by 2030, the Kingdom has the
As a new cinema market, the type of content that appeals to audiences potential to absorb up to 2,600 screens.
in the Kingdom is still to be established. .
Around one third of Saudi Arabia's total population are expatriates, Market benchmarks indicate an average of 6.6 screens per 100,000 inhabitants in
largely centered around the provinces of Riyadh and Makkah, with developed markets (excluding USA & Canada, which have a highly penetrated cinema
Non-Saudis constituting 38% and 42% respectively. Saudi Arabia is market).
home to ~3 million Indians which is the largest expatriate community
in the Kingdom. While UAE is at the lower end of benchmarks, the screen density has increased
significantly from 3.6 in 2012 to 4.8 in 2017. With many new multiplexes expected to
Keeping this in mind, content screened in Saudi Arabia should be in the open in the UAE in the next few years, the screen density will also be closer to the
range from global Hollywood blockbusters to Bollywood, regional and average benchmark.
local films. In addition, CMX cinemas, through a partnership with 20th
century Fox, can exclusively distribute Fox content in the Kingdom(who A mix of regional and international examples indicate, Saudi Arabia would require
are successfully being accepted by the authority and people equally) . around 370 cinema sites based on an average of 7.0 screens per cinema to
accommodate 2,600 screens.
And a loud and clear mission statement should be given by CMX that
they will also work to conserve and promote national heritage and
talent by screening movies produced by local producers and will work
towards exporting local content internationally. One strategy could be
to develop the local film industry with the goal of producing at least
some number of Saudi movies by 2022.
Vision 2030 : Government Schemes Supporting CMX Market Entry
DAEM: MEANINGFUL ENTERTAINMENT FOR CITIZENS
Saudi Arabia will increase the number and variety of cultural and entertainment
activities with the aim of opening dedicated venues to showcase our citizens’
myriad talents.
The Kingdom will review our regulations to simplify the establishment and
registration of amateur, social, and cultural clubs. Saudi Arabia will launch and
provide the necessary financial support for “Daem,” a national program to
enhance the quality of cultural activities and entertainment.
The program will create a national network of clubs, encourage the exchange of
knowledge and international experiences, and promote better awareness of a
wide range of hobbies and leisure activities. By 2020, there will be more than 450
registered and professionally organized amateur clubs providing a variety of
cultural activities and entertainment events.
SAGIA: Streamlining Regulations on Foreign Investment
In recognition of the logistical requirements of international partnership,
Vision 2030 and preceding trade policy set out to streamline investor
entrance into Saudi markets. In 2015, the Saudi Arabian General Investment
Authority (SAGIA) announced that it would allow full foreign ownership of
retail and wholesale businesses in the Kingdom, thereby removing the
former 25 percent local ownership requirement. Foreign investors are no
longer required to adopt local partners in many sectors and may own real
estate for company activities.
They are allowed to transfer money from their enterprises outside of
the country and can sponsor foreign employees, provided that
“Saudization” quotas are met. Minimum capital requirements to
establish business entities range from zero to SR 30 million ($8
million) depending on the sector and the type of investment. SAGIA’s
Investor Service Center (ISC) offers detailed information on the
investment process, provides licenses and support services to foreign
investors, and coordinates with government ministries to facilitate
investment.
SAGIA has traditionally issued foreign investment licenses for seven
broadly defined activities: 1) industrial, 2) trading, 3) agricultural, 4)
contracting, 5) real estate, 6) specialized and non-specialized services
and 7) consulting. In a bid to streamline the process, SAGIA announced
plans in early 2016 to reduce the number of documents needed to
obtain and renew foreign investment licenses.
According to SAGIA, the ISC must grant or refuse a license within five
days of receiving an application and supporting documentation from
the prospective investor. Foreign investors report increased efficiency
over the last year in obtaining a license, with an approval time
averaging at one week compared to over a month in the past.
 TARGET LOCATION
& POPULATION
Population of main cities: Riyadh (5,188,286); Jeddah (3,430,697); Mecca (1,534,731); Medina (1,100,093); Ad-Dammam
(903,312); Hofuf (660,788); Taif (579,970)

Riyadh being one of the city with

best crowd in terms of spending
power and having an average age
population revolving around 25 to
35, it’s the best location to start
experimenting with

Women in the same age group in

all region of Saudi with changing
norms becomes one of the best
target crowd to start with in the
industry
 CURRENT MARKET SCENARIO
AND COMPETITORS
Box office returns in 2020 will suffer an estimated 80% global The Middle East in 2019 was worth $600 million, of which Saudi accounted
drop due to COVID-19, the Kingdom of Saudi Arabia is bucking Competitors
for a $110 million share and the UAE roughly $250 million. This excludes
this downward trend, having grown since 2019 to become the releases of Indian and Arabic films and some indie content.
Middle East’s top grossing territory this year to date. • Kuwait
National
Also, VOX has obtained permission to keep its venues in Riyadh, Jeddah and
Fresh figures released during the recent META Cinema Forum Cinemas
exhibitors’ conference reveal that Saudi Arabia this year has Dammam open 24 hours a day.
• CJ
Since cinemas re-opened in June, the two biggest releases across the
overtaken the United Arab Emirates and is currently the region’s 4DPLEX
Middle East have been “Tenet” and “Mulan,” which Disney has released
top-grossing territory, with more than $73 million in theatrical • iPic
theatrically in the Middle East where its Disney Plus platform has not yet
movie ticket sales over the past 40 weeks — a roughly $2 million
Entertain
increase in box office returns compared with the same period in
launched. Russel Crowe-starrer “Unhinged” also performed handsomely in
2019. ment
the region, though figures were not readily available.
• I Max
Meanwhile, screen growth in Saudi is going forward undeterred, with Vox
The UAE during the same 2020 period has generated roughly $51 projecting there will be 340 screens in operation in the country by year’s
.
million, roughly a quarter of its 2019 box office draw end, and close to 700 by the end of 2021.
Besides VOX, the other exhibitors operating in Saudi include Cinepolis,
Saudi market as having increased by roughly 4% year to date — Empire Cinemas and AMC which has five Saudi venues in operation and is
despite the fact that, due to the pandemic, cinemas where expected to open three more in coming months.
shuttered there between March and the middle of June — and is Having a market like Saudi can help Hollywood studios offset some of their
forecasting an 8% growth by year’s end. losses, says Mitchell, who is worried that due to COVID-19, the supply chain
is drying up.
 REVENUE MODEL
•Pricing Model
•In the initial years, cinema demand is
expected to far outstrip the supply
•For long term sustenance of the
sector, industry players would need to
adopt/experiment with different
pricing models that are appealing to
its audiences (such as movie passes,
pricing by time of day/day of week,
seat configurations, types of screens,
etc.)
Revenue Source (Ticket Sales, Food and
Beverage, and Advertisements and
Sponsorships)
Ticket sales constitute a majority share of total movie
theater revenues. As the cinema industry is still nascent,
this segment will continue to dominate.
As more and more theaters open, and more people visit
them, concessions on tickets will be more common.
Nearly 45% of the movie theaters operating in Saudi
Arabia should have ticket admission revenues more than
18%, compared to mature companies , which have
between 10% average revenue share of ticket admissions.
F&B revenues are still growing and are
not at par with countries with full matured
theater industry, where their share of the
revenue dominates movie theater revenue.
On average, Saudi spends between SAR on
F&B.
Advertisement and sponsorship
revenues are related to pricing of
advertisement exhibition and the duration of
the exhibition. Longer the duration of the
advertisement, higher will be the price
charged. Moreover, advertisements can be
digital, in the movie and traditional in terms
of posters and banners as well.