An initiative of the EU MEDIA Programme with the support of the Italian Government
Since 1992 MEDIA Salles has been promoting the European cinema and its circulation at theatrical level




UK cinema – Twenty years after its arrival, how the multiplex brought audiences back to the cinema
By Philip McCosker


In 1946 UKcinema admissions peaked at 1.64 billion.  This was followed by a spectacular decline in the popularity of cinema with annual admissions falling in almost every single year between 1948 and 1984, to just 54 million

In 1985 the UK’s first multiplex cinema opened.  Since then operators have invested heavily in new multiplexes and admissions have soared.  By 2002 with annual admissions of 177 million, and box office takings in excess of £755 million, the UK was the largest market in Europe.

Twenty years after its arrival the multiplex has transformed cinema-going in the UK. However, many analysts believe that the market is approaching saturation and there are doubts as to whether annual admissions can support the number of cinemas currently in operation.

This paper examines the reasons behind the initial decline in cinema admissions and considers the impact of the multiplex in their recent recovery.  It also considers the current level of competition between the main multiplex operators and assesses future prospects for the sector.


In 1946 UK cinema admissions reached 1.64 billion, the highest level ever recorded anywhere in the world. [1]   There followed a rapid decline in the popularity of cinema with annual admissions falling in every single year between 1948 and 1973.  This decline corresponded with the growth in television ownership and the failure of cinema exhibitors to continue to invest in new and existing infrastructure.   By 1984 annual admissions had fallen to just 54 million.

In 1985 the UK’s first multiplex cinema opened.  The concept was imported from the US where along with blockbuster movies it had successfully attracted audiences back to the cinema.  It has proved equally successful in the UK, with admissions in 2002 reaching a 30-year high.  During the last 20 years operators have invested heavily in new multiplexes and they now make up around 70% of all cinema screens in the UK.  However, many analysts believe that the UK market is approaching saturation and there are doubts as to whether admissions can support the number of multiplexes currently in operation.

The ‘Golden Age’ of Cinema

The origins of cinema can be traced back to Paris in 1895 when the Lumiere brothers played a short piece of silent film to a small paying audience.  The film showed a train approaching a station, and newspapers at the time reported that several members of the audience actually fled in horror!  The following year a two and a half minute screening of the Derby, run the previous day, became the first film shown to a paying audience in England [2] .

Initially films were shown in fairground tents and converted shops and it was not until around 1910 that purpose built cinemas first started to appear in the UK. [3]   The design of these early cinemas was based upon the music halls and variety theatres prevalent during the late nineteenth century.  At around the same time Hollywood started to produce a number of short films, and began to establish itself as the film capital of the world.  This combination of investment in new cinemas accompanied by the availability of silent movies allowed cinema to prosper at the expense of music halls and variety theatres.

Newsreel coverage of the First World War increased admissions further, but it was during the inter-war period that cinema really began to thrive.  New technology in the form of talking pictures in 1927, and Technicolor in the early 1930’s proved popular with audiences and was accompanied by heavy investment in new cinemas.  By 1930 there were 5,361 screens in the UK [4] and as table 1 shows, with annual admissions throughout the 1930’s in excess of 900 million, cinema had quickly established itself as one of the country’s most popular leisure pastimes.


Annual Admissions (Millions)













Table 1: UK cinema admissions 1933-50

Source: British Film Institute

Despite the limited number of alternative leisure activities, operators invested huge amounts in constructing large and elaborate facilities.  This culminated in 1937 with the opening of the largest single screen cinema ever seen in the UK.  ‘The State’ in Kilburn was a single screen cinema with seating for over 4,000 people [5] , almost double the capacity of the average 10-screen multiplex today. 

Annual admissions continued to grow, soaring above 1.5 billion during the Second World War, as audiences flocked to cinemas to watch the latest newsreel footage of the conflict.  

The spectacular decline in admissions

UK cinema admissions peaked in 1946 at 1.64 billion.  At its peak on average every person in the UK visited the cinema 34 times each year.

As table 2 shows there followed a spectacular decline in the popularity of cinema.  By 1984 admissions had fallen to just 54 million, with every person in the UK making on average just one visit to the cinema each year!


Number of screens (1)

Annual Admissions (millions) (2)

Admissions per screen ('000's)





























Table 2: UK cinema admissions and number of screens in operation 1955-84

Source: (1) National Statistics Online, 2003; (2) British Film Institute


Many factors contributed to this decline in cinema admissions however, it is the growth in television ownership that is credited with striking the most severe blow. 

The period 1951-63 saw a rapid rise in the level of disposable income, and for the first time households were able to afford to purchase consumer durables.  As a consequence, between 1951 and 1963 television ownership increased from 340,000 to over 13 million [6] .  During the same period annual cinema admissions fell from 1,365 million to 357 million.  This means that with each new television purchased, annual cinema admissions fell by around 80.  Television enabled families to be entertained without leaving the comfort of their own homes, and the launch of ITV in 1955 further exacerbated the problems facing cinema operators, increasing both the range and quality of programmes on offer.  By 1965 annual admissions had fallen to just 20% of the 1946 level.

However this decline in the popularity of cinema cannot be attributed solely to television, with several other factors contributing to the slump in admissions.

The 1947 Town and Country Planning Act started the movement of people from inner-city areas to newly built, out of town housing estates. Between 1954 and 1963 over 320,000 houses were built each year [7] .  Traditionally cinemas had located in town centres, and few operators had either the foresight or resources to move with their audiences to these new, out of town locations.  Cinemas were therefore no longer as easily accessible as had previously been the case. 

In addition the 1950’s saw the birth of ‘Rock and Roll’ and a new youth culture more eager to spend their leisure time in dance halls than cinema.  Cinema attempted to keep audiences interested through a series of short-lived gimmicks including ‘Cinerama’ (wide screen projection), three-dimensional films (which required audiences to wear special glasses), and Smell-O-Vision.  However these did little to halt the downward trend in admissions.

By the early 1970’s annual admissions had fallen below 200 million.  As admissions fell, many cinemas were forced to close, whilst those remaining open were often urgently in need of refurbishment.  Operators were caught in a vicious spiral.  Falling admissions reduced both box office takings and profits.  As profits declined operators were unable (and unwilling) to afford the cost of re-furbishing cinemas and these once grand buildings became shabby causing admissions to fall further still.

As table 2 shows, the number of screens did increase slightly during the mid-1970’s, as operators divided large single screen cinemas into two or three smaller theatres in order to increase the number of films on show.  However this did little to reverse the downward trend in admissions, and by the late 1970’s the independent city centre ‘fleapit’ was prevalent and a visit to the local cinema often meant ‘…sitting in an uncomfortable and smoky auditorium watching whatever happened to be showing that week.’ [8]   A similar trend was witnessed throughout Europe and North America.

By the early 1980’s unemployment in the UK had soared to over three million, with school leavers, unskilled workers and those aged under-25 most affected.  These were the very groups that had traditionally comprised cinema’s core audience, but with little disposable income they could no longer afford to visit the cinema.

With annual admissions below 100 million, it was feared that the arrival of the Video Cassette Recorder (VCR) in the early 1980’s would signal the end of cinema as a mainstream leisure activity.  In 1981 just seven per cent of UK households owned a VCR, by 1986 ownership had risen to 51%. [9]   As VCR ownership increased so video rental soared and as table 3 shows, by 1984 was generating over four times as much revenue as total UK box office receipts.


UK box office Takings

£ millions

Video / DVD Rental

£ millions

Video / DVD Purchase

£ millions

























Table 3: UK consumer expenditure on cinema and video / DVD 1984-2001

Source: 1984 British Film and Television Handbook (1995) p.30; 1991-2001 National Statistics Online 2003

By 1984, the industry appeared to be in terminal decline.  Admissions stood at just 3% of the 1946 peak, and only 1,226 screens remained open.  At a time when the odds seemed firmly stacked against its survival two developments arrested this decline – the arrival of the multiplex cinema accompanied by an increase in the number of Hollywood produced blockbuster movies.

The Arrival of the Multiplex

The success of films such as Star Wars and Jaws during the late 1970’s had demonstrated that there was potentially a huge market for blockbuster movies.  Whist the huge growth in video rental during the early 1980’s also suggested that the public had not lost its appetite for Hollywood produced films.

US film production companies started to realise that the problem lay not in the movies but the theatres in which they were screened.  There was little point in producing special effects laden blockbuster movies unless there existed an appropriate environment in which to exhibit them. 

To remedy this, the large US film production companies provided the funds necessary for their subsidiaries to invest in new, state of the art, purpose built multiplex cinemas in which to screen the latest blockbuster releases.  A multiplex is defined as ‘…a new cinema with five or more screens.’ [10]    At a time when cinema admissions throughout North America and Europe were in severe decline, and in the face of competition from an increasing array of alternative leisure pursuits and the arrival of the VCR, vertical integration and heavy investment of this nature was a very risky strategy with no guarantee of success.  However if large US film production companies were not willing to invest in multiplex cinemas, who else would?

The multiplex cinema proved popular in North America, successfully attracting audiences back to the cinema.  Consequently it was only a matter of time before the concept crossed the Atlantic, and in 1985 American Multi Cinema Entertainment (AMC), one of the largest operators in the US, opened the UK’s first multiplex cinema, ‘The Point’, a 10-screen complex in Milton Keynes. [11]

As tables 4 and 5 indicate, the opening of ‘The Point’ heralded the start of a period of massive investment by multiplex operators and by the end of 2003 there were 3,318 cinema screens in the UK, over 70% of which were multiplexes.   This growth in multiplexes is credited as the main catalyst behind the recent revival in cinema, with admissions increasing in almost every year since 1985.  Between 1984 and 2002 the number of cinema screens in the UK increased by an astonishing 166%.  Admissions during the same period grew at an even faster rate, rising by 226%. 


Number of multiplex screens

Multiplex screens as a % of total screens (%)
















Table 4: The growth of Multiplex screens in the UK 1985-2003

Source: 1985-1990 Policy Studies Institute 1995; 1995-2003 British Film Institute

By 2002 UK cinema admissions had risen to 176 million, the highest recorded since 1970.  Although admissions fell to 167 million in 2003, this still represented the second highest level recorded since 1970.

Despite this revival, admissions per screen do not compare with the boom years of cinema.  As table 2 shows, in 1955 each screen had around 264,000 admissions per year.  Even in 1980, with the industry in deep decline, annual admissions were 65,000 per screen.  Today each screen has around 50,000 admissions per annum (table 5).  This is however much higher than in the US, where a combination of rising admission prices and an increase in the number of cinemas has seen admissions per screen drop below 40,000 per annum for the first time. [12]


Number of screens (1)

Annual Admissions (millions) (2)

Admissions per screen ('000's)


































Table 5: UK cinema admissions and number of screens in operation 1985-2003

Source: (1) 1985-90 MEDIA Salles 2002; 1995-2003 British Film Institute

(2) British Film Institute

Whereas 20 years ago cinema did not appear to have a future, today despite competition from DVD’s, cable and digital television, and a wide range of other leisure activities, admissions continue to rise thanks to huge investment by multiplex operators and a steady stream of big budget movies from Hollywood.  However would the dramatic decline have occurred in the first place had operators continued to invest in new facilities during the period 1950-1980?

‘The popularity of multiplexes showed that there was a voracious appetite for film-going in Britain that had previously been smothered by the flea pit conditions of the nations cinema estate.  In retrospect it was obvious that 50 years of minimal investment had dulled enthusiasm for cinema.’ [13]

Huge investment in Multiplex cinemas

The growth in out of town developments during the 1990’s proved an ideal environment for both multiplex operators and their audiences, offering easy access by road, ample and secure parking and a range of other leisure activities on the same site.   With the most successful multiplexes attracting up to 1 million visits per annum [14] , by the mid-1990’s a multiplex was often the central feature of many out of town developments.

By 1995, Cannon MGM was the largest cinema operator in the UK, with a 25% of share of the market.  Owned by French bank Credit Lyonnais, Cannon MGM had a portfolio of 116 cinemas comprising 92 traditional high street sites, five large city centre cinemas, and 19 multiplexes.  Lacking the funds necessary to invest in new multiplex developments, Credit Lyonnais put Cannon MGM up for sale.  In June 1995, Richard Branson’s Virgin group entered the UK cinema exhibition market when it beat 30 other bidders to acquire Cannon MGM for £190 million [15]

Within 12 months Virgin had decided to concentrate solely on multiplexes and sold its 92 high street sites to Cinven for £68 million.  Cinven immediately re-branded its cinemas as the ABC chain.

Fuelled by forecasts which suggested that UK admissions would continue to grow, the late 1990’s saw all the leading operators unveil massive plans for further investment in new multiplex and megaplex cinemas.  Following its entry into the market Virgin unveiled plans to build a further 20 multiplexes by 2000.  In 1998 Cine UK announced plans to increase its portfolio from six to 20 by 2000, while UCI announced that it was planning to build a further 10 multiplexes by 2000 including two 20 screen cinemas in Greater Manchester.

Despite a decade of huge investment, as table 6 shows, data on the number of inhabitants per screen suggested that there remained a shortage of screens in the UK.  This combined with rising admissions during the late 1990’s attracted several overseas operators into the UK market.  In 1997, Time Warner (US) and Village Roadshow (Australia) formed Warner Village and announced ambitious plans to establish 25 new multiplexes in the UK by 2000, including a 20 screen site in Glasgow, a 30 screen megaplex in Birmingham, and a £35 million, 32 screen entertainment complex on the site of Battersea Power Station.  In the same year

Ster Kinekor, South Africa’s largest operator and Australian based Hoyts, also acquired several sites in the UK.  With the US market nearing saturation, several North American operators were also watching the UK, which was still very underdeveloped by US standards.


Number of inhabitants per screen















Table 6: Number of inhabitants per cinema screen

Source: MEDIA Salles 2003 p.85

In 1998 UCI estimated that the cost of building a 16 – 18 screen complex was around £15 million.  However as competition for the best sites intensified, so this figure increased causing returns to fall.  Little wonder that by the late 1990’s entrance costs had ‘…reached prohibitive levels for all but those with the deepest pockets.’ [16]

Not everyone in the UK welcomed this huge growth in the number of multiplexes.   As investment in multiplexes increased several small, independent cinemas were forced out of business.  In 1995 the UK had 743 cinema sites, 79 of which were multiplexes.  By 2003 there were 234 multiplexes in the UK, but the total number of cinema sites had actually fallen to 678.  This has led to concern that in the long term cinema might only be available to those living in urban areas with a population large enough to support a multiplex.  Additionally critics have suggested that the growth of multiplexes has resulted in UK cinema screens being dominated by Hollywood produced films, with E.U. funded body MEDIA Salles describing the growth of multiplexes in the UK as ‘a strategy to create better conditions for the exploitation of typical US films.’ [17]

The leading exhibitors in the UK

As Exhibit 1 shows, cinema exhibition in the UK is dominated by just six operators who between them control around 70% of all screens. 

With 98 sites and 608 screens, Odeon is the largest operator in the UK and has the most diverse portfolio, comprising both multiplexes and traditional high street cinemas.  Founded in 1930, it is also the longest established of the leading operators, although in recent years its ownership has changed several times.  Odeon was part of the Rank Group from 1942 until February 2000, when it was acquired by Cinven for £280 million.   Cinven already owned the ABC cinema chain, and following the acquisition re-branded its entire portfolio as Odeon.

In its 2002 accounts Odeon reported a turnover of £212 million and an operating profit of £46.6 million. [18]   Despite this, in March 2003 Cinven sold Odeon to a syndicate led by German investment bank West LB for £431 million. [19]

Vue Entertainment Group
Although only established in 1997, by 2003 Warner Village operated 36 sites and 405 screens in the UK, including the 30 screen megaplex at Star City in Birmingham.  However in May 2003 Warner Village sold its UK operation to SBC International Cinemas for $402 million. [20]   The new chain was re-named ‘Vue Entertainment Group’, and today has a portfolio of 45 sites and 426 screens.  With annual admissions of over 25 million per annum, Vue is the largest operator of multiplexes in the UK, and in terms of box office takings is second only to Odeon.

One of the largest operators in Europe with 92 cinemas and almost 900 screens, UGC entered the UK market in October 1999 when it acquired the 32 site Virgin chain for £215 million.  Today the French based operator has 41 sites and 389 screens in the UK.  In 2001 UGC’s total European box office takings amounted to almost €520 million and admissions exceeded 58 million.

Cine UK (Cineworld)
Launched in 1995 by Steve Weiner, former Managing Director of Warner Bros Cinemas in Europe, Cine UK has 34 multiplexes and 357 screens, and since its formation claims to have opened more multiplex cinemas that any other operator in the UK.  In 2002 its annual admissions were around 15 million, giving it an 8.5% share of the UK market.  In particular Cine UK has focused upon the Bollywood market and claims to take around 50% of all box office revenue generated in the UK by Bollywood produced films.

UCI (United Cinemas International)
Owned jointly by Universal and Paramount, UCI operates 39 multiplexes including ‘the film works’ a 20-screen complex in Manchester that also incorporates an IMAX screen.

Showcase (National Amusement)
Part of the giant Viacom group that includes CBS TV, Nickelodeon, MTV, Paramount and Blockbuster Video, Showcase currently operates 19 multiplexes with 243 screens in the UK including the prestigious 12 screen Bluewater complex which it bought from Hoyts in January 2001.

The relationship between several of these operators is complex and provides further evidence of the high level of integration within the cinema industry.  Universal and Paramount jointly own UCI.  However Universal is itself owned by French company Vivendi which also has a stake in UGC, whilst Paramount is part of the Viacom group, whose parent is National Amusement, owner of Showcase.

Many analysts believe that the recent withdrawal of Warner Village and Cinven is an indication that the UK market is rapidly nearing saturation.

Over reliance on US produced Blockbuster Movies?

Although it is true that the development of the multiplex has been a key factor in explaining the recent revival in cinema admissions, it is blockbuster movies that attract audiences.  Many fear that the recent rise in admissions is much too dependent upon the success of just a few Hollywood produced blockbuster movies.  Nick James, editor of Sight and Sound, suggests that the recent growth in admissions ‘…is exclusively focused on the really big films, and in fact there were some problems before these blockbusters came along of finding major projects for the multiplexes….it’s fortunate…that these blockbusters have all performed very well.’ [21]

This was clearly illustrated in 1995 when a stream of poor films accompanied by a long and hot summer saw year on year admissions fall for the first time in a decade.  Similarly, despite almost 200 new screens opening during 1998, too few blockbuster movies and the football World Cup meant that admissions were down on 1997.

Analysis of box office takings provides further worrying evidence to suggest that UK cinemas are over reliant upon the success of just a few US produced blockbuster movies, with table 7 indicating that in recent years the 20 highest grossing films have been responsible for generating around 60% of total annual box office takings.   Indeed in 2002 just 27% of films released accounted for 94% of UK box office takings. [22]   The top 20 films at the UK box office in 2003 again demonstrates the dominance of US produced films.  Thirteen were US produced whist the remainder were US joint productions with other countries.  As a consequence, in 2003 US solo and joint productions accounted for almost 95% of UK box office takings.

This clearly demonstrates the main problem facing cinema exhibitors operating in a ‘…capital-intensive industry heavily dependent on the quality of product but with no control over it.’ [23]


Total Box Office Gross Receipts

£ millions

Gross Receipts from top 20 films at UK Box Office

£ millions

% of UK Box Office Gross Receipts generated by top 20 films

















Table 7: Percentage of UK Box Office Receipts generated by top 20 films 1995-2003

Source: British Film Institute

The composition of cinema audiences

The real danger in filling cinema screens with a diet of Hollywood produced movies is that these films primarily appeal to the 15 – 24 age group and will not necessarily attract those aged 35 and over on a regular basis.  In terms of population the 15 – 24 age group is declining in size whilst the 35 and over is growing.  Information from the 1991 census suggested that around 29.7 million people in the UK were aged 35 years and over, which represented almost 51% of the total population.  By 2001, this group had grown in size to over 32 million people, or 54.5% of the total population.  During the same period the 16-24 year old age group declined in size from 7.5 million to less than 6.5 million and now makes up just 11% of the UK population [24] .   In addition people in the 35 and over age group have a significantly higher disposable income.

As table 8 shows, in 1984 just 1% of those aged 35 and over visited the cinema at least once a month.  By 2003 this had risen to 14% and although this represents a significant increase, there remains much room for improvement.

With more screens to fill and with multiplexes now competing directly against each other within the same catchment area, operators have been forced to consider a variety of innovative ways in which to attract and retain audiences.  In 2000 Warner Village opened a 30-screen megaplex at Star City, Birmingham.  At the time this was the largest cinema in Europe and many other operators were planning similar complexes across the UK.  However, within a few months it became apparent that Warner Village would not be able to regularly fill all its seats through relying solely on Hollywood produced blockbusters.  Worse still rumours suggested that due to poor admissions Warner Village might even be forced to close several screens at the complex.


Age Group


7 – 14


15 – 24


25 – 34





























Table 8: Cinema Attendance by Age – Percentage of each age group who visit cinema at least once each month

Source: Office for National Statistics 2004

Having invested heavily in such a prestigious development, and having only recently opened in a blaze of publicity, this was not something that Warner Village or its key stakeholders wanted to contemplate.  Other operators watched Star City with interest as its failure would have led to rivals scaling down their own plans.  Instead, Warner Village has taken advantage of the high Asian population of inner city Birmingham, and now devotes several screens to Indian language films.

In an attempt to increase its admissions during off peak periods of the day, Odeon has introduced a ‘senior screen’ that shows classic films from the 1940s and 50s in the afternoon, and includes tea and coffee in the admission price.  Odeon also screened live football matches during the 2002 World Cup finals and rents out its cinemas to businesses for conferences and training events.  It is also investigating the possibility of showing West End musicals, rock concerts and live Premier League football matches on its screens.  UGC and UCI have also started to devote a few screens to art house and foreign language films.  In some multiplexes, entrance to these niche screens is through a separate foyer with a theme appropriate to the target audience.

In recent years the previously neglected family group, which comprises both the 7-14 and 25-44 age groups, has been successfully targeted through films aimed specifically at young children.  As table 8 shows, in 1984 just 10% of those aged 7-14 years visited the cinema at least once each month.  Film production companies and cinema operators now realise that the 7-14 age group is the audience of the future and it is therefore important that children get into the habit of going to the cinema on a regular basis.  In addition this is the group that is most likely to generate the highest levels of secondary expenditure on DVD’s, games, toys and refreshments.

By 2003, 37% of 7-14 year olds visited the cinema at least once each month.   In a number of cases children were accompanied by parents and other adults, which goes some way to explain why admissions of those in the 25-35 age group increased from 4% in 1984 to 33% by 2003.

Although the composition of cinema audiences has changed greatly since the multiplex was first introduced, there remains scope for further change.  During the next decade the most successful operators will be those who successfully attract niche audience groups on a regular basis, and in particular the over-35’s.

The Power of Film Distributors

It is the film distributors who decide which films are exhibited in UK cinemas, and how much cinema operators pay to screen a film.  Research by Dodona indicated that in 2002 European cinema operators paid on average 45% of gross box office takings to distributors, though this varied considerably across Europe with French operators paying 50%, and their Greek counterparts just 33% to exhibit the same films [25] .

As we have already seen the film industry is highly vertically integrated with many film production companies also having an interest in distribution and exhibition.  United International Pictures was set up in 1981 by three US film studios, Paramount, Universal and MGM, to oversee the efficient and cost effective distribution of their films in Europe.  Buena Vista is a subsidiary of Disney, and Columbia Tri Star is part of Sony.

The largest six distributors in the UK are all subsidiaries of US based film production companies, and as Exhibit 2 indicates, between them they control around 90% of the market.  This has intensified criticism that the UK market is too dependent upon US produced films. 

In 1997 US produced films accounted for around 77% of UK box office takings. [26]   Remarkably, despite this huge appetite for Hollywood produced blockbusters, it was the multiplex operators that held the upper hand when negotiating with film distributors as even following a decade of huge investment, in 1997 there were less than 2,400 screens in the UK, of which only around 1200 were multiplexes.  This was far fewer than Germany (4,300 screens), France (4700) and Italy (2,500). [27]    As a consequence cinema operators in the UK paid distributors far less than their European counterparts.

By 2003 there were over 3,300 screens in the UK and the balance of power had shifted in favour of the distributors.  As a consequence the percentage of box office receipts paid to distributors has increased from around 30% to nearer 40%.  Indeed for a major blockbuster such as ‘Star Wars – The Phantom Menace’ some smaller cinema chains were forced to pay around 70% of receipts to distributors. [28]

The impact of Video, DVD and Digital Television

"Let us imagine that we are in 1984 and we tell you that, over the next 10 years, there will be the advent of satellite television with three film channels; there will be a video business whereby people can rent or buy films...and then we tell you against the background of cinema admissions decline, that admissions will grow from 54 million to 124 million and you would have said you're nuts.  That's exactly what happened." 

            Michael Griffiths, chief executive of Rank (Odeon) [29]

Initially it was feared that the arrival of VCR in the 1980’s and DVD, satellite, cable and digital television in the 1990’s, would each threaten to end the revival that cinema was enjoying.  However, despite their appearance, cinema admissions have increased to their highest level since 1970.

Where video and DVD were initially seen as substitutes for cinema, today rental and purchase of recent blockbuster movies provides lucrative secondary revenue for film producers.  ‘Although only responsible for around 35% of a films gross revenue, the big screen is still the primary shop window where the seeds of interest are sown in the succession of videos, pay per view television showings and ancillary products’ [30]

In recent years the biggest growth area has been the purchase of films on video and DVD.  As table 3 shows, by 2001 video and DVD purchases generated more than twice as much revenue as UK box office takings.  The growth in pay per view film channels also indicates that viewers are prepared to pay to watch the most popular films in the comfort of their own homes prior to their release on DVD.  All of this complements cinema since the most popular films with viewers and broadcasters are usually those that have enjoyed success at the box office.

For many films box office takings are no longer the main source of revenue.  Jurassic Park, Harry Potter, and several Disney films have seen merchandising and licensed promotion generate revenue far in excess of box office takings.  “Jurassic Park generated $917 million in box office takings, merchandising and licensed promotion generated (a further) $1 billion.” [31]   Whilst “…the 1,000 different Lion King products and promotions generated Disney $1 billion overnight”. [32]

More films are now accompanied by video and computer games and often these are released in advance of the film to whet the public’s appetite.  However this strategy may occasionally backfire.  In 2003 Paramount blamed disappointing box office takings for the sequel to ‘Lara Croft: Tomb Raider’ on the poor reception of the video game launched prior to the film [33]

Today there is a high correlation between success at the box office and sales of DVD, computer games and other related merchandising.  This would appear to strengthen the role of cinema as a marketing tool.

Brand differentiation

There is no doubt that the arrival of the multiplex transformed cinema exhibition in the UK.  For the first time in more than a generation huge investment provided audiences with the facilities that they desired – a wide choice of films and screening times; clean and comfortable theatres; free and secure car parking; easy to reach locations; flexible booking systems; and often a range of other leisure and retail facilities on the same site, including shopping malls, restaurants, night clubs and bowling. 

For multiplex operators this ‘standardisation’ has brought with it the problem of brand differentiation.  Until recently cinemagoers in most parts of the UK had access to just one multiplex.  However, following a period of huge investment, competition has intensified and it is becoming increasingly common to find more than one multiplex operator within the same catchment area. 

Upon entering the UK market in 1995, Virgin immediately sought to differentiate its cinemas from those of rival operators by introducing several innovative new ideas. 

‘All new Virgin multiplexes…offer many facilities not seen before in the UK, such as customer friendly check in counters, The Movie Store, mezzanine level café bars and the Premier Screen – an upper class auditorium and lounge which offers guests a unique personal service coat check, private bar and premier food and drink’ [34]  

However, like many operators before, Virgin soon discovered that it was far from easy to differentiate its cinemas from those of rivals.  The films shown at multiplexes are identical, and the facilities offered by each operator fairly similar.  To date, loyalty schemes, one month and 12 month unlimited access passes, café bars, web sites, and flexible booking facilities have all been easily replicated by rivals.  Even Virgin’s ‘Premier Screen’ concept was quickly copied by other operators.

 Differentiation is an area that operators have so far failed to successfully address.  If this situation continues, and if the market remains intensely competitive, operators may instead be forced to compete on price.

easyCinema – a ‘no frills’ approach to cinema exhibition

In May 2003 easyJet founder Stelios Haji-Ionnou opened his first ‘no-frills’ cinema, ironically in Milton Keynes on the site of the UK’s first multiplex cinema.  Having leased ‘The Point’ from UCI for five years, [35] easyCinema immediately set about re-engineering the way in which multiplexes traditionally operate. 

To reduce staff costs easyCinema does not have a box office.  Instead customers must buy tickets on line, either in advance or via a computer in the cinema foyer. Those prepared to buy a ticket several weeks in advance pay as little as 20p, as the day of screening approaches so the price increases.  However this requires cinemagoers to plan the purchase of tickets several weeks in advance rather than treating a visit to the cinema as an impulse buy.   It remains to be seen just how price sensitive a visit to the cinema actually is.

Initially easyCinema did not sell food and drink (again saving on staff and cleaning costs), nor did it show adverts and trailers prior to the film.  Whether this is such a good idea remains to be seen since Richard Segal, former Chief Executive of Odeon estimates that a cinema’s gross profit can be broken down into 66% from box office takings, 26% from food and drink sales, and 8% from advertising and advance booking fees.

Research by Dodona concurs with Segal and indicates that in 2002 each cinema admission in the UK generated a further €1.99 in food and drink sales [36] .  With the average price of a cinema ticket being £4.14, food and drink sales represent significant additional revenue for operators.

The greatest problem facing easyCinema is however its relationship with the large film distributors who control what is shown on cinema screens in the UK.  As we have seen cinema operators currently pay distributors a fixed percentage of box office receipts.  However distributors will not accept a fixed percentage of a 20p ticket.  easyCinema has instead offered distributors a lump sum payment, which most have so far refused to accept.  Of the largest distributors only Columbia Tristar allows easyCinema to show its films.  In return easyCinema must pay Tristar £1.30 per admission.  With cinemagoers paying as little as 20p for admission, in some cases easyCinema might actually screen the most recent blockbuster films at a loss.

Unable to reach agreement with the remaining large distributors, easyCinema has instead been forced to show a combination of blockbusters from previous years and ‘B’ movies.  This means that easyCinema is not in a position to attract large audiences nor can it compete with rival operators.  Stellios admits that this situation cannot continue long term, and until a solution is reached has put on hold plans for further expansion of the easyCinema chain.

Faced with overcapacity and falling returns, other operators are closely monitoring the easyCinema situation.  If easyCinema is able to reach agreement with the major film distributors, the innovative ideas introduced could have a far-reaching impact upon the operation of cinemas in the UK.

Twenty years after it became the site of the UK’s first multiplex cinema, it will be interesting to see if ‘The Point’ is once again at the centre of a new revolution in UK cinema exhibition.

The Threat of Overcapacity

By 2003 the UK had just over 3,300 cinema screens, which is only slightly higher than the number of screens in operation in 1960.  However, admissions of 167 million were significantly lower than the 1960 level of 501 million (see table 2).  More worrying though is that the recent growth in admissions has slowed.  Although between 1995 and 2003 the number of screens increased by 64%, admissions grew by just 45%.

Admissions in 2002 were the highest since 1970, and with gross box office takings of £755 million, the UK market was the largest in Europe.*  However it was a year that saw the release of a huge number of eagerly awaited films including Spiderman, Harry Potter, Lord of the Rings, Star Wars II, Minority Report, and Monsters Inc, all of which performed well at the box office.  Many industry analysts fear that this might prove to be a one-off, and the UK market is in fact nearing saturation.

Further evidence of this was provided in 2003 when UK admissions fell by 5% to 167 million.  The UK was not alone in experiencing a fall in admissions with The Motion Picture Association [37] reporting that global admissions of 8.6 billion in 2003 was 5.5% down on the previous year.  This decline reinforced how dependant megaplex and multiplex cinemas are upon well-promoted blockbuster movies.

In addition, intense competition for the best sites has increased the cost of building a multiplex and reduced returns.  As Exhibit 3 shows, between 1996 and 2000, pre-tax profits fell sharply for all the UK’s leading operators.  Thus, despite admissions continuing to rise, heavy investment in new screens funded by debt, and an intensely competitive environment saw profits fall. 

Following two decades of rapid expansion, several operators have now started to scale back on planned new developments, whilst others have withdrawn from the market altogether.  In January 2001, less than four years after entering the UK, Hoyts disposed of all its UK cinemas (including its prestigious multiplex in the Blue Water shopping centre in Kent).  Virgin’s foray into cinema was also short lived, and in 1999 it sold its UK operation to UGC.  More significantly, in 2003 two of the UK’s largest operators, Odeon and Warner Village, both changed ownership.  

In the US, which is a more mature market than the UK, multiplex operators are now paying the price for several years of rapid expansion funded by debt.  During the late 1990’s operators in the US invested huge amounts in 20-screen megaplexes.  Between 1997 and 2000, the number of screens in the US increased by 22%. Admissions during the same period grew by just 3%.  The result is several multiplexes playing to almost empty theatres.  In August 2000, Carmike, the third largest operator in the US was forced to file for bankruptcy protection.  Regal, the largest US operator followed suit in October 2001 filing for protection with debts of $2 billion [38] .

Is the same thing now about to happen in the UK?  Many observers see consolidation as the only way forward.  Consolidation would at least give operators greater bargaining power when dealing with distributors. It would, however, result in the closure of several multiplex sites.   It could be that during the next few years the action taking place between rival operators could be every bit as compelling as anything that is shown on the big screen itself.

Exhibit 1

Number of screens operated by leading exhibitors 1997-2003


Number of screens











ABC (re-branded as Odeon from 2000)





Vue (formerly Warner Village and SBC)





UGC (formerly Virgin)





Cine UK










National Amusements (Showcase)





Source: 1997-2001 Accountancy Magazine December 2002 p.45; 2003 UK Film Council yearbook 2003 p.33

Exhibit 2

Market share of leading film distributors as a percentage of UK Box Office Gross Receipts 1999-2003









Buena Vista












Warner Bros




Columbia Tri Star




20th Century Fox
















Source: UK Film Council Statistical yearbook 2003 p.27


Exhibit 3

Pre-tax profits / (losses) made by leading exhibitors 1996-2000


Pre tax profits (£ millions)


























Cine UK





Total Pre-tax Profit / (loss)










Source: 1996-2000 Accountancy Magazine December 2002 p.46


[1] Dodona Research, (1998) ‘Coming soon – A cinema near you’

[2] Waters, I., (1994) ‘Entertainment, Art and Cultural Services’, London: Longman, p.48

[3] Westbrooke, J. ‘Reality hits palaces of dreams’ Financial Times, 18 January 1997, p.4

[4] Moyes, J.’Fleapits fight to survive in new age of cinema’ The Independent, 17 September 1997, p.3

[5] Westbrooke, J. ‘Reality hits palaces of dreams’ Financial Times, 18 January 1997, p.4

[6] Lowe, N. (1988) ‘Mastering Modern History’ London:MacMillan, p.389

[7] Lowe, N. (1988) ‘Mastering Modern History’ London:MacMillan, pp387-390

[8] Daneshkhu, S. ‘An evening out at the local multiplex’ The Times, 1 December 1995

[9] Docherty, D. (1987) ‘The Last Picture Show?’ London:BFI, p.62

[10] Moyes, J., ‘Fleapits fight to survive’ The Independent, 17 September 1997, p.3

[11] Januarius, M., Multiplexes Multiply’ Leisure Management, August 1991, p33

[12] Anon., ‘World cinema: poor product fails multiplexes’, September 2000

[13] Newton, R., ‘The silver screen turns to gold’ The Sunday Telegraph, 25 January 1998

[14] Bell, E., ‘Clash of the multi-screen monsters’ The Observer, 20 August 1995, p.2

[15] Nuttall, R., ‘Branson swoops on MGM Cinemas’ Daily Express, 1 July 1995

[16] Parkes, C., ‘Big screen attractions fuel cinema mergers’ Financial Times, 2 October 1997, p.28

[17] MEDIA Salles (1994) ‘White book of the European exhibition industry’ London, p.20

[18] Cope, N., ‘UK cinema industry poised for blockbuster year of deals’ The Independent, 11 March  2003

[19] Anon., ‘UK’s Odeon chain sold for $690’, 10 March 2003

[20] Forde, l., ‘UK’s Warner Village cinemas sold for $402m’, 13 May 2003

[21] Anon., ‘UK cinemas reel in record audience’ BBC News Online, 8 March 2002

[22] Anon., ‘Comedies top record UK cinema visits’ BBC News Online, 8 June 2003

[23] Rawsthorn, A., ’Multiplex market presents a moving picture of potential growth’ Financial Times, 21 January 1999


[25] Dodona Research, (2005) ‘Over 1 billion cinema admissions in Europe for second successive year’

[26] Glaister, D ‘Film distribution: A narrow view’ The Guardian, 10 February 1998

[27] MEDIA Salles (2003) ‘European Cinema Yearbook’, London, p.84

[28] Gledhill, D. ‘Not a dry eye in the house’ The Independent on Sunday, 24 October 1999, p4

[29] Daneshkhu, S. ‘An evening out at the local multiplex’ The Times, 1 December 1995

[30] Parkes, C., ‘Big screen attractions fuel cinema mergers’ Financial Times, 2 October 1997, p.28

[31] Carter, M., ‘How to flog a dinosaur to death’ The Independent, 16 June 1997, p.4

[32] Davies, D., ‘The film of the mug of the duvet’ The Independent, 1 February 1997, p.13

[33] Anon., ‘Bad box office? Blame the video game’ The Guardian, 20 August 2003

[34] Anon., ‘Another multiplex from Virgin to offer a great night out’ Yorkshire Post, I November 1996

[35] Malkani, G., ‘easyCinema to resist pitfalls of mass roll-outs’ Financial Times, 4 March 2003, p.21 

[36] Dodona Research, (2005) ‘Over 1 billion cinema admissions in Europe for second successive year’

* Anon., ‘Comedies top record UK cinema visits’ BBC News Online, 8 June 2003

[37] UK Film Council (2003), ‘Statistical Yearbook 2003’ p.5

[38] Anon., ‘Cinema chain files for bankruptcy’ BBC News Online, 12 October 2001