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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 |
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UK cinema – Twenty years after its
arrival, how the multiplex brought audiences back to the cinema AbstractIn 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. IntroductionIn 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 CinemaThe origins of cinema can be traced
back to 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 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.
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 admissionsUK 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!
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.
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 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 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%.
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]
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] 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 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
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. 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 UGC Cine UK (Cineworld) UCI (United Cinemas International) Showcase (National Amusement) 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 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 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]
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
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
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 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, 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 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 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 differentiationThere 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 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
Market share of leading film distributors as a percentage of UK Box Office Gross Receipts 1999-2003
Exhibit 3 Pre-tax profits / (losses) made by leading exhibitors 1996-2000
[1] Dodona Research, (1998) ‘Coming soon – A cinema near you’
[2]
Waters, I., (1994) ‘Entertainment, Art and Cultural
Services’, [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’
[7]
Lowe, N. (1988) ‘Mastering Modern History’ [8] Daneshkhu, S. ‘An evening out at the local multiplex’ The Times, 1 December 1995
[9]
Docherty, D. (1987) ‘The Last Picture Show?’ [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’ www.screendigest.com/yp_00-09.htm, September 2000
[13]
[14]
[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’ [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’ www.screendaily.com, 10 March 2003 [20] Forde, l., ‘UK’s Warner Village cinemas sold for $402m’ www.screendaily.com, 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 [24] www.statistics.gov.uk/census [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
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MEDIA Salles (2003) ‘European Cinema Yearbook’, [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 |
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