Annex 2: Country Studies

United Kingdom
 
Key Points Screens and Admissions
 
 
UK
EU
UK
EU
 
Admissions
Admissions
No. of screens
No. of screens
1960-92
-79%
-80%
-42%
-40%
1980-92
0%
-38%
10%
-24%
1985-92
44%
- 3%
38%
- 9%
 
 1992
UK
EU
 
Average*
Total
Number of screens
1,757
  
16,621
Number of seats ('000)
520
  
4,509
Number of admissions per seat
199
124
  
Total number of admissions (millions)
103.6
  
561.0
Number of admissions per head of population
1.8
1.61
 
 
* unweighted average
 
The UK figures for attendances and screens seem at first sight to be in line with Europe as a whole. But they disguise a decline in the period up to 1985 which was deeper and faster than any other country. While the rest of Europe has seen a gentle reduction in both cinemas and cinema-going in the second half of the 1980s, the UK saw a steep recovery. Often associated with the arrival of multiplexes, the UK recovery for the most part pre-dated the opening of the new cinemas. Exhibitors point out that the recovery came in the wake of the abolition of special levies and quotas. Instead, the rise in attendances seems to coincide with a substantial increase in the marketing of feature films which is largely associated with the home video boom. Also, the commitment by the US majors (notably Warners and UCI) to exhibition spurred not only their own efforts but also those of their competitors, Odeon and MGM, to win back audiences to the cinema. Finally, cinema-building activity could be said to have contributed an atmosphere of excitement and urgency in the many cities where multiplexes were being created which served to make cinema-going a fashionable activity for the young and more attractive to older audiences (35 plus).
 
Set against the general decline in Europe in cinema-going and, in the last three years, the strengthening grip of the recession, not to mention the dire state of domestic production, the UK trend towards increased audiences must be attributed both to creating a new audience and winning back former cinema-goers. That said, no more than 10 per cent of the population account for a very large (around 70 per cent) of all cinema-going. This encourages UK exhibitors who see scope to achieve a US level of visits-per-year-per-head which would translate into 200 million admissions annually. Even conservative forecasts anticipate a rise to 140 million over the next five to seven years.
 
 
Concentration in Exhibition
 
 1992
United Kingdom
EU
 
Screens
Admissions
Screens
Admissions
Market share of Top 3 players
 
53%
 
67%
 
18%
 
34%
Market share of independents responsible for own programming
 
24%
 
20%
 
68%
 
47%
 
Among the major national markets, the UK is by far the most concentrated. Despite the arrival of new players (notably Warners and National Amusements from the US and small, domestically-owned circuits like Apollo and Robins), the Top 3 - MGM, Odeon and UCI - account for a growing share of the market. This is achieved both by maintaining audiences at existing sites and the creation of new ones. MGM, with some 24 per cent of the screens and 30 per cent of admissions, is the leader. Odeon, which has divested itself of most if not all of its non-viable sites, has around 17 per cent of screens and 22 per cent of admissions. UCI, the company created by Universal and Paramount to develop multiplexes in the UK (it has only two non-multiplexes, both London West End showcases, out of 25 sites), accounts for 12 per cent of screens and 18 per cent of admissions.
 
In practice, there are 1,450-1,500 commercial screens in the UK (excluding part-time, military and university screens). There are only 25 companies with more than two sites. The BFI (see below) with 51 sites is the seventh-largest circuit.
 
That said, the pronouncements that the independent sector was set to disappear do not seem to have been well-founded. As in France, the major circuits tend to be restricted to the larger catchment areas. Elsewhere in the country, the market is left to the independents and smaller chains. In some important local markets, an independent operator will be able to maintain a monopoly, which gives him access to first-run prints of major releases (for Jurassic Park, independents reportedly took 90 - 22.5% - of the 400 prints).
 
Bullish commentators see scope in the UK for 20 more multiplexes (on top of the 62 already in operation). To the extent that this comes about, it could be expected to lead to the closure of as many as one hundred independently-run screens but it would take an equal if not larger toll on city-centre screens owned by Odeon and MGM.
 
Unsurprisingly, however, the trend towards opening new multiplexes has slowed down considerably in the past few years as the recession has forced even the exhibition sector to adopt an attitude of caution.
 
 
Access by Films to Screens
 
 Companies involved in both distribution and exhibition - 1992 
Distribution market share
(% admissions)
Exhibition market share
(% admissions)
UIP/UCI/MGM
22.3%
46.1%
Warners
30.9%
4.1%
Rank
2.4%
20.8%
 
Like the exhibition sector, distribution in the UK is highly concentrated: in 1992, six distribution companies (the five US majors and Guild) accounted for 43 per cent of the new films released and 90 per cent of box office). Three groups account for 56 per cent of the distribution side and 72 per cent of the exhibition side. However, the companies involved - UIP, Warners and Rank on the distribution side; UCI, MGM, Warners and Odeon on the exhibition side - all insist that the two sides are completely separate. Indeed there is no evidence of the two sides giving more favourable terms to one another than to third parties. Where alignments between distribution and exhibition exist, they are a function of who has the best films and the best cinemas, not of preferences for a circuit to handle the films provided by its sister distribution company.
 
Where distributor/exhibitor ties become more of an issue is with more specialised, especially European films. Three groups - Artificial Eye, Mayfair/Curzon and Mainline - are acquiring films intended to be exhibited at their own cinemas. In London, which accounts for perhaps two-thirds of revenues for such films, the distributors will only play films in other outlets if their own cinemas are already full. Mayfair/Curzon, in particular, will grant its flagship Curzon cinema an exclusive for the Greater London area. It is argued that this kind of integration is the only thing which makes specialised films commercially viable in the UK. But this policy can be considered responsible for creating a scarcity of prints and very limited releases for a large number of films which, in other countries, will tend to enjoy a comparatively wider distribution.
 
In general, despite the relatively fewer screens in the UK, exhibitors see an insufficiency of prints as being the main barrier they face to getting access to films, with many sites being forced to wait some considerable time after first release, and after most of the interest has waned, before being given a print. Also, distributors are tending to insist on increasingly long guaranteed runs which will tend to work against exhibitors in smaller markets. Distributors are also unwilling to sanction arrangements whereby cinemas share a print.
 
 
Ticket Prices and Exhibitors' Shares
 
 1992
UK
EU average
Average ticket price incl. taxes (ECUs)
3.92
4.19
Average rental as a % of box office net of tax
41%
47.2%
Exhibitor's average share (%)
59%
52.8%
Exhibitor's share of ticket price (ECU)
1.83
1.93
Exhibitor's average share per screen (000 ECUs)
108
63
 
At first sight, the UK looks to have the richest and most profitable screens of any country in Europe. This is because of the low number of screens relative to the size of the population. It is therefore striking to note that ticket prices fell in real terms in the 1980s until 1988, only overtaking the 1980 level in 1991. There has been little real increase in ticket prices despite the very high investment in cinema construction and renovation.
 
As well as keeping down ticket prices, exhibitors have had to absorb VAT increases and increased rentals paid to distributors, so that their net receipts have only increased to the extent that they have succeeded in attracting new customers. Cinema advertising is a comparatively small business (around £35 million in 1992) and the share of expenditure on cinema advertising which flows back to exhibitors is, in any case, smaller still (as little as 25 per cent).
 
To mitigate these trends, exhibitors have placed a large emphasis on concessions which will tend to yield in gross receipts amounting to 50 per cent on top of box office - higher than the European average.
 
Rental levels are set by distributors, with one major distributor negotiating with each cinema (or, in the case of the multiplex circuits, UCI, National Amusement and Warner, with their headquarters) a "break figure" or "house nut", corresponding to the break-even point for each screen. The agreed figure is then accepted by all other distributors. The distributors, through their trade association, the Society of Film Distributors, also sets business terms for all exhibitors, in terms of amounts of credit, how prints are to be handled, exclusive runs etc. The normal arrangement on rentals, which applies to virtually all films and to the vast proportion of cinemas, is that the exhibitor retains 75-90% of box office up to the break figure, after which he keeps 25 (or 10) per cent. The exception to this is Odeon which pays rentals on the sliding scale basis common elsewhere in Europe.
 
 
Cinemas Provision
 
 1992
UK
EU*
Number of screens per 100,000 population
3.10
5.24
Number of seats per screen
296
266
% large screens
26%
24%
% Dolby
95%
51.4%
% multiplexes (7+ screens)
29%
10.7%
* weighted average
 
On average, the UK is less densely screened than any other European country except the Netherlands and Portugal and has the most seats per screen after Portugal and Spain. The average figure may be misleading, however. The decline in the number of cinemas and screens has largely been at the expanse of less-densely populated areas, so that the screens that do remain (or have been built) are serving larger catchment areas. The major population centres may be as well - or possible better - served in the UK than in many other countries. The seats-per-screen figure are inflated by 10 cinemas with more than 1,000 seats, six of which are part-time cinemas.
 
 
Programming
 
 1992
UK
EU*
US films' market share
86%
74%
European films' market share 

  - of which national films
13%
 
12%
24%
 
17%
Art-house & experimental: screens as % of all screens
5%
10.8%
Art-house & experimental: share of admissions
3%
9.7%
* weighted average
 
At first glance, the breakdown of UK box office by country of origin of films seems to conform to the European average, but the underlying truth is that the respectable 12 per cent share achieved by UK films is thanks to a situation unique to the UK in which the US majors will frequently finance and distribute UK films. Notable examples in recent years include Shirley Valentine, A Fish Called Wanda, Memphis Belle and The Commitments. Perhaps more surprisingly, also qualifying as UK films were the Star Wars trilogy, the Indiana Jones films and Batman, not to mention films made by UK producers in the US (e.g. Lawnmower Man). Discounting these films and the UK share falls to below 6%. Also holding up the UK films' performance is the insistence of the UK industry in claiming as British films made as much if not more in Ireland as in the UK and using Irish talent: My Left Foot, The Crying Game, Hear My Song, The Playboys etc. Exclude these films and there is hardly any UK box office at all for UK films.
 
Just as UK films often perform much better in other European countries than they do in their home market, so French and Spanish films fare as well in the UK if not better than UK films which, in any case, tend to be financed by television (BBC and Channel 4), receiving limited theatrical release (e.g. The Snapper, which was only shown in the cinema after being screened on BBC).
 
The seemingly poor performance of non-domestic European films and the low percentage of admissions accounted for by art-house cinemas also conceals the reality: the specialist cinemas clustered in London's West End are some of the most profitable screens in the country, nearly all owned and operated by integrated distribution/exhibition companies (e.g. Mayfair/Curzon, Mainline, Artificial Eye). These are supplemented by a nationwide network of Regional Film Theatres which receive public funding and programming assistance from the British Film Institute.
 
 
Role of the Public Authorities
 
 1992
UK
EU*
Taxes: 

                              - VAT 
                              - Other taxes 
                              - Rights (musical) 
 
 
17.5%
2.5%
1.0%
 
 
10.80%
5.18%
-
- Total/ticket (in ECU)
0.82
0.65
Financial assistance: 

                              - Total (in ECU Millions)
 
 
1.00
 
 
52.7
                    - Per ticket (in ECU)
0.01
0.09
* unweighted average
 
Compared to France or Germany, the film business in the UK receives virtually no support from the public authorities. Since the abolition of the Eady Levy and the last remnants of exhibition quotas in 1984, the government has applied a rigorous free-market policy to exhibition. The industry has responded by perhaps the highest level of investment (certainly per screen) of any country in Europe: the exhibitors' trade association, the CEA, estimates total investment in building and refurbishing screens between 1985 and 1992 amounted to £654 million.
 
What support there has been is confined to the monies provided by the British Film Institute for the Regional Film Theatres (RFTs), to cover everything from modernisation to employing educational officers. With their [51] screens, the RFT network has significant broking power.
 
In 1993, the authorities did intervene with the establishment of an inquiry by the competition tribunal, the Monopolies and Mergers Commission, into all aspects of the supply of films in the UK. This inquiry follows similar investigations in 1966 and 1983 the result of which was to curb exclusivity arrangements and alignments (between exhibitors and circuits). The UK government ministry responsible for the film industry, the Department of National Heritage, is currently preparing to issue a policy statement which may reverse the last decade's trend towards benign neglect.