A brief history of cinema exhibition in the UK

A brief history of cinema exhibition in the UK
Philip McCosker

Brief curriculum Vitae

Address:   Birmingham College of Food, Tourism and Creative Studies
                Summer Row
                Birmingham
                B3 1JB
e.mail:      p.mccosker@bcftcs.ac.uk

Qualifications

1998    University of Birmingham - Master of Business Administration (Distinction)
1990    Fellow of the Association of Chartered Certified Accountants (FCCA)
1985    University of Salford - B.Sc. (Honours) degree in Economics

Employment

Since May 1995 I have been employed as a Lecturer in Financial Management at Birmingham College of Food, Tourism and Creative Studies. The College offers a number of higher education business programmes and is an accredited college of the University of Birmingham. I also lecture on a part-time basis for the Open University on a module entitled ‘Accounting for managers’. Prior to this I spent almost 10 years working as a management accountant.

I have a keen interest in cinema exhibition in the UK and as part of my MBA I completed a 20,000 word dissertation entitled ‘The UK multiplex cinema industry - A strategic audit of Virgin Cinemas’.

Articles published

‘The Importance of Working Capital - Manchester United may be Kings of Europe, but how good are the treble winners at managing their working capital?’ (ACCA Students’ Newsletter – March 2000)

‘Adjustments to final accounts’ (ACCA Students’ Newsletter – November 1999)

‘Adjustments to final accounts’ (CIMA Student Magazine – August 1999)

‘Making more sense of financial accounts through the use of ratio analysis’ (ACCA Students’ Newsletter - June 1998)

‘Making more sense of financial accounts through the use of ratio analysis’ (CIMA Student Magazine - February 1998)

‘Methods used to evaluate investment in capital projects’ (CIMA Student Magazine - February 1997)

‘The financial evaluation of capital projects’ (ACCA Students’ Newsletter - December 1996)

Abstract
A brief history of cinema exhibition in the UK
Philip McCosker

Along with big budget movies, the multiplex is credited with saving cinema exhibition in the UK. In 1984 annual cinema admissions had fallen to an all time low of just 54 million. Since 1985 operators have invested huge sums in building multiplex cinemas and as a consequence admissions have soared to almost 140 million. This boom is forecast to continue with operators planning to open almost 600 new screens within the next few years, and admissions expected to increase to around 185 million by 2002.

This article will examine the reasons behind the spectacular decline in admissions between 1950 and 1984 and assess the impact that multiplexes have had upon the UK cinema industry. It will also consider the opportunities and threats faced by exhibitors during the next few years. A brief history of cinema exhibition in the UK 1) Introduction "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) (Daneshkhu 1995)

From the screening of the first film to a paying audience in the late 1890's right up to 1984, UK cinema exhibition followed traditional product life cycle theory with periods of introduction, growth, maturity and decline. Had this pattern continued then cinema would today be a minority leisure activity in the UK. However since the arrival of purpose built multiplex cinemas in the mid-1980's, there has been huge investment in the industry and admissions have soared. Although admissions are expected to increase even further, there are concerns as to whether the market can support the huge number of planned new multiplex developments.

2) The golden age of cinema

In 1930 there were 5,361 screens in the UK (Moyes 1997 p.3) and as table 1 shows, cinema was one of the country's leading leisure pastimes with annual admissions throughout the 1930's and 40's regularly exceeding one billion.

Despite the limited number of alternative leisure activities, operators invested huge amounts on cinema interiors, culminating in 1937 with the opening of the largest cinema ever seen in the UK. 'The State' in Kilburn was a single screen cinema with seating for 4,004 people, almost double the capacity of the average 10-screen multiplex of the 1990's (Westbrooke 1997 p.4).

Admissions peaked in 1946 at 1.64 billion (Lake 1998), one visit per adult each week, the highest number of admissions ever recorded anywhere in the world (Dodona www page, 19 August 1998). There followed a spectacular decline in the popularity of cinema (table 2), and by 1984 we were visiting the cinema just once each year.

	Annual Admissions (millions)
1933	903
1936	917
1939	990
1940	1,027
1943	1,541
1946	1,640
1949	1,430

Table 1: Annual cinema admissions in the UK 1933-49 (Source: BFI www page, 19 August 1998)

3) The spectacular decline in the popularity of cinema

By 1984 annual admissions had slumped to just 54 million (Lake 1998). A similar trend was witnessed throughout Europe and the US, with the advent of television, the introduction of the video cassette recorder (VCR), poor quality films and a failure to invest in new cinemas all credited with contributing to the fall in admissions.

It is the growth in television ownership that is credited with striking the most severe blow to UK cinema admissions. Between 1951 and 1963 television ownership increased from 340,000 to 13 million (Lowe 1988 p.389). For each new television licence purchased, cinema admissions fell by almost 80.

The number of cinema screens did increase slightly during the mid-1970's as operators divided large single screen cinemas into two or three theatres in an attempt to increase the number of films on show. However this did little to reverse the downward trend in admissions.

Year	Number of screens (1)	Annual Admissions (millions) (2)	Admissions per screen('000's)
1930	5,361	-	-
1951	-	1,365	-
1955	4,483	1,182	264
1960	3,034	501	165
1963	-	357	-
1965	1,993	327	164
1970	1,531	193	126
1975	1,547	116	75
1980	1,576	101	64
1984	1,246	54	43

Table 2: Summary of UK cinema admissions and the number of screens in operation 1930-84 (Source: (1) Mintel 1992; (2) BFI www page, 19 August 1998)
By the early 1980's, admissions had fallen below 100 million and it was feared that the arrival of home video would finally kill off cinema. In 1981 just seven per cent of households in the UK owned a VCR, by 1986 ownership had risen to 51% (Docherty 1987 p.62), and as table 3 clearly shows, within a few years video rental generated over four times as much revenue as total UK box office receipts.

As admissions fell many cinemas were forced to close, whilst those remaining open were often in need of urgent refurbishment. Unfortunately operators were caught in a vicious circle. Falling admissions reduced box office receipts and hence profits. As profits fell operators were unable to afford the cost of refurbishing cinemas, and these once grand buildings became shabby causing admissions to fall further still.

	UK box office £m	Video rental £m
1982	207	-
1983	125	310
1984	103	425

Table 3: UK consumer expenditure on cinema and video rental 1982-84 (Source: BFI 1995 p.30)

By 1984 annual admissions were just three percent of the 1946 level (Lake 1998), and only 1,246 screens remained in operation (Moyes 1997 p.3). However two developments arrested this decline; the arrival of the multiplex cinema accompanied by an increase in the number of Hollywood produced blockbuster movies.

4) The arrival of the multiplex

In 1985 American Multi-Cinema Entertainment (AMC) opened the UK's first multiplex cinema, 'The Point', a purpose built 10-screen complex in Milton Keynes (Januarius 1991 p.33). The concept was imported from the US where it had successfully attracted audiences back to the cinema. As table 4 shows, it has proved equally popular in the UK and the period since 1985 has seen a huge revival in the fortune of UK cinema exhibition. Indeed multiplex cinemas are increasingly seen as pivotal to many leisure and retail parks, attracting thousands of people throughout the entire day.

Despite this revival, admissions per screen do not compare with the early years of cinema. As table 2 shows, in 1955 each screen had around 264,000 admissions per annum. Today each screen has around 60,000 admissions per annum. This is however much higher than in the US where admissions per screen have fallen from 57,822 in 1980 to 45,099 in 1996 (Dodona www page, 19 August 1998).

	Admissions (million) (1)	Total Number of screens (2)	Number of Multiplex Screens (3)
1985	72	1,251	10
1990	97	1,685	393
1992	103	1,845	564
1994	124	1,969	683
1996	124	2,250	900
1997	140	2,356	1,103
2002 (forecast)	185	3,150	1,900

Table 4: Summary of UK cinema admissions and the number of screens in operation 1985-2002
(Source: (1) 1985-96 BFI www page, 19 August 1998; 1997-2002 Rawsthorn 1998
(2) 1985-1996 Moyes 1997 News p.3; 1996 Rawsthorn 1997b p.15; 1997-2002 Rawsthorn 1998
(3) 1985-1994 Policy Studies Institute 1995; 1996 Rawsthorn 1997b p.15; 1997 Lake 1998; 2002 Rawsthorn 1998)

5) Planned investment in multiplex and megaplex cinemas

During the decade to 1995 operators invested over £600 million in new cinemas (Ivison 1995), and in 1997 alone £300 million (Lake 1998) was spent on thirty new multiplexes consisting of 293 screens and 70,000 seats (Jones 1997). Despite this huge investment, there remains a shortage of screens in the UK, with one cinema screen for every 25,000 people (Jones 1997). As table 5 indicates, this does not compare favourably with other developed countries.

Fuelled by forecasts that UK cinema admissions will continue to grow, all of the leading operators are planning further massive investment in multiplex and megaplex cinemas. Virgin expects to open a further 10 multiplexes by the end of 2000, whilst UCI's plans include two 20-screen cinemas in Greater Manchester (Garrett 1997 p.7). Warner Village intends to open 21 new sites by 2003 (Rawsthorn 1999) including a £35 million, 32-screen development on the site of Battersea power station (Glaister 1997 p.12), a 30-screen megaplex in Birmingham (Daneshkhu 1997 p.13) and the UK's first twenty-four hour cinema in Bolton (Chaudhary 1997 p.7).

In addition a number of overseas multiplex operators have started to enter the UK market. Ster Kinekor, South Africa's largest operator, sees the UK as having huge potential and Australian based Hoyts Cinemas has also acquired several sites (Kingston 1998 pp.35-36). With many analysts believing that the North American market is saturated, US cinema operators are turning towards the UK and Europe. Consequently competition in the UK will intensify during the next few years as operators battle for prime sites.

	Number of inhabitants per screen
US	9,000*
France	13,000
Ireland	17,000
Germany	20,000
UK	25,000
EU Average	20,000

Table 5: Ratio of inhabitants to cinema screens (to nearest thousand inhabitants) (1997)
(Source: MEDIA Salles 1997 p.57; except *Newton 1998)

6) Have operators overestimated the size of the UK market?

Karsten Grummit, managing director of Dodona Research, forecasts that by 2002 the UK will have almost 2,000 multiplex screens, and whilst analysts agree that the UK is "undercinema'd", there is differing opinion on how much growth it can actually sustain.

Until recently a multiplex was often a monopoly supplier to its local catchment area. However as competition intensifies it is becoming increasingly common for multiplex operators to compete directly against one another within a locality. Some observers believe that as market saturation is reached cinemagoers will be swamped and operators forced to slash admission prices.

"Multiplex operators are about to enter a period of savage competition, in which the big players will invest tens of millions of pounds in top of the range complexes on the doorstep of their competitors in a drive to kill or be killed." (Newton 1998) The cost of building a 16 to 18-screen complex may be as high as £15 million (UCI www page, 28 May 1998), and this figure is rising as more operators compete for the best sites. Recent studies suggest that intense competition between operators has increased rents by upto 30% and consequently profit margins have fallen from 30% to 20% (Newton 1998). It is reaching the stage where "...entrance costs to the industry have reached prohibitive levels for all but those with the deepest pockets" (Parkes 1997 p.28). As early as 1995 Steve Knibbs, Managing Director of UCI, forecast that although, "...there is room for expansion in the UK market..." it is "...not enough to sustain the level of ambition of competitors and new arrivals...We will end up chasing the same sites which will push prices up and nobody will gain except the developers...operators margins will be squeezed and profits will fall." (Bell 1995b) Sheffield, which has been described as the 'multiplex capital of Britain' (Jones 1997), provides an excellent example of the intense competition between operators: "The city currently has an 11-screen Warner Bros. cinema, a 10-screen UCI, and a 10-screen Odeon. Virgin has been given planning permission for a 20-screen cinema at Sheffield Arena, and Warner Village aims to develop the 11-screen site at the Meadow Hall shopping centre into a 30-screen megaplex...there is a planning application for a 9-screen Warner Village as part of the redevelopment of the city's covered market." (Jones 1997) Sheffield has a population of around 500,500 (Microsoft 1996), if all these developments proceed the city will have 79 screens, one for every 6,350 inhabitants, a ratio much higher than even the US. It will be interesting to see if all of these proposed cinemas are able to survive.

Glasgow is another city in danger of over-saturation with Virgin, Rank, Warner Village and THI Leisure all planning new multiplexes in addition to the three already operating in the city (Houston 1999). If plans come to fruition the city will have "...50 screens on three sites within half a mile of one another." (Houston 1999) Whilst in Birmingham Virgin unsuccessfully objected to a rival operators plans to develop a 24-screen cinema on the site of the former children’s hospital (BBC Ceefax 9 September 1998 p.163). Virgin believed that the city could not support further multiplex developments.

7) Areas of concern for exhibitors in the UK

Despite the huge increase in admissions during the past 15 years, there are several factors that concern operators, the most important of these include:

7.1 Quality of films

Although it is true that the development of multiplex cinemas has been a key factor in explaining the growth in cinema admissions, it is blockbuster movies that attract audiences. This was clearly illustrated in 1995 when a stream of poor films, accompanied by a very long and hot summer saw admissions fall for the first time in a decade.

In 1998 admissions declined to 135.2 million (Rawsthorn 1999), this was blamed on a combination of the world cup and a lack of blockbuster films. However Italy, France and Germany all experienced an increase in admissions despite the world cup. This "…underlines its vulnerability as a capital-intensive industry heavily dependent on the quality of product but with no control over it." (Rawsthorn 1999) For exhibitors the main concern in developing both multiplexes and 20-screen megaplexes is whether sufficient high quality films are available to attract audiences.

7.2 Government stance on out of town developments

Worried by the negative impacts of out of town sites the Government is encouraging local councils to limit them, suggesting that wherever possible town centres should be the focus of any future developments. Such a policy will impact significantly upon the cinema exhibition since most multiplexes have been developed in out of town locations.

Town centre schemes raise a number of difficulties, not least the cost and availability of large enough sites, adequate car parking and transport links. In addition operators have been critical of the UK's slow and unwieldy planning system, which fails to meet the needs of the leisure industry (Gilling 1998 p.44). As things stand government policy towards out of town developments represents a serious threat to the industry's future prospects.

7.3 Attracting new audiences

Multiplex operators and film producers have been accused of ignoring certain groups of cinemagoers. In particular there is a lack of art and foreign language films, as Hollywood blockbusters are given priority to screens. Although the over-35 age group makes up 52% of the UK population (Pullinger 1998 p.34), and comprises the empty nest households which traditionally have a higher level of disposable income, only 12% of this category visit the cinema four or more times each year, whilst 57% never go to the cinema.

More worrying are the results of a survey among cinemagoers in 1997 which found that whilst around 90% of those aged 16-35 believed that going to the cinema provided a good night's entertainment, only 56% of the 45-64 age group agreed with this view. For the over-65s the figure dropped to just 36% (Key Note 1997 p.30).

As multiplexes become larger, to remain successful operators must attract new audience groups.

8) Conclusion

Despite competition from video, digital television and other leisure activities, cinema is currently a growth industry thanks to huge investment by multiplex operators and a steady stream of big budget movies from Hollywood.

Records were broken in 1997 when for the first time ever 15 films exceeded £10 million at the UK box office (McCann 1998 p.9). In addition exhibitors can draw comfort from table 6 which suggests that the UK is currently a growth market with admissions per capita forecast to reach three times each year by 2003. Within the next decade this figure could increase to four times. However most analysts believe that at this level the UK market will reach saturation (Dodona Research www page, 19 August 1998).

	Admissions per capita UK	Admissions per capita US
1984	1	4
1996	2	5
2003 (forecast)	3	5

Table 6: Cinema admissions per head of population (Source: Dodona Research www page, 19 August 1998)

Operators are now starting to develop the next generation of cinemas – the megaplex. However as Richard Segal, managing director of Odeon Cinemas, explains they may encounter problems.

"...the megaplex concept is unproven. Planning consents might be refused - and they may have difficulty finding enough product to fill 25 screens or more throughout the year." (Garrett 1997 p.7) It must be asked whether the dramatic decline in admissions would have occurred had operators continued to invest in new infrastructure during the period 1950-1970. "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." (Newton 1998)

Philip McCosker BSc (Hons) MBA FCCA
Lecturer in Financial Management at Birmingham College of Food, Tourism and Creative Studies, UK
2 September 1999

References

BBC CEEFAX (9 September, 1998) "Branson opposes plan for new cinema" p.163

BELL, E., "Cinema paradiso for multiplex investors" The Observer 18 June, 1995a, p.2

BELL, E., "Clash of the multi-screen monsters" The Observer 20 August, 1995b, p.2

BFI (1995) "BFI Film and television handbook" London: British Film Institute

BFI (downloaded 19 August, 1998) UK Cinema admissions 1933-96 www.bfi.org.uk/right/FAQ/admissions.htm

CHAUDHARY, V., "US cinema chain bids for Christmas opening." The Guardian 30 August, 1997, p.7

DANESHKHU, S., "An evening out at the local multiplex - leisure parks are here to stay - accessible and with activities for all generations." The Times 1 December, 1995

DANESHKHU, S., "Cinema set to revitalise power station; Joint venture to invest £35 million in 32-screen complex at Battersea." Financial Times 24 June, 1997, p.13

DOCHERTY, D., et al. (1987) The last picture show?: Britains changing film audience London: British Film Institute

DODONA RESEARCH, (Downloaded 19 August 1998) Coming Soon - A Cinema Near You? www.dodona.co.uk/somethingtoread.html

GARRETT, A., "Will the megaplex take us to cinema paradiso" The Observer 29 June, 1997, p.7

GILLING, J., "Full scheme ahead" Leisure Management April 1998, pp.42-45

GLAISTER, D., "Battersea power station to usher in a new golden age of cinema." The Guardian 20 June, 1997

HOUSTON, K., "How many more cinemas does Glasgow need?" The Scotsman 8 January 1999

IVISON, J., "Silver screens with the golden touch. Multiplexes are playing the lead role in feeding cinemagoers seemingly insatiable appetite for films." The Scotsman 17 August, 1995

JANUARIUS, M., "Multiplexes multiply" Leisure Management August 1991, pp.33-34

JONES, A., "Coming soon near you - a multiscreen boom" The Times 11 February, 1997

KEY NOTE (1997) UK Leisure and recreation (8th ed.) London: Keynote publications

KINGSTON, N., "Ready for a close up" Leisure Management May 1998 pp.34-36

LAKE, H., "Big screen fights back: facts and figures" Mail on Sunday 15 March, 1998

LOWE, N., (1988) Mastering Modern World History (2nd Ed.) London: MacMillan

MCCANN, P., "The year the money kept rolling in for Hollywood" The Independent 1 January, 1998, p.9

MEDIA SALLES, (1997) European Cinema Yearbook 1997 6th Edition Milan

MICROSOFT (1996) Encarta 1996 Encyclopedia CD ROM

MINTEL (1992) Leisure research 1992 London: Mintel publications

MOYES, J., "Fleapits fight to survive in new age of the cinema" The Independent 17 September, 1997, p.3

NEWTON, R., "The silver screen turns to gold: The days of the flea pit cinema have gone." The Sunday Telegraph 25 January, 1998

PARKES, C., "Films take a back seat to the main event" Financial Times 24 February, 1997

POLICY STUDIES INSTITUTE (1995) Social Trends 1995 CD ROM

PULLINGER, J., (Ed.) (1998) Social Trends 28 London: The Stationery Office

RAWSTHORN, A., "UK cinema admissions down 17%" Financial Times 21 June, 1997a, p.6

RAWSTHORN, A., "UK ticket sales to soar on back of cinema expansion" Financial Times 23 January 1997b, p.15

RAWSTHORN, A., "Healthy growth in cinema market set to continue" Financial Times 25 March, 1998

RAWSTHORN, A., "Multiplex market presents a moving picture of potential growth." Financial Times 23 January 1999

UCI CINEMAS, (downloaded 28 May, 1998) The making of a multiplex www.uci-cinemas.co.uk/docs/whyuci/corp/cor2.htm

WESTBROOKE, J., "Reality hits palaces of dreams" Financial Times 18 January, 1997, p.