UK Cinema On Track For £1bn Box Office By 2008

The optimistic outlook comes despite a decline of 8.5 million in admissions during 2003. Dodona says that this fall was due to the exceptional film line-up of 2002, rather than an underlying weakness in the market. It notes that the 167.5 million admissions of 2003 were precisely in line with a decade-long trend of 4% annual growth.

Higher ticket prices and growth in revenues from sales of snack items, screen advertising and other sources (such as ticket booking fees), helped industry revenues last year to equal the £901 million earned in 2002.

Dodona says that an examination of audience and box office trends shows that the fall in attendance was among older, less frequent cinema-goers, as was also the case in the previous downturns of 1995 and 1998.

“It is an irony of the cinema business that the headline figures for the year are almost always determined by the most fickle customers,” says report author Karsten-Peter Grummitt. “But the locomotive of the market – the cinema-goers who are delivering growth – is the increasing number of regular attenders.”

Combined with a slowdown in the rate of new cinema construction, audience growth means higher profits across the industry, according to the report.

Just eight new multiplexes were opened in 2003 and the total for 2004 is expected to be even lower. Dodona says that investment in new cinemas is highly cyclical – 54 new complexes were opened between 1988 and 1991, compared to only 23 in the four following years. It therefore predicts that an upturn in new cinemas from 2006 will support the continuing expansion of the market.

The pattern of cinema screen development in the UK is shown in the table and graph below.

Multiplex Cinema Openings
	Sites	Screens
1985	1	10
1986	1	8
1987	3	26
1988	9	97
1989	15	146
1990	13	108
1991	17	128
1992	6	52
1993	5	50
1994	7	62
1995	5	36
1996	14	139
1997	19	212
1998	26	275
1999	26	248
2000	24	257
2001	25	284
2002	19	193
2003	8	84
Source: Dodona Research, March 2004

The multiplex rules Cinema development in smaller towns – which cannot support a large multiplex – continues to be poor. “With no more than a handful of the UK’s independent exhibitors having the financial resources or ambition to take advantage of these opportunities, on current trends cinema-going will become even more concentrated in larger towns and cities,” says the report.

More than 70% of Britain’s 3,318 cinema screens are already in multiplexes, with fewer than 1,000 screens in smaller, traditional cinemas.

Corporate activity is expected to be higher than site development during 2004, with three of the top six key circuits on the merger and acquisition trail. Consolidation began last year with the merger of Warner Village and Spean Bridge to create Vue, the country’s third largest circuit. There have also been some smaller buy-outs.

“At the end of 2002 everyone was saying boom times had come for cinema. As subsequent events have proved, 2002 was something of a flash in the pan. The work that has been done quietly over the last year, and the plans that are in formation, are actually much more important in providing a platform for the next phase of sustained growth in this market. By the middle of the decade we expect to see the emergence of a considerably more profitable and dynamic industry,” predicts Grummitt.

Leading UK Cinema Exhibitors
	2003	2004
Odeon Cinemas	608	604
UGC Cinemas	396	389
Vue		385
Cine-UK	319	357
United Cinemas International	352	332
National Amusements	237	237
Ster Century	59	73
Warner Village	352	*
Spean Bridge	24	*
Other	911	941
Total	3,258	3,318
Note: * merged to form Vue
Source: Dodona Research, March 2004

Advertising revenues Recent forecasts from Initiative Media predict that cinema will be one of the strongest growing media in terms of ad revenues during 2004. The sector is expected to see expenditure rise by 8.8% to £160 million – a growth rate surpassed only by cable/satellite and the internet. However, this follows a particularly weak year in 2003, when revenues dropped by 4.4%, according to Initiative.

Separate figures from Mediaedge:cia predict a 5.0% rise for cinema advertising this year, followed by a 6.0% increase next year.

Advertising revenue trends from the Cinema Advertising Association (CAA) are shown below.

UK Cinema Advertising Trends
	Revenue (£m)	% UK Display Revenue
1984	16	0.5
1985	18	0.5
1986	19	0.5
1987	22	0.5
1988	27	0.5
1989	35	0.6
1990	39	0.7
1991	42	0.7
1992	45	0.8
1993	49	0.8
1994	53	0.8
1995	69	0.9
1996	73	0.9
1997	88	1.0
1998	97	1.0
1999	123	1.0
2000	128	1.2
2001	164	1.6
2002	180	1.8
Source: AA/CAA/MediaTel.co.uk