about the industry
About cinema exhibition
This section of the website has been designed to provide an overview of the cinema exhibition sector.
The core objective of the industry has remained unchanged for almost a century - to provide audiences with a consistently excellent ‘big screen’ experience.
That said, the cinema business has had to constantly reinvent itself to ensure it has continued to offer the best possible experience to customers at an affordable price. In addition to bringing a diverse range of content to screens, cinemas have to consider their food and drink offers as well as the comfort of their cinemas, ticket prices and promotions and providing for a range of customer needs. All this falls within the overall aim of making a trip to the cinema an enjoyable outing that will make customers want to return again and again.
The most recent change to the industry - the transition to digital cinema technology - is one of the most fundamental shifts seen in all that time, with the traditional cinema offer now expanding to give audiences much greater choice in what they see.
The following sections explain some of the core functions of cinema exhibition, including interviews with key colleagues who give their individual perspectives on working in the industry and how they see the cinema business changing. (The interviews here were recorded in late Spring 2012 so some of the detail of what is said may have moved on since then).
Circuits, multiplexes and smaller sites
The UK cinema sector is made up of a wide range of multiplex and smaller cinema sites. These are operated either by key ‘circuit’ companies, who own a large number of sites across the country, or by smaller operators who may have a handful of sites, or sometimes just one. The three largest cinema circuits cover around 70 per cent of total UK screens, with the largest six circuits collectively accounting for 85 per cent.
Cinema companies operate very differently depending on how many sites they have.
One of the largest cinema chains might typically have over 750 screens, employing several thousand staff, over 90 per cent of those at individual cinemas sites. These companies might have whole departments which deal with film booking, customer services, retail services, operations, marketing and HR for example. In contrast, a smaller operator with just one site may have just one manager who would deal with all of the above as well as a general site manager and maybe a dozen or so box office/concessions staff.
Below, Crispin Lilly, Vice President of Business Affairs, Cineworld Cinemas gives his insight to working in the business:
Distribution and exhibition
It is important to explain how a film reaches the big screen and the relationship between film distributors and exhibitors. A film distribution company has the job of getting a film in front of audiences in whichever countries they have been given the ‘rights’ to sell it. Distributors not only manage the ‘theatrical’ release of their films to cinemas, but often also distribute films on other platforms including DVD, Blu-Ray, Video on Demand, Online, Pay and Free TV, amongst others. For more information on how film distribution works see the website of the Film Distributors' Association.
Exhibitors and distributors work together to encourage audiences to see films at the cinema. As explained below, both parties wants to maximise their income, distributors on the films they sell, and exhibitors across all the films they show at their cinema. So getting the right programme of film screenings on at every cinema often involved a complex process of analysis and negotiation.
Exhibitors and distributors also negotiate how much each cinema will pay the distributor in ‘rental’ for the films it shows. This is usually a percentage of the box office takings on the film. The percentage paid to distributors will depend on a number of factors, including the size of the film and whether the cinema is showing it on the release date, as well as the location of the cinema and its penetration with audiences. While most large cinemas will receive major films as soon as they are released, a number of smaller cinema sites may not receive these films until a few weeks later.
The share of income from cinema tickets which goes to the film distributor ensures that money can be returned to film-makers to repay the costs of making and marketing the film and to invest in producing new work. While vital to the future of the wider film industry, this does mean that there is less money than one might think available to the exhibitor to cover all of the other costs associated with running a cinema operation.
A further explanation on the economics of cinema follows below.
The economics of cinema
As well as the core purpose of showing films to audiences, each cinema is also a significant hospitality and retail business. Customer service is therefore of paramount importance, as is getting the food and drink offer right. Cinemas work hard to ensure they offer a quality experience to customers, this need extended much further than just what's seen on the big screen.
Cinemas need to earn enough to cover staff costs and other overheads such as energy, water and waste bills as well as to pay for the cleaning and maintenance of the cinema. There are also other business costs such as local rates and music licenses to be taken care of. This is all in addition to the huge sums involved in upgrades to seating and technologies to ensure that customers are getting the best experience possible.
In the last five years alone, the six largest UK cinema operators – representing some 85 per cent of UK market share by screens - estimate that they have invested over £400 million in sustaining and growing the country’s cinema infrastructure. This same period has seen over 40 new cinemas open across the country. Cinemas need to anticipate and keep up with public expectation of their services, constantly improving their offer to ensure happy customers.
As explained above, the cinema operator only retains a proportion of the cinema ticket price. For that reason, cinemas rely significantly on other sources of income, including on screen advertising and concessions (popcorn, sweets etc), in order to cover their costs and, hopefully, make a profit.
The cinema sector is occasionally challenged on the price of its food and drink offer. The reality is that this is an incredibly important income stream for cinemas. Cinemas, in a similar way to other catering businesses such as cafes and public houses, have to factor into their prices the cost of using the building and paying for staff and energy to make, serve and clear away the food and drinks. Of course, buying cinema food is optional, but it is available for those who want it and research suggests that many see it as a key part of the cinema-going tradition.
Some cinemas - in particular smaller sites - make very marginal profits, and income from concessions and advertising etc can mean the difference between financial viability and closure. Profit also enables investment into providing a ‘gold standard’ cinema experience for customers and allows operators to invest in the latest technology.
Cinema companies carefully analyse concession prices, ticket price and ticket promotions to make sure that the business has the right balance between earning enough income to provide a top quality experience whilst also providing customers with a good value night out. Compared to other leisure activities, the sector continues to provide a very good value night out, as evidenced by the stable level of cinema admissions in recent years in spite of the economic downturn.
The summaries below give a broad indication of the different functions that exist in many cinema companies.
Film programming in simple terms is the process by which decisions are made on which films to show in the cinema each week. Programmers also often negotiate the agreement of ‘rental’ with the distributor of each film. Film programmers might book films for just one cinema or several or across an entire circuit if they work for a major operator.
A film programmer needs to know and understand each cinema's audience in order to be confident that they will book films that people want to see. At the same time, they may need to try to book as wide a range of films as possible to attract a broad audience and encourage people to watch films they might not ordinarily choose. Programming also needs to take account of what audiences respond to at different times of day, days of the week and even times of the year, with school holidays for example being particularly popular periods for younger and family audiences. The fewer screens there are to programme at a particular site, the more challenging all of this can be.
The role of film programming often requires the understanding of a good deal of data and statistics. Programmers look at the admissions numbers from the previous week to see which films they want to ‘hold over’, and which films to take off their screens in order to make room for new releases. They might also decide on the times of the film screenings, which screens they are shown in and which screenings will be subtitled or included in ‘family friendly’ shows for example.
Film schedules are typically confirmed on a Monday, so over the weekend or very soon afterwards, film programmers will look at the weekend box office figures to judge which films are proving popular with audiences, and then decide on their schedule for the forthcoming week (starting on Friday). Once a plan is in place, then calls and emails will begin with film distributors to negotiate the booking of their films.
Understandably, each film distributor wants their film(s) to be kept on as many screens as possible to maximise their box office takings. Given these differing needs, film progamming is often a complex process of negotiation which includes not just agreeing which films to book but also the ‘terms’ – which includes the split of box office revenues between exhibition and distribution.
Below, Clare Binns, Programming and Acquisitions Director, Picturehouse Cinemas, explains a little more about her work programming for smaller cinemas:
The person in charge of the operations function in a cinema is normally responsible for almost everything concerned with keeping the cinema up and running, from staff, opening times, health and safety, on-site customer service, heating and lighting to cleaning and maintenance.
Operations teams must be aware of everything going on across their organisation to ensure that new procedures and promotions etc are implemented on site. A larger multiplex chain would normally have a national operations manager and regional, or area, operations managers who work together with the general managers on site to oversee the running of their cinemas, cascade information from Head Office and feed back information from individual sites about their performance and any specific issues.
In a smaller company, these functions might be shared between a general manager and the owner. In all cases, whoever is in charge of operations will need to ensure that each cinema is ready for business, that the environment is comfortable and safe, that the building is clean and well-maintained, that there is enough concessions stock, that ticket machines are working and that there are well trained staff to keep the cinema running.
The operations function will also normally be closely involved in the development of new sites and ensuring that issues such as accessibility and relevant health and safety and fire regulations are met. Operations managers are normally responsible for acquiring the entertainments licences required by cinemas to operate. These specify a number of matters, including opening hours and permit the sale of alcohol and late night refreshments.
Marketing and promotions
Marketing and promotion involves ensuring that each cinema engages with the widest possible range of customers. Cinemas need to understand what customers want now, and what they might want in the future, and respond to that. Marketing teams have a fundamental role in communicating clear messages about why people should choose to spend their time and money at the cinema and why the big screen experience remains the best place to watch a film.
Marketing in cinemas will include film, brand and retail marketing. As well as internal communications there is also a wide range of external communication which needs to be managed via consumer and trade PR, local area marketing – particularly for site openings, and directly to customers through a variety of channels including social networking and mobile technology. There are lots of reasons why someone may go to a particular cinema, from convenience factors such as transport links and parking, accessibility, safety of a locality to more subjective reasons such as pricing, offers, customer service, comfort and quality of the facilities. Marketing teams work hard to ensure their overall offer is clear to customers and the best it can be.
Cinema as a business is changing. Digital technology brings huge opportunities for cinemas to broaden their offer to customers, making it much easier to show a wider range of films and, with the ease of moving films around screens, making it easier to respond to audience demand.
Delivery of content via satellite has also enabled cinemas to show a range of so-called ‘alternative content’ such as opera, ballet, theatre, music and sporting events. These can be broadcast live to cinema screens, making national events much more accessible to audiences across the UK.
An increasing number of cinemas are now also offering VIP or ‘gold class’ tickets in an attempt to attract customers willing to pay more for arm-chair style seating or recliners, with more leg room and space for wine and nibbles, providing an altogether more premium experience. At the other end of the spectrum, customers seeking value for money can still avail themselves of the long-running Orange Wednesdays 2 for 1 ticket promotion, or a range of company-specific loyalty card or discount schemes.
Many cinemas also run special screenings for the elderly, mothers and babies, and for schools or disabled groups, for example through autism-friendly screenings. Cinemas will adapt their traditional screening experience to cater for these groups. Some sites also work with local partners to promote film festivals or events with the surrounding community.
It is the role of cinema marketers to ensure that customers know about the increasing range of benefits that cinema has to offer. Cinemas companies need to stay in touch with all their existing customers whilst constantly reaching out to potential new audiences. With the huge range of communication channels available in a digital world, cinemas need to have an understanding not only of what audiences want, but also how they access information. The aim is to equip people with all the knowledge they need to make an informed choice about going to the cinema.
Below, Mark De Quervain, Sales and Marketing Director, Vue Entertainment, offers his perspective on the role of marketing for cinemas:
Each cinema typically has a general manager to oversee the smooth running of that site. The general manager will ensure films, trailers, adverts, posters etc all arrive on time, will control concessions stock, arrange staff rotas, deal with customer enquiries and complaints, ensure that admissions, box office and other takings are all reported to the management team, and overall ensure that the cinema building itself is ready to be open to the public every day.
Essentially the role of the general manager is similar to that of the operations manager but on a site-specific basis.