About the UK cinema sector

The economics of cinema operation

The economics of cinema operation2016-11-24T13:05:37+00:00

As well as showing films to audiences, each cinema also runs 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, something which extends much further than just what is seen on the big screen (important though that is).

Amongst the costs that cinemas need to cover to remain viable are staff, utilities such as energy, water and waste bills as well as cleaning and maintenance. There are also additional costs such as local business rates and music rights payments to be taken care of.

And of course in order to ensure that the cinema experience remains the ‘gold standard’ cinemas are required to invest significant sums on an increasing basis in upgrades to seating and new technologies.  By way of example, over the last five years the six largest UK cinema companies estimate that they have invested over £400 million in sustaining and growing the country’s cinema infrastructure, a period which has seen 40 new cinemas open across the country.

As explained above, each cinema only retains a proportion of cinema ticket price income and so has to rely on income from other sources such as food and drink, as well as screen advertising for example, to remain viable. Without this income, the cost of cinema tickets for everyone would need to be higher. This would in turn mean less people were able to afford to go to the cinema in the first place.

Even so, all 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.