COMMENT The charismatic Steve Weiner launched the very first Cineworld back in 1996, in the not-so-Hollywood town of Stevenage; incidentally, the best part of 30 years later this still remains a top-ranking cinema in the UK.
Following the launch of Stevenage came a swift roll-out across the UK and a famed expansion programme led by Weiner with his deals agreed with a handshake. Site selection tended to be excellent, and the result was an estate consisting of many of the nation’s very best-performing cinema locations.
UK cinema admissions had gone through something of a resurgence in the late 2000s, growing from 123m in 1996, at the time of the creation of Cineworld, to 171m in 2015, a year after Cineworld took over Israel-based Cinema City International. Things looked great. UK box office revenues were around £1.2bn and things could only get better… or could they?
Stopped in its tracks
There was a significant growth in multiplex development during the late 2010s, with multiplex screens alone rising from around 2,735 screens in 2009 to around 3,707 screens in 2019 (a 35% increase), according to the British Film Institute. In the same period, total admissions rose from 173m to 176.1m (a paltry 1.8% increase), suggesting that cinemas were simply pushing ticket prices up to bolster revenue while in real terms their audience numbers were static and in some cases declining.
Then we had a pandemic, and we all know what happened then.
However, let’s not forget the basic facts. Cinema is still incredibly popular; pre-pandemic there were more than 175m people a year visiting cinemas – this is a huge number and shows the popularity of the format. However, in many cases operators have taken the consumer for granted, with overpriced concessions, poor customer experience and expensive tickets. Despite many chains opting to install luxury seating across their portfolios, which certainly boosted admissions in many cases, this was really robbing Peter to pay Paul, as the market share was simply shifted across local competing sites.
We have seen very clearly what happens when occupiers become complacent and don’t constantly innovate and invest. Just look at Fitness First when the budget gyms came along, and similarities can also be drawn between the likes of Primark and the mid-market fashion brands such as Topshop. The mid-market is a dangerous place to dwell.
Debt burden
Back to Cineworld. Despite the company’s innovation in 4DX, ScreenX and Superscreen, is this really what the consumer wanted? Personally, I am not so sure I want to be shaken and stirred in my seat as I drink my Coke Zero – I can go to Alton Towers for that.
Combined with this, and much more relevant to their current predicament, a huge global expansion focusing on North America – with the purchase of Regal for around $3.6bn (£3.1bn) and then the highly publicised Cineplex saga in Canada – put huge costs (debt) on the business at the worst possible time, with the pandemic in full swing.
Sadly, the Chapter 11 bankruptcy process has commenced in the US. And while there is no doubt that the UK business has some incredible sites, it now seems to be a case of when and not if there will be some sort of change in structure. Will Picturehouse be sold off? Is there really any synergy between that brand and Cineworld? As it has some of the largest cinemas in the UK, will Cineworld now follow the market trend and try to downsize its locations? Can it reduce square footage and increase efficiency? If so, this will inevitably mean difficult conversations with landlords.
Finally, could the brand that started with the entrepreneurial and charismatic Steve Weiner see a change at the top in the UK? Only time will tell.
Thomas Rose is co-founder of P-Three
