Memorandum submitted by the Cinema Exhibitors'
Association
IS THERE A BRITISH FILM INDUSTRY?
Cinema exhibition is the most important sector
within the British film industry by numerous measures. It represented
0.1% of Gross Domestic Product in 2001, whereas film production
represented 0.06%, of which approximately 0.04% was foreign production
in the UK and British film production represented 0.02%. (Unfortunately
current figures are not available to calculate 2002, but there
is no reason to believe that 2001 is atypical).
Approximately 16,000 people were employed in
exhibition on Skillset's Census Day (26 June 2002) and, whilst
there were not many films in production around the time of the
census, and the actual figure of 1,500 is probably low because
of the methodology, even when adjusted the total is only around
10,000.
Employment in exhibition is four fifths of broadcast
radio's and approximately the same as the combined independent
and corporate production sectors' in TV. Cinema exhibition is
a major employer providing flexible working hours, which suit
the lifestyles of many people who wish to have a part-time employment
in an interesting industry.
Cinema exhibition contributes to the social
fabric of society in the UK. The cinemas is a place where people
can gather together in safety and enjoy with other people probably
the highest form of artistic endeavour available as a film is
the combination of nearly all art forms. Cinema (176 million admissions
in 2003) is probably the largest participatory out of home artistic
activity in the UK, though most who attend cinemas do not consider
it in this way. They visit our cinemas to see a well told story
in comfortable surrounds and hopefully to be entertained and intellectually
stimulated by the experience. It is a joint social experience
with other like-minded individuals.
Until the mid-1980s cinema exhibition was in
serious decline (54.5 million admissions in 1984). The reasons
for this decline were numerous. Many cinemas were no longer a
desirable destination for a night out. The films we were able
to offer the public were not catching its imagination. The public
had the alternative of watching a film on video or television
in the comfort of the home, which was very attractive, as the
comfort and standard of people's homes was often superior to some
of our cinemas.
The decline caused cinema operators to review
their operations and, though many operators were introducing innovative
concepts, it was not until all the innovations were combined that
cinema going again became attractive. The date of this renaissance
is taken, for convenience, as the opening of the first multiplex
at Milton Keynes in the autumn of 1985. Another major contributing
factor was that film makers started to produce attractive films
for the whole of the population again and not just for those that
they perceived to be cinema-goers.
As the attractiveness of cinema-going grew,
cinema operators began to invest in new cinemas and to upgrade
the existing ones to equal standards of the new multiplex. New
builds became the cornerstone in many redevelopments and the regeneration
of our cities. New employment opportunities were created, many
of them in the north and Midlands, where the first multiplexes
were built, often in areas of relatively high unemployment. The
interest created by these new builds amongst the public was huge
and as it rediscovered cinema-going, it also rediscovered an interest
in film and film makers.
Cinema is the engine of the film industry as
it is in the cinema that the film makers' art and skills are exposed
for the first time to the paying public. Cinema is the showcase
for their films. In the cinema, the monetary value of the film
is first established and its exposure there drives the later exploitation
in other windows of opportunity that are available to all film
makers.
Nearly everyone employed within the audiovisual
industries aspire to make a feature film. The production of a
film which enjoys a cinema release is the pinnacle of achievement
for auteurs, directors and producers.
In 2003 the UK cinema industry achieved a total
of 176 million admissions to its cinemas. People in the UK visited
the cinema 3.08 times a year on average. The cinemas they visited
were mainly multiplexes (new builds since 1984 with at least five
screens) which contained just over 70% of the 3,258 screens situated
in 668 sites). Sites continue to close (63 sites, 130 screens
in 2002) where the public has decided to move its custom to other
cinemas that are better equipped, more comfortable or provide
it with a more suitable choice of film. Closures are no longer
restricted to traditional sites but also include multiplexes no
longer attracting customers. Multiplex closures have been first
generation builds. Cinemas close when people cease to visit them.
Cinema exhibition in the UK is a substantial
contributor to the exchequer even though the majority of exhibition
companies have not themselves produced taxable profits over the
past few years. The sector collected approximately £181,500,000
in VAT. Only the UK and Denmark pay standard rate VAT on cinema
tickets. Other countries within the European Union take advantage
of the derogation available to them to charge a lower rate of
VAT on cinema tickets (Annex H, 6th VAT Directive). Cinema operators
were also a net contributor under the Climate Change Levy as full
relief was not available to the industry as many of our employees
are part-time. Cinemas, especially in our tourist cities, are
utilised by overseas visitors, but unlike other "exporters"
we are unable to obtain relief as "exporters".
Since May 1997 cinema exhibition has, like all
other industries, had to bear the cost of Government's reform
programme. Whilst the reforms may be welcome, the extra costs
we have had to bear through increased operating costs and additional
red tape have been considerable. Using the British Chambers of
Commerce's Burden's Barometer, we believe that the extra cost
per ticket sold of these new burdens is now running at approximately
6p-7p on an annual basis.
To operate a cinema we are dependent on being
able to secure films from distributors. The cost of obtaining
prints has risen substantially over the past few years. Cinema
operators in the UK pay in both dollar and euro terms the greatest
amount of money in Europe to distributors for the films they exhibit.
The UK cinema industry is the third highest contributor—after
USA and Japan—to the income of distributors worldwide. If
the box office receipts in Germany and the UK in the first few
weeks of this year for the same films issued at the same time
are compared, as reported in both Variety and Screen International,
it would seem to indicate the UK should be a more profitable territory
as the total receipts are larger for the UK than Germany, even
though substantially fewer prints are struck for the UK than Germany.
Whilst CEA does not become involved in discussions
between exhibitor and distributor over the terms that are paid
to obtain a licence in copyright to exhibit a film in the cinema,
it is common knowledge within the sector that the average percentage
paid by exhibitors has risen in recent years.
It is understood that for many releases distributors
are now demanding that a minimum percentage of box office receipts
after VAT must be paid to obtain the film. The old systems of
a figure on which a lower rental was paid with sliding scales
above that figure is rarely available. Many distributors are demanding
40, 45 and 50% of the net box office for the first fortnight for
films of average appeal and up to 65% for films with major appeal.
These percentages are then usually reduced by 5% per fortnight.
The lowest minimum percentage asked for now is 30% even when occasionally
the old system of sliding scales is used. For some major release
films, which may have been on general release for some weeks,
some distributors are demanding that a higher percentage is payable
than is currently being charged to a cinema where the film has
been shown since the general release date when it is shown in
a new venue for the first time. This consistent upward pressure
on "film hire" has increased the yearly average paid
for all cinemas which, for some smaller operators, is over 50%
and for all rarely below 40%.
Cinema operators do not consider the country
of origin of a film. The decision to exhibit a film is based solely
on whether they consider the film will attract an audience, or
help to build one. Exhibitors do not have the information to decide
the country of origin of a film and even publications which pertain
to do so cannot agree on the market share that UK films achieved
in 2002. (Variety Deal Memo states 8%, Dodona 11 States 15.6%).
According to Dodona, more than three quarters of UK films were
released theatrically in 2002. 350 films were released in the
UK in 2002. All cinema operators attempt to widen their offering
to the public because it is good business, as new markets may
be created. As well as exhibiting an extremely wide choice of
film from all genres, major operators also individually create
programmes to widen the choice even further.
The wide choice now available to all cinemagoers
is illustrated by two examples—firstly, a single subsidised
screen in a small market town which exhibited 72 films in the
year and, secondly, by a small circuit of six sites with 13 screens,
which exhibited over 100 films. The subsidised "art house"
and "commercial sites", which are both some distance
from large conurbations, have selections which are very similar
and both contain films of all genres, often described in the following
terms: "mainstream, wide-appeal, art house, specialist, minority
appeal product". The choice now offered is greater than it
was some years ago and offered on a wider basis. It is in our
own interests to widen the choice of attractive films so as not
to be so dependent on expensive "blockbusters".
Exhibitors believe that the work of Film Education
in helping to create a cine-literate population is important.
Exhibition continues to support Film Education through direct
voluntary payments and making cinemas available free of charge
for events throughout the year.
Commercial cinema exhibition in the UK has,
without government subsidy, created a vibrant sector of the British
film industry. It has invested in its own future and created a
cinema estate where over 70% of the screens are in post-1985 buildings.
Cinema exhibitors have widened the choice of films available across
the whole country, without prejudice to the genre of the film,
being guided only by the potential of the film to attract or create
an audience. It has widened the accessibility of film by making
its cinemas more accessible to those with physical disabilities
or sensory impairments. The financial difficulties experienced
by cinema operators in both USA and Germany have been avoided
through prudent management whilst being at the European forefront
in exploring the potential of digital projection. Cinema exhibition
has, in some areas, over-screened but continues to explore how
it can place viable in cinemas in under-screened locations. The
climate for operating cinemas has become more difficult with increased
government regulation and increased costs of operation driven
by both Government and other sectors of the film industry. It
has had its potential market curtailed because of the widespread
availability of pirated films which is an increasing danger, with
more new films becoming available illegally on the Internet. Despite
the threats to the viability of the cinema operation, going to
the cinema remains most people's favourite place to watch and
enjoy a film.
3 March 2003
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