Examination of Witnesses (Questions 500
- 509)
TUESDAY 17 JUNE 2003
MR STELIOS
HAJI-IOANNOU
AND MR
JAMES ROTHNIE
Q500 Alan Keen: In my dealings, he
would not allow this to go on. I do not mean he would not allow
you to go on, he would not allow the film industry to go on trading
as they do—
Mr Haji-Ioannou: As always, it
is a matter of evidence in the sense of you need, I think, for
a sustained period of time to continue to make offers on films
and get the rejections and get the procrastination and get the
unreasonable requests for film hire and then paint the picture
and say "You know, these people are not—it is not a
coincidence they are behaving like that". I think that is
what you have to prove.
Q501 Alan Keen: This is a question.
Please will you go across to Europe and get Mario Monti to forget
about football for a few years and concentrate on the film industry?
There is much more to—
Mr Haji-Ioannou: I will give Mario
a call. Mr Monti has spent a lot of time in the airline industry
too, I know. I know him, yes.
Q502 Mr Doran: I am intrigued by
the 20 pence figure and just how you have reached that figure.
[No verbal response] That is what I thought.
Mr Haji-Ioannou: It looks better
than 30 pence.
Q503 Mr Doran: It is a great headline
grabber. I am fairly familiar with your aeroplane operations because
we have got an easyJet flight from Aberdeen, my constituency,
down to Liverpool which is in direct competition with the BA flight
to Heathrow and, from what I am aware of, I think your cost for
a return flight was about a fifth of British Airways' most expensive
flight, but obviously they have various offers and all the rest
of it.
Mr Haji-Ioannou: My guess is that
on average the price is about half, which is again the comparison
we were trying to make.
Q504 Mr Doran: That will level out.
Mr Haji-Ioannou: Yes.
Q505 Mr Doran: Someone like me who
needs flexibility tends to pay at the top end. So you are right,
I can accept that. But the 20 pence—you licked your finger
and put it in the air and I can see the headline grabbing aspect
of that, but I just wonder how it is actually going to work in
practice because I have always seen cinema going as a relatively
cheap leisure activity. In my local cinemas the going rate is
about £4.00-£4.50 for a ticket, top line and you are
absolutely right, there is not very much variation, but when you
look at the economics of it—and we have been looking at
some of the economics over the last few weeks while we have been
undertaking this inquiry—the figure that you have mentioned
from Sony sounds just about right for the take that the producers—I
am not sure whether they were offering that as a producer or a
distributor, that would be—
Mr Haji-Ioannou: As a distributor.
Q506 Mr Doran: As a distributor.
You heard earlier when we were talking to Mr Walker that we had
the director and producer of Bend it Like Beckham who claimed
that the exhibitors and distributors took something like 75% of
the take of her film. So the producer is getting 25% of the £4.50
or thereabouts and the rest is divided up between the two. And
the economics of splitting up your 20 pence or your average, I
think you said around about £1.50 or thereabouts, does not
make it economic for anyone to give you that film.
Mr Haji-Ioannou: I think you have
to solve the equation for the number of people who see the movie.
If you start by offering a minimum of £1.30—actually
if you were paying Sony £1.30 you have to start at £1.50.
If you start at a minimum of £1.50 and try and put it up,
you will end up with X number of people seeing the movie. If you
start at 20 pence and finish at £4.00 my belief is you will
end up with two X, for example. That is what elasticity is all
about.
Q507 Mr Doran: Okay, but your assumption
is that you will pull more people into the cinema?
Mr Haji-Ioannou: Correct. Especially
if you have the ability to promote it and sell it properly in
the sense that you have to present the consumer, in my mind, with
a very clear proposition and a very clear guideline as to what
they have to do—like book three weeks in advance and you
get a cheaper price, go on a Tuesday and it is cheaper. At the
moment there is no incentive to book The Matrix three weeks
in advance. It will be the same price as it was the first night.
Q508 Mr Doran: One of my local multiplexes
sells a ticket, I think it is about £12, and you can go to
see any number of films for the whole month. Now, that is getting
close to your sort of prices and these are the sort of anoraks
who want to be in the cinema on an afternoon.
Mr Haji-Ioannou: Yes, volume discount,
which is what it is, is only one method of yield management, usually
the most unsophisticated because what you are doing is you are
giving a discount to your most loyal, keen customer and he is
indifferent about when he goes. So invariably he consumes your
most valuable piece of inventory; the Saturday night. Now, the
way we practice yield management is you isolate your inventory
and say "If you really want to get a discount, book in advance
and go on a Tuesday afternoon when you are alone in the movie
theatre". So you have to do it differently to fill the off
peak, in my view. Volume discounts, we have seen them offered
in other industries, they are not the answer. In one of my Internet
cafés you can get a month unlimited pass to access the
Internet for a whole month for £10-£15. It is not the
best way to do yield management.
Q509 Chairman: Well, obviously, as
you will have seen, there is a very widespread interest in the
Committee. We are most grateful to you for coming.
Mr Haji-Ioannou: Thank you.
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