Cinemas in Europe are facing some common challenges. Topmost of these are recovery from the pandemic, high energy prices and interest rates, the cost-of-living crisis impacting consumer behaviour, and debt and liquidity issues in the sector undermining overall market confidence. However, major blockbusters saw 2022 make big-box office gains on 2021, customers are returning, and they are showing a willingness to pay for premium large-format screens and luxury seating options.
To take the pulse of the cinema business in Europe, Screen International spoke jointly to the chief executives at three exhibitors, which operate collectively across France, Spain, Scandinavia, Italy, Austria and southeast Europe.
Nathanaël Karmitz is chairman of mk2 Cinemas, the Paris-based company straddling film production, distribution, international sales and exhibition. mk2 Cinemas operates the biggest arthouse chain in France, and since 2014 the Cinesur chain in Madrid and southern Spain — with a combined 200 screens across 26 sites generating 5.4 million admissions last year. Karmitz joined mk2 in 1997, taking over leadership of the company from its founder Marin Karmitz — his father — in 2005.
Christof Papousek is CEO of the Vienna-headquartered Cineplexx chain, which has expanded from its Austria core market into 11 other countries, and is owned by entrepreneurs Christian Langhammer (with his family foundation) and Papousek. Cineplexx operates 61 multiplexes and six traditional cinemas across Austria, German-speaking northern Italy, Greece, Romania, Albania and the nations of former Yugoslavia.
Asger Flygare Bech-Thomsen is CEO of Nordisk Film Cinemas, which is the market leader in both Denmark and Norway, and has expanded into Sweden. The company — with 260 screens across 46 sites, achieving 6.7 million admissions in 2022 — is part of the Nordisk Film group, which also engages in production, distribution and other activities including games and interactive. Nordisk Film Cinemas has been named 2023 international exhibitor of the year by CineEurope, and will receive the award at this year’s event in Barcelona in June.
The three executives joined Screen International over Zoom in late March to discuss the challenges and opportunities facing their businesses.
Screen International: How was the 2022 recovery in your markets, and how has Q1 been this year?
Christof Papousek: (CEO, Cineplexx) In 2022, overall across our 12 countries, we saw a -30% gap to our 2019 admissions numbers. Our cinemas performed a little better in Austria, and especially in terms of box office because we had big titles which outperformed in premium large format and with luxury seating. At the concessions we did even better — in Austria we are only 7.5% behind 2019. This is linked to a price increase, but more to the big popcorn movies on release, and maybe also to the long period of closure during the pandemic — people were really happy to get back to the theatres and get their popcorn and Coke and nachos.
In the German-speaking part of northern Italy, we are close to 50% down on 2019 — so this is a catastrophe, and we have to keep on working to close this gap.
In the lower-ticket price markets, especially in the second half of 2022, in Serbia, Bosnia, Macedonia, Montenegro, and also Albania and Kosovo, it was slowed down by the economic situation. In Serbia, the government always pointed out that there might be a difficult winter, maybe without heating, without energy. The fear in society was big, and this was slowing down out-of-home entertainment activities. But in these markets the capacity was also increased because new shopping malls came and new cinemas were opened, even during the pandemic. The shopping mall construction went on, there was no interruption during lockdowns.
Nathanaël Karmitz: (chair, mk2 Cinemas) In France last year, the market dropped by 60 million admissions since the pandemic, from 213 million in 2019 to 152 million in 2022. We had 250 French movies released in 2019, and a similar number in 2022, with -15% admissions for French movies. So 50 million admissions were lost by American movies. And you had 127 American movies in 2019, and 65 last year. So it’s only a question of offer, and US market share per territory. France is getting better as it has a stronger French cinema. We see the exact opposite in Spain, where it’s a
US‑dependent market, and the drop was more than 50% from 2019. It’s an offer business: movies are coming back, people are coming back.
Asger Flygare Bech-Thomsen: (CEO, Nordisk Film Cinemas) We are in Norway, Denmark and Sweden, and the average for 2022 was probably around 70% of 2019. As for Q1 this year, that’s not been a good quarter, lacking international titles. We’re looking at something like 65% of pre-Covid across the three territories in Scandinavia.
So you’re heavily reliant on international titles for the Scandinavian market?
Flygare: I wouldn’t say heavily reliant. International titles are around 70%-75%, so we do have between 25%-30% of local titles. But if you only have half of 75%, then it does matter.
In the UK, commercially weak awards season titles negatively impacted Q1 for cinemas. How was it in your markets?
Papousek: Awards season has been better as a share of admissions this year, but that is also because Q1 has been weak overall. The award season is not a very big thing for us.
Flygare: When the awards are not generated for the bigger mainstream titles, or for crossover, then the impact on audiences is not that big.
Karmitz: For us, awards season is Cannes, otherwise the Oscars and Césars doesn’t have much impact. My belief is that it’s taking too much importance on the US and UK side, because it seems that many distributors think the only way to show arthouse or independent movies is to be in this awards season and awards marketing. Interest in awards season is more concentrated for industry people than for the real customers. In Spain, we follow the US and UK a bit more in this regard: the win has an impact on admissions. But otherwise, it’s low impact, except in the mind of the distributors.
Cinema chains are making a lot of investment in premium large formats, including Imax. How do they fit into your brands?
Papousek: We are operating eight Imax theatres and four Dolby. For special titles it works very well, especially with Imax. Here we see a huge co-branding effort in co-operation with studios, and the awareness created in movie advertising campaigns is great. We also see a huge potential in the lower ticket price markets, because it’s unique there. For territories where there’s only maybe one Imax theatre, people are making an effort to come.
We run an Imax in Thessaloniki in northern Greece, and for special titles like Avatar, we organised bus trips from Athens just to watch these titles on Imax. We had a lot of noise on social media, people were excited. In Belgrade, we opened a new Imax right in the pandemic, and we are also bringing Imax to Pristina, the capital city of Kosovo. You can see that young economies and young societies are already open for such premium formats, and the excitement is great there.
Flygare: We do not operate Imax — we operate THX and our own PLF brand. What’s most interesting, there’s a lot of talk about price sensitivity, but if you have a multiplex with several screens, with one PLF format, that one sells out first — especially to a movie like Avatar.
The real problem is that if you play in a PLF 3D format, you usually also have to do it in 2D. So a large movie like Avatar — which also has a runtime of three hours — works a bit like a cuckoo in the nest: it squeezes everything out, and makes programming difficult. We have the same problem with John Wick 4 right now.
Karmitz: We have two different situations. Spain is like the rest of the world, so you have a lot of this premium renovation or openings. And I think the impact is just that it’s a big investment for a new standard of markets, which is not really asked by people. People are asking for movies, not for seats. Seats are important, but I still think our business is selling movies, not food or seats.
In France, we have a different situation. We have one actor, which is Pathé, within this premium field, and the other ones are doing it differently, and we’re doing it differently. When you’re in this premium idea, you’re addressing people that are going once or twice a year to cinemas, you’re addressing people that are willing to see blockbusters. So you’re willing to put 90% of your business in the hands of Hollywood. And we are French, so this is not going to happen.
mk2’s French cinemas are all in Paris, and playing to a more arthouse audience. And that audience traditionally is not driven by technological innovations.
Karmitz: I don’t think people are driven by technique, they are driven by having a good experience with their friends and a great image and sound. We’re doing arthouse, but we’re also doing some big blockbusters and have good results on this. We prefer to address and to put our money into having competitive prices and people coming back often, more than having €25 [$27] one-time people coming in, and more than having our business that transforms from cinema to restaurants with a screen in front of you. We prefer to have big rewards to the people coming often, and more than electric reclining chairs.
How do you respond if customers are now becoming more price-sensitive in your markets and costs are rising?
Flygare: It’s very interesting with prices, because like with Avatar, the most expensive tickets sell out first. If you have a recliner row in your cinema, with a price premium, those seats go first. If there is a cinema day where you discount the prices, you have a massive reaction the moment the information goes up. We have not seen anything in Scandinavia that goes towards ticket prices going down — it’s been growing over the general price index in all countries.
Papousek: We see the same pattern, even in our lower ticket price markets. Premium format, special leather-covered recliner rows, these are the first tickets sold.
What about dynamic — as opposed to merely flexible — pricing?
Flygare: Dynamic pricing is an interesting question. I don’t feel that we have completely comprehended the full complexity of price elasticity in cinema ticketing.
Papousek: Dynamic pricing sounds nice in theory. In Austria, there is now dynamic pricing applied in ski resorts — if the weather is good at the weekend, the ski resorts are full and will increase the pricing. When you have a rainy Wednesday afternoon, the prices go down.
But in cinema, it’s a little bit different: you have peaks and you have lower periods during the week, and also related to movie releases. What we do not want to do is to charge titles differently. We have several prices linked to seating categories — we have some crazy halls, equipped with up to six different seating categories with recliner seats, and here the people can decide.
Then during the week we have our cinema days that are lower priced from Monday to Wednesday, and what we call monthly saver, the first Sunday every month. Here we select titles, which are a little bit more mature in the market, and we go down to 40%. It’s good for families, especially on Saturday afternoons.
But real dynamic pricing is not applied in our markets: to say on a Wednesday afternoon, in addition to the cinema days, we go even lower because capacity is free, I do not think that it would bring additional traffic.
Theatrical windows took a pummelling during the pandemic. Are you happy with the current situation in your markets?
Flygare: It has been an interesting journey. Everybody has learned from the Covid years, and apparently the studios have learned as well. Because under Covid, we were discussing seven to 30 days, and now we’re discussing 45-plus days. There has been a change of attitude in the studios — because cinema still accounts for 50% of the cashflow for a title that is premiered in cinema.
Nathanaël, are you confident windows will remain protected by the media chronology laws in France?
Karmitz: What has changed is that companies like Disney were saying, “We’re not going to release in France because of the media chronology situation.” I think all these types of discussions are finished, and now everyone is starting to be happy with this chronology. The main point to remember is that this chronology is meant to defend local cinema and local production, which is the main reason why France is going well.
In Spain, I think it’s the same as in the other markets. Our approach with distribution is to say: “Okay, if you want day-and-date, or if you want a two-week window, you have to pay for it.” We usually start at 50% or 60% for the content provider, so we could start at 25%. Why not? And you decide what is your window, but you have to put it into the rental price. I think we had some good agreement with most of our partners on this variable-terms basis.
Papousek: Like Asger described, we also see that studios have realised the importance of exploiting movie rights in theatres, because of the high proportion of the total revenue coming from theatres.
It is disappointing that the big streamers are not coming with an attractive business model. What we are against is to be used as an advertising platform for a window of eight days, no matter what the terms are, without any communication for the theatrical release. So we have to work together here, then we can develop business models. Cinemas to be used as a billboard is not something where we could take part.
Did you play Netflix’s Glass Onion: A Knives Out Mystery, where you had a slightly bigger window?
Papousek: No, because it was not a big window, and especially no visible efforts to advertise the theatrical release.
Does the fact a major cinema chain in the US and UK is insolvent undermine confidence in the cinema category and create a bad-news story for consumers?
Karmitz: I think this crisis is a debt crisis for most companies — and it’s not the model that’s in crisis. Also, this press communication led by the platforms saying cinema is dying, I think it’s over, at least in France.
Flygare: I would say the debt crisis is not a thing consumers worry about. I hear only questions about that from board members who are worried and more interested in why these networks have problems, how the dynamics of the industry are, and does it affect us.
Papousek: [Cineworld’s] Chapter 11 situation is certainly an issue with our financing partners because they do read the industry news and they do all their analysis, and it is problematic here to finance new projects or refurbishment projects. And also our relationship with landlords, there are many concerns when big stock-listed companies go into these kinds of procedures. So, yes, it’s a problem on this side. It’s not a problem on the B2C [business-to-consumer] side, the consumers are too disconnected from this industry news.
There are other challenges for exhibition: rising interest rates, the cost-of-living crisis impacting consumer behaviour, bigger energy costs, and we hear talk of challenges with staff recruitment and retention.
Flygare: Prices are going up on a lot of items we have to purchase, and energy is one. I hedged power over several years, so the impact is not so big. But of course, when the prices are rising, you have to adapt yourprice, and that seems to be well accepted by the guests.
Papousek With increasing prices and higher interest rates, the industry risk is going up, and the spreads between the market interest and the bank interest rates are also going up. So that’s a double effect, which is creating more cost on the financing side. That said, regarding energy prices, we see that the spot market prices, and also on the long curve, are going down. And energy costs motivated us to speed up in the implementation of photovoltaic [solar panel] systems. We are quite far with that in three of our sites in Austria, and we are gaining experiences abroad.
And staff retention? Have wages been going up?
Flygare: Definitely, they will be going up. Usually, the union agreements cover a period of several years — if they’ve been negotiated, they are maybe not going up yet, but they will go up.
Papousek: Regarding staff, it was not easy to staff our theatres, especially during summer last year. Now it is getting better. And we have made the second significant increase in wages. We tried to be flexible and we tried to communicate it our way, without the trade unions, but in good relations with the trade unions. It’s always better to find your individual programmes with your employees.
Nathanaël, can you speak to the current political and industrial situation in France. Is that affecting your cinema operation?
Karmitz: It’s having constraints and impact on other businesses like hotels and restaurants, but regarding cinema, no, not yet. As for the other issues, energy has been a big problem, but it’s coming back to normal. We also accelerated all the energy savings, even if we’re already in a good situation.
Regarding the staff, we didn’t have any problem, either in Spain or France. Those two territories were with governments that helped a lot during the pandemic. We didn’t have “the big quit”. On wages, legal minimums in Spain and France have been revised a lot in the last few years by government decisions. For high salary or management salaries, we had to re-evaluate — but all this was about making a good agreement.
The big concern for our business is, like everyone else, we managed to raise our prices and it’s going well with the audience, but also the costs went up, so there are margin worries on the business, because between recovery, the energy crisis, salaries and price increases, it’s not going at the same rhythm. We think we’re going to find back our audience of the pre-pandemic, but to find back the margins is another challenge.
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