UK distribution: Show time

The UK exhibition sector has undergone radical changes in recent years with the near total digitisation of cinemas, the rise of alternative content and further consolidation of the business.

Confidence in the sector remains high, with exhibitor Vue Entertainment sold for $1.5bn in June, while Cineworld acquired Picturehouse for $76m in December 2012.

This buoyancy is in part down to the total modernisation of the UK exhibition sector. “We have been talking about going fully digital for 15 years, and it’s finally here,” says Vue Cinemas’ CEO Tim Richards. “It is an epic change.”

The digitisation of the UK sector is now near its end, with more than 3,700 screens (95.2%) converted to digital technology by the end of the first half of 2013, according to IHS Screen Digest.

“We are an industry that has embraced digital technology and is coming to terms with what it means for us,” says Justin Skinner, marketing vice-president at Cineworld. “The studios used 3D to encourage the exhibition sector to go digital but it has had other positive effects, leading to increased flexibility and breadth of our offering.”

There was speculation that the costs associated with replacing 35mm projectors would be prohibitive for independent cinemas. But Lyn Goleby, co-founder and managing director of Picturehouse, says: “There has not been the great ‘falling over’ in terms of digitisation of independents, which is great. Everyone has managed this huge transition and there is still growth to come.”

Event cinema

One major area of growth is event cinema. The UK is the most advanced market for alternative content in cinemas in Europe as a result of digitisation. More than 130 events were screened in UK cinemas last year, generating an estimated gross revenue of $20m (£12.5m), according to the first report on the sector conducted by IHS Screen Digest with the Event Cinema Association.

‘We will see more alternative programming, from conferencing to playing video games on a 70-foot screen’

Tim Richards, Vue Cinemas

Opera ranks as the most popular form of event cinema followed by ballet and popular music, while live events overall represent 51.9% of alternative content in UK cinemas.

“Event cinema helps to keep a sense of occasion, which meets the threat of home entertainment. And while live theatre is still core, there is growing traction in encore screenings,” says Goleby.

The Audience, starring Helen Mirren as the Queen, broke box-office records for a National Theatre Live broadcast in June, drawing an audience of more than 110,000 worldwide (80,000 in the UK). Peter Morgan’s play has continued to generate income, with almost 800 encore screenings in the UK.

The major chains are paying attention too, with Vue’s Richards stating: “We will see more growth in alternative programming from things as mundane as conferencing to playing video games on a 70-foot screen with incredible sound.”

Despite leading the move to digital, 3D is an area where confidence is wavering. Income from 3D remains strong and contributed more than a fifth of the total UK box office of $1.8bn (£1.1bn) in 2012 via films including The Amazing Spider-Man and The Avengers. Upcoming 2013 releases include The Hobbit: The Desolation Of Smaug and space drama Gravity.

But Andrew Cripps, president of Imax EMEA, says they are keeping “a close eye” on how 3D is performing. “There are some worrying trends for 3D,” he says. “I am a big believer in it for the right movies and want it to thrive, but for family films the take has come under pressure. Is it the price point? Is it getting kids to wear the glasses? We’re keeping a close eye on it.”

However, it may not be wise to write off the immersive format just yet and Cripps points to next-generation laser projectors Imax will be introducing in late 2014-early 2015 that will make 3D movies look as bright as current 2D offerings.

“There is nothing more annoying than putting on sunglasses in the theatre, but laser projection will help solve that,” predicts Cripps.

Richards also says laser projection is “a really exciting” development. “The next big thing is getting more light on the screen,” says the Vue CEO. “Currently, it is limited in scope and high on price but that will change and will become a commercial reality for exhibitors.”

The first laser projectors are expected to cost as much as $500,000, some 10 times the cost of xenon projectors.

Sound of cinema

Sound is another area where exhibition is set to take strides to surpass the home-entertainment experience.

Richards says Vue is testing new sound systems including Dolby Atmos, currently installed in more than 80 screens around the world at a cost of around $70,000 for a large auditorium.

“We need to understand how best to apply it, such as offering enhanced sound in our Xtreme screens to provide an enhanced package,” he says of Vue’s new super-sized screens.

Dolby Atmos is being used as a selling point for a new independent cinema due to open in the London district of Barnes on October 14.

The redevelopment of the Olympic Cinema has been overseen by Lisa and Stephen Burdge, a former Film4 executive and the founder of British film promotion agency Empire Design, respectively. Given the UK has more than 3,800 screens across around 750 sites, how are they feeling about entering such a crowded market?

‘Everyone has managed this huge transition and there is still growth to come’

Lyn Goleby, Picturehouse

“If you look at good independent cinemas, they are not struggling,” says Stephen Burdge of the new venture. “However, we will not be making our money from popcorn and are aware it has to be a great experience to get people to come back.”

Olympic has also employed music producer Chris Kimsey to advise on the sound quality and worked with Flare Audio, which is best known for providing speakers for live music events, to install their sound system.

“We are hoping the Dolby Atmos will help put us on the map,” Burdge adds.

Admissions challenge

Cineworld’s Skinner agrees the experience of cinema needs to be improved to ensure cinema prospers.

“The perception of the cinema experience has to go up if we want to remain relevant in an increasingly competitive market,” he states.

“Airports have addressed how to get people to spend more time in the retail environment. We need to improve the foyer experience to get people to come earlier and dwell before seeing the film.

“Our challenge as an industry is to increase admissions.”

While admissions remained fairly flat in the first half of the year, up 1.25% on 2012 according to figures from the Cinema Advertising Association, it has proved a tough summer. After all, better picture, better sound and alternative content prove no match for a sunny day in the rain-prone UK.

“We all got hit with incredibly unseasonal weather,” says Vue’s Richards “We can usually rely on bad weather during the summer in the UK but it broke 100-year records. And the UK is one of the few markets where people choose the pub, park or seaside over the cinema when the weather is hot and sunny.”

In July, admissions dropped to 14.32 million - down 7.7% year on year and nearly 20% down on 2011.

Cinemas will also struggle to match the record-breaking $165.1m (£103m) box office Skyfall took from the end of October.

But looking further ahead, the future seems bright for the UK box office, with 2015 set to feature the release of The Avengers: Age Of Ultron, Jurassic World, a Batman-Superman film and Star Wars: Episode VII among others.

Vue’s Richards adds: “Looking ahead to the blockbusters coming over the next few years, I’m really excited about the future. And that’s not Hollywood speak, that’s real.”

Protecting windows

Distributors continue to bang the drum about the benefits of simultaneous multi-platform releases but the theatrical window remains “a very important component of [exhibitors’] business,” according to Richards.

“While there can be fine tuning for periods such as Easter and Christmas, studios have come out in support of windows and that four-month period remains important,” he adds.

Imax’s Cripps explains: “When distributors spend a considerable amount of money on marketing, they will want to offer the film on other formats so there will be increased pressure on the window going forward. But cinema continues to survive.”