Cinema booms as Britons seek escape from reality

The downturn and the growth of 3D-digital movies are driving a revolution, says James Thompson

Cineworld yesterday provided further evidence that the recession has only deepened the British public's love of the big screen. The listed operator of 77 cinemas in the UK and Republic of Ireland said that its box-office revenues – the number of admissions multiplied by prices – soared by 10.9 per cent over the 43 weeks to 22 October. This was despite it being up against a strong third quarter last year, when hordes of women were singing along to Abba songs in the blockbuster musical Mamma Mia!

Cineworld's two main rivals, Vue Entertainment and Odeon, are also thought to have also enjoyed robust trading during the recession. According to analysts at Nielsen EDI, box-office sales in Britain and the Republic of Ireland have grown by 6 per cent to £838.4m in 2009 and are on track for a record year.

Tim Richards, the chief executive of Vue Entertainment, said: "If the industry keeps going at this rate, we are comfortably going to pass £1bn at the box office this year [for the first time in the UK]."

Recessions have often been kind to cinemas. Mr Richards said that after the US stock market crash of 1929, box-offices receipts in America soared by 35 per cent in 1930. As in previous recessions, British families have flocked to cinemas this year, because they provide value-for-money entertainment and escapism from the grind of everyday life that shops and restaurants struggle to match. This year, cinemas have also been boosted by "staycationers" – the hordes of Britons who chose to take their summer holidays on these shores. James Wheatcroft, an analyst at Evolution Securities, said: "There is a halo effect of people wanting to stay in the UK, especially if it is bucketing down with rain."

However, the tectonic plates appear to be shifting more powerfully during this recession, which can only be partially explained by a series of quality, popular films from Slumdog Millionaire to Star Trek in 2009.

Lucy Jones, the director of client services at Nielsen EDI, said: "It is widely accepted that cinema-going remains robust during a recession, but the levels we are seeing now are far in excess of those recorded in previous downturns. During the recession of 1990-91, only 100 million cinema tickets were sold per year; in 2008, almost 165 million tickets were sold, and 2009 is on course to be another blockbuster year."

A key factor during this recession has been the growing phenomenon of the three-dimensional digital movie, which offers a far superior viewing experience for customers.

"This is the first real year of digital 3D. It has been around since the first quarter of 2006 with Chicken Little, but this year we will have 13 to 14 releases and next year we will have 19 – and that is a very big part of the revitalisation of the industry," added Mr Richards.

This year, cinemas have shown Ice Age 3, Harry Potter And The Half-Blood Prince, and Up in 3D-digital. But in December, cinemas will show the first adult 3D-digital film, Avatar, an action movie by the director James Cameron.

Cinemas benefit from 3D digital movies because they can charge a higher entrance free for them. Cineworld charges an extra £1.50 for 3D movies, which includes the cost of the glasses required to watch the film. Richard Jones, the chain's finance director, justified the extra cost by saying: "We have to invest in digital projectors and the movies cost more to make themselves."

Mr Wheatcroft said: "Generally, 3D is driving more traffic and a higher prices into cinemas and our view is that that will continue into next year."

Cineworld cinemas have 144 3D-digital screens out of a total 775, and it will open a further 15 this week. The operator said it would soon open a 10-screen multiplex in Aberdeen and a five-screen cinema in Witney, Oxfordshire, which will be the first in Cineworld's estate to have digital projectors in every auditorium.

Digital technology is set to transform the movie industry in other ways. At present, the latest releases are still delivered to cinemas in canisters of 35mm film – as they have been for about 100 years – but with digital they can be transmitted by satellite or hard drive.

Mr Wheatcroft believes digital will provide cinemas, which are expensive to run, with far wider opportunities to generate revenue. He said: "Niche markets showing music, such as live opera and sports, will be a further catalyst for driving people to the cinema."

However, as with leisure activity during a recession, the price of cinema tickets is still critical for consumers. Mr Jones said: "It is still a good value night out. People are not going away as much in this climate and they need to get out of the house and forget about their worries."

While the average admission price, including children's tickets, has gone up from £5.21 in 2008 to £5.40 so far this year, this represents a small rise from the 2004 average of £4.58.

That said, cinemas have kept their finger on the price button in the downturn, by continuing to offer discount days, loyalty cards and weekly promotions. Mr Jones said: "We always offer bargains and discounts at off-peak times. You have to encourage people to come at different times, otherwise everyone would come at 8pm on Saturday and many would be disappointed."

Odeon, Vue and Cineworld still offer Orange Wednesdays, where the mobile phone operator's customers get two tickets for the price of one. Cineworld also has a loyalty card, where film buffs pay £13.50 a month outside London and £16.50 inside the capital to watch unlimited films. City analysts have also been surprised by how well retail spend, largely popcorn, drinks and ice-creams, has held up during the recession. One said that this was partly because cinema-goers were not going out for meals beforehand and are gorging themselves on comfort food at the cinema. Yesterday, Cineworld said its retail revenues had jumped by 5 per cent in the 43 weeks to 22 October.

However, it is not all plain sailing. A key area of concern continues to be slumping advertising sales, although Mr Wheatcroft believes that may have now bottomed out. Cineworld said that its other income, largely advertising, was down by 26.9 per cent over the 43-week period.

That said, next year looks set to be another bumper year for the cinemas, driven by a strong release schedule and the growth in 3D digital films. Even recent tragedies, such as the death of the pop singer Michael Jackson, appear to be working in their favour. At 4am this morning, Vue Cinemas began screening This Is It – a documentary about the last days of Jackon's life – as part of a worldwide release. Overall, it's fair to say that after a bumper past 12 months, British cinemas are likely to look back on the credit crunch with fond memories.