Opinion

Cineworld sales show big titles still mean big business for the film industry – for now

8 min read

07 July 2015

Total revenues increased 11 per cent for Cineworld during the first half of 2015. Releases including Jurassic World showed there's still value in the traditional film-going experience, but the rise of streaming services means the industry is under pressure to keep delivering.

Netflix’s ongoing appeal has raised questions over whether streaming services would steal away cinema business.

Over in America, several major cinema chains reacted angrily when The Weinstein Company, Netflix and IMAX announced a partnership to distribute Crouching Tiger, Hidden Dragon: The Green Legend exclusively and simultaneously through the streaming service and IMAX theatres worldwide. Regal, Cinemark and AMC all refused to screen the film amid concern they were being cut out of the distribution process. The availability of big releases to be viewed at home at the same time as in the cinema was evidently a worry – seen as a possible threat to business.

For the time being, however, Cineworld’s latest revenue figures indicate that if enough good content is being churned out – people will still be interested in going the traditional route of heading to watch a film in a cinema.

The chain reported total revenues jumped 11 per cent in the UK and Ireland, its box office revenues increased by 10.5 per cent and retail sales were up 10.8 per cent in the 26 weeks up to 2 July 2015.

Cineworld said the “nature of the film mix” in the first half of the year had been a big draw for film fans – highly-anticipated flicks across the genres saw Marvel’s Avengers: Age of Ultron, Fifty Shades of Grey and Jurassic World amid the titles hitting the big screen in early 2015.

The company said “the growth in admissions and nature of the film mix also had a positive impact on advertising revenues,” another crucial area for the business – which was reflected in the increase in other income.

The popular reception wasn’t just limited to the UK either. The chain has 1,700 cinemas across Poland, Slovakia, Romania, Israel, Bulgaria, the Czech Republic and Hungary. It saw box office revenue growing in every region apart from Slovakia – taking total group revenue up 11.2 per cent.

There is then, a spread of positive figures for Cineworld, but some feel Netflix and internet TV will continue to eat into both linear offerings and cinemas’ business.

Its increasingly powerful position in the entertainment industry shouldn’t be overlooked. Subscribers keep rising – with currently around 62m worldwide, and the draw in using it for a business strategy is obvious, in terms of providing immediate access to consumers.

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We have already seen Adam Sandler sign up to an exclusive four-film deal with Netflix, while it also has its own productions in the works. It debuted a host of original series this year, reflecting its increase in investment across exclusive programming. For 2015, it is planning to have around 320 hours of original programming – around three times what it offered the year before.

Where Netflix may have an advantage to a TV network is the diversity in content it can offer. CEO Reed Hastings has said that “we want the original content to be as broad as human experience”, while particular channels may be known for hosting particular types of content.

Hastings was clear in the direction he thought the entertainment industry was moving in. He said: “We’ve had 80 years of linear TV and it’s been amazing, and in its day the fax machine was amazing. The next 20 years will be this transition from linear TV to internet TV.”

The streaming service looks in good health – if it continues on with its consistent production of impressive content, new viewers will be attracted by extension and likewise more subscribers. This will then enable Netflix to further reinvest on programming. 

Of course, like every other successful area – there have also been new entrants to the streaming market, such as HBO, looking for a slice of Netflix’s pie. Whether advertisers make a significant shift from television to digital is something that is yet to be seen, but Netflix has reaffirmed its commitment to remaining ad-free for the time being – though scepticism remains as to whether this will be sustainable.

Another consideration is the change in home experience that has seen computers and TVs becoming increasingly high quality, with bigger screens and better sound meaning our viewing experience has been much-improved. People may cite the cost of cinema, but despite this, it still has something of a unique quality when it comes to creating a suitable film-watching environment. 

This is particularly evident when upcoming films are highly-anticipated – the communal aspect shouldn’t be underrated. When Fifty Shades hit the screens for Valentine’s Day, it quickly became a go-to plan for many groups of friends, and opened in the UK with £13.55m – the biggest debut for an 18-certificate film. Additionally, watching Fast and Furious 7 or Jurassic World on the big screen is still going to be a much better all-round experience for most film fans.

It’s interesting to note how cinemas are faring elsewhere. China for example, is now the world’s second-largest cinema market with box office receipts up 37 per cent in 2014 for a total of about $4.8bn. It’s likely that emerging economies will continue to drive the film industry’s growth in the coming years. More than 55 per cent of IMAX’s 800 screens are outside of America, many in high-growth markets.

Also, Cineworld’s plans indicate that the appetite for seeing films on the big screen is still there among UK film fans. It aims to open another six cinemas across Britain in the second-half of 2015 and believes it’ll be well-stocked for big flicks on the horizon. It pointed to titles including Star Wars: Episode VII, the final Hunger Games title Hunger Games: Mockingjay Part 2 as well as the upcoming James bond film Spectre as some of the big-budget films that should keep business looking good for the rest of 2014.

There are warning signs that the film industry needs to keep the quality and anticipation up though – America had its lowest cinema attendance in two decades last year, and as Richard Gelfond, IMAX’s CEO, said: “People need a reason to leave their house.”

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