European Outlook: UNIC President Phil Clapp on European Exhibition

Interview with Phil Clapp, President, UNIC / CEO, UK Cinema Association

What were the major takeaways from European exhibition in 2015?

2015 was a record year for cinema operators in many European territories. Total box office revenue for UNIC territories reached €8.5 billion, a 9.6 percent increase on the previous year. Total admissions increased by 6 percent, reaching more than 1.25 billion visits to the cinema for the first time since 2004.

This positive trend resulted predominantly from the strong performance of key international titles, including Fifty Shades of Grey, Furious 7, Minions, SPECTRE, Jurassic World, and, of course, Star Wars: The Force Awakens. 

Consolidation is a hot topic in North America right now. What is the outlook for increased consolidation in the European market for the coming years?

We are experiencing the same kind of consolidation in Europe, driven by the same consideration of economies of scale and desire for “market muscle.” This is a trend that has been steadily on the rise since Cineworld’s acquisition of Cinema City International in early 2014, a move which made the former Europe’s second-largest cinema chain.

The largest, Odeon-UCI, is expected to announce a buyer in the near future, with media speculation that a number of European and foreign investors are amongst those interested. Moreover, Cinépolis, the largest cinema chain in Latin America and fourth largest in the world, acquired the Spanish company Cines Yelmo last summer, whilst Turkey’s main exhibitor, Mars Entertainment Group, is now also looking for a potential buyer.

We have also witnessed similar developments at the national level, the most recent example being Cinema Park and Formula Kino—Russia’s two largest cinema chains—announcing plans to merge ownership in March 2016.

We foresee particularly interesting times ahead, as several exhibitors are now racing for the 10,000-screens mark. Alongside these developments, the continuing existence of a strong tier of highly successful independent operators and dynamic local film production across many territories will continue to help fortify the resilience of the sector.

Graying audiences are always a concern; what have been some noteworthy initiatives from regions or individual markets to attract younger viewers? 

Demographic change in a number of European territories has if anything increased the challenge of attracting younger audiences. That said, cinema-going amongst younger Europeans remains very encouraging, particularly in growing markets such as those found in Central and Eastern Europe.

The more mature markets of Western Europe are tackling the challenge of building new audiences and competing against a myriad of other leisure offers by experimenting with a range of consumer-engagement initiatives, the best example of which is most probably the French “4 Euro” campaign, which began in 2014 with the vast majority of French exhibitors offering cinema tickets at a discounted price of 4 euros to children under 14 years old.

Alongside this, film literacy initiatives can of course enable children and teenagers to develop their critical thinking and media literacy, whilst also encouraging them to become loyal cinema-goers in the future. In the U.K., the industry-backed charity Into Film enables schools and youth groups to set up their own film clubs, to watch films, to make their own films, and of course to experience film in the cinema.

Now that 95 percent of Europe is digital, what have been some of the clearest benefits you’ve seen from the transition?

While there is more work to be done in a small number of territories, I think we can reasonably say that the transition is now very close to completion in Europe. Digital cinema has delivered on its promise of fundamental change to the economics behind the sector, leading, both in Europe and further afield, to the establishment of a more diverse cinema offer, characterized by greater flexibility in programming, something which enables operators to respond to increasingly fragmented audience tastes. As financing arrangements concerning the acquisition of digital cinema upgrades gradually come to an end, it is to be expected that the full impact of digitization will further benefit independent films as well as event cinema.

The new paradigm of digital cinema does mean that all operators face a world of increasing technological change, with a variety of upgrades and enhancements with us now and around the corner. While discussions on the nature of such support continue, given the ongoing savings made by partners in distribution, operators will expect to see some financial upside to offset these increased costs.

There was strong growth in both box office and admissions across several markets. Are there any in particular you’d like to highlight?

There have been a number of impressive results across UNIC territories this year. Particularly so in the U.K., the second-biggest cinema industry in the European Union, in which admissions increased by 9.2 percent compared to 2014. Germany enjoyed similar results, bolstered by the success of the national production Fack Ju Göhte 2, which ranked second in the box office top five.

We have also witnessed positive signs in southern Europe, as Spain, while still enduring the consequences of a VAT increase on cinema tickets in 2011, experienced a 9.2 percent growth in admissions, also thanks to the success of Ocho Apellidos Catalanes. In addition, it is important to point out the continuing growth in Central and Eastern Europe, where Poland has asserted itself as one of the leading European markets, with more than 40 million admissions in 2015, an increase of 10.6 percent compared to the previous year.

We also saw some dips in attendance in markets like France and Turkey. What would you attribute that to?

Despite their being the only two major European markets that experienced a decrease in attendance in 2015, we must recognize the robustness of both the French and Turkish market. Whilst admissions decreased slightly by 1.4 percent in 2015, France still accounted for more than 200 million visits to the cinema for the second year in a row, a figure well above average yearly admissions over the last 10 years. It must also be noted that the French box office was buoyed by the huge success of three particular French productions in 2014—this was never going to be a like-for-like comparison. Additionally, increased safety measures were implemented after the Paris attacks, leading to the closure of most French cinemas for a certain period of time.

The decrease in admissions observed in Turkey is perhaps indicative of the stabilization of the market after years of exponential growth and a particularly successful 2014. It is worth noting that Turkish films amassed 57 percent of total admissions in 2015, with four local productions in the box office top five, an impressive European record.

What are some of the most intriguing trends in exhibition (e.g., seating, concessions, ticketing) that you’re currently seeing in Europe?

As noted above, we are entering an era where, more than ever, continuous experimentation and innovation in cinema will be a strategic necessity, and where each exhibitor’s ability to adapt will be most definitely a key competitive advantage.

The digital transition gave exhibitors the opportunity to diversify their cinema offer and go beyond film screening, as they are now able to accommodate a great deal of content ranging from live concerts to online video games competitions. Operators are continuously investing in upgrades related to picture quality (from premium large format to HDR) and sound quality (immersive sound), which make the cinema experience even more immersive and truly set it apart from competition in the home-entertainment market.

We are also currently witnessing an increasing amount of boutique cinemas, with high-end service and seating, for example. The most interesting development, however, may in fact be directly related to our audiences, as the clever use of data analytics, social media, and mobile solutions help cinemas engage with their patrons in new ways and build upon the social dimensions of cinema-going.

Daniel Loria

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