Sunday 22 July 2018

Lights, camera, action! The inside track on the cinema business

Paul McNeive
Paul McNeive

Paul McNeive

With retailing under pressure, and a focus on mixed-use development, the importance of cinemas as a driver of footfall has never been more pronounced. New cinemas are planned in several locations in Dublin and the Greater Dublin Area, including Carrickmines, Cherrywood, Swords and Bray, Co Wicklow. It's important for developers to align with the right operators, and for an 'inside track' on the business, I met Graham Spurling, joint managing director of Movies@Cinemas.

The Spurling family is in the business for 40 years, having started in Greystones, Co Wicklow. They now operate at Dundrum Town Centre (12 screens), The Pavilions, Swords (11 screens), Gorey, Co Wexford (seven screens) and Dungarvan, Co Waterford (four screens).

Cinemas require a lot of space - Dundrum and Swords are approximately 3,000 sq m (32,291 sq ft) each, and need two and a half storeys of height. Spurling explains that with large foyers producing no income, it is vital that the operator knows how to maximise revenue in a competitive market.

Ireland remains the top cinema-attending country in Europe with an average of 3.4 visits per capita, per annum. However, Spurling points out that when his family opened for business in Dundrum 13 years ago, Ireland was also number one, but with an average attendance of 6.5 visits per capita, per annum. So average attendances have halved over the period. Spurling says that rural cinemas have borne the brunt of this decline, while good urban cinemas have, in contrast, seen only single-digit percentage drops in ticket sales. Rural cinemas have begun to recover somewhat though, and are doing quite well now, he adds.

Rental values, to shell specification, are in the range of €150 per sq m to €200 per sq m, I estimate, probably with a premium for the best south Dublin locations. The operator fits out the premises, with Spurling estimating a cost of approximately €750,000 per screen. This cost includes mechanical and electrical, seating, screens and projectors.

Movies@Cinemas properties in Gorey and Dungarvan are freehold, while the two Dublin sites are on long leases with upward-only rent reviews.

This year sees the company's first rent review with Hammerson, the new owners at Dundrum. Coincidentally, he is dealing with the same landlord, which is part-owner at The Pavilions in Swords. Every time a new cinema opens, Spurling believes there is a small net gain in total attendances, as new locations become more accessible. However, the overall effect is to "divide the pie more thinly".

Income from concessions becomes increasingly important and, in this regard, Spurling looks to generate a minimum extra income of 60pc of ticket sales from popcorn and drinks sales. There is a higher average spend on such extras in rural cinemas, compared to urban sites.

Cinema operators can pay up to 60pc of ticket sales to the movie distributors for blockbuster films in opening week, before scaling down. Spurling's goal is to keep the percentage of ticket sales paid out in the mid-40s, each year. The more screens an operator controls, the more bargaining power he or she has with the distributors.

Innovation, he tells me, is key and Movies@Cinemas was the first fully-digital cinema in Ireland, which allows for multi-screening. For example, 'Pirates of the Caribbean' showed 19 times a day in Dundrum and nine times a day in Dungarvan. The company also live screens events such as concerts and ballets.

The crucial part of Spurling's week is the 7am Sunday start, when he assesses the week's sales and decides his strategy on what to show on the 34 screens.

"Different movies work better in different locations," he says. You make your money from 'counter-programming' - spotting little surprises and sleepers, such as 'The Greatest Showman' which has been running for 21 weeks in both Dundrum and Gorey.

Most films are downloaded by the cinemas via a satellite link. The Dundrum site is the jewel in the crown with over 15 million people having been through its doors over the last 13 years. The facility regularly appears as a top-three-ranked cinema for individual film attendances across Ireland and Britain.

On plans for the future, Spurling concludes, "I love working in the entertainment business. We've been at the forefront of change, and we'll be sticking to what we are good at."

And that's a wrap.

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