Specialist
Senior executive at entertainment consultancy
Agenda
- Attendance, pricing and spend per head outlook amid film slate shortages and an economic downturn
- PVOD (premium video-on-demand) threat and implications of shorter theatrical windows for operators, highlighting challenges on film hire costs and consumer behaviour shifts
- Competitive landscape update, highlighting Odeon (NYSE: AMC), Cineworld’s (LON: CINE) UK outlook, Vue’s restructuring and rise of boutiques Everyman (LON: EMAN) and Curzon
- Unit economics, including 2022-23 OPEX and CAPEX expectations
Questions
1.
Could you describe the levels of attendance throughout 2022 and any comparisons to pre-pandemic?
2.
How are you thinking about attendance levels in H1 2023?
3.
You mentioned year-to-date 2022 is 30% down vs 2019 levels. In previous Interviews [see Forum Pulse: UK Cinema Industry – Q3 2022 Attendance & Pricing Trends – 28 October 2022 and Forum Pulse: UK Cinema Industry – Q2 2022 Attendance & Pricing Trends – 20 June 2022], you’ve mentioned the older demographic is still missing from cinemas. Is this still the case? Who’s the key demographic that you’re not seeing return?
4.
Besides the over-50s, are there any other key buckets that are missing or anything else around demographics in terms of consumer behaviour?
5.
You mentioned the cost of living crisis. How is this likely to impact attendance? We’ve heard the argument about cinema being the cheapest form of entertainment in previous recessions, but what are your 2023 expectations?
6.
Do you expect the current cost of living crisis to be more dramatic than before? Could this have a dent in attendance if we have what seems to be a weaker film slate and then streaming titles or offerings for consumers?
7.
In terms of ticket pricing, you’ve mentioned limited opportunities for further increases, especially in the multiplex offering. What have you seen so far in 2022? How does this vary by operator? What is your outlook for average ticket prices in 2023?
8.
In terms of price increases, you’ve mentioned there’s limited room. How could pricing power or dynamics come into play by operator? I’m assuming Everyman and Odeon could potentially be in a better place in the luxury?
9.
What are your expectations for full-year 2022 box office revenue? How should we compare it to 2019?
10.
Could you recap the cost challenges operators are facing? What are your expectations around each of these or opportunities for operators to mitigate them?
11.
In terms of the big operators you say have been overly optimistic, in your October Pulse Interview you mentioned around 45% of screens are under restructuring. What opportunities do these big operators have to resize their estates and adjust to new market conditions?
12.
You mentioned Picturehouse could potentially be something interesting within the Cineworld portfolio. If the sale process went ahead, who might be interested in a brand such as Picturehouse? Where’s the value and where might it fit within the market?
13.
Could you estimate the valuations a brand such as Picturehouse could get in today’s environment? What is the market like and how do we factor in more independent brands vs the multiplex traditional ones?
14.
What are your expectations for screen rationalisation or estate reconfiguring over the next 12-24 months? Might we see a fundamental difference in today’s estate?
15.
Do you expect more estate rationalisation from the key operators, so Cineworld, Vue and Odeon? Might one of them have more idle sites or more sites that, as you say, make no rational sense to keep in a portfolio?
16.
Do you think rationalisation might present an opportunity to boutiques such as Everyman to potentially sweep up sites or thrive on better locations? What is the net impact for boutiques?
17.
It seems there’s a clear case for upgrading and premiumising the cinema offering, but how should we think about maintenance and growth CAPEX in these instances? I’m assuming a lot of the operators you’ve mentioned are in survival mode and won’t be looking at CAPEX on the refurbishment side. How long can this go on for without ultimately hurting attendance levels?
18.
In terms of premiumisation plans, you’ve mentioned Odeon has 20% of premium screens or recliner seat-based cinemas. What is your outlook for conversion of those estates in the coming months? What are the CAPEX requirements? Are there any challenges around the inflationary environment and cost of capital there?
19.
If we take a more long-term structural outlook on the industry, how are operator and studio relationships today? What’s changed in the last 6-9 months, especially amid the lack of content you’ve mentioned?
20.
Do you expect any further changes or developments to the theatrical window? It seemed as if one year or a few months ago the power was very much within the studios to change that. What’s the situation now on theatrical windows?
21.
Do you think any of the operators in the UK have a better chance of having a stronger relationship with studios? How does the situation Cineworld is in impact its relationship with studios and its negotiating leverage?
22.
Could the vertical integration business model be something we see in the mid-to-long term in the UK? Might there be a model shift here?
