In the News

Lights dimmed in cinemas - a temporary or structural challenge?

Geoff Riley

19th March 2020

The cinema industry is facing unprecedented pressure as venues close, revenues collapse and an industry heavily burdened by debt faces a deeply uncertain future.

This Financial Times article is well worth reading. It suggests that in the United States at least, there is excess capacity with many more cinemas per head of population contrasted with the UK.

Cineworld - the world's second biggest cinema chain - has over $3.5 billion of debt. It made a pre-tax profit of $200 million last year but their revenues are dropping fast as cinemas close - perhaps for several months?

The prospect of blockbusters appearing in the late autumn including the new James Bond film looks distant at the moment. The majority of the costs of a cinema are variable such as seasonal staff but there are also fixed costs such as rents which eat quickly into business cash flow.

There is no doubt that cinemas will be thinking 24/7 about how to respond both the immediate crisis but also how consumer behaviour might change going forward. Will there be a reluctance in future to sit in a full cinema? Can cinema chains pivot to streaming films online at low prices to generate emergency revenue streams?

Or to offer a slightly more optimistic tone, might there be a pent-up demand for live cinema later on this year when families have had enough of being cooped up and there is a flood of held-back movies to watch as a new year comes into focus?

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

© 2002-2023 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.