| Description |
Lessons on cinema development can be learned from observations of sometimes alarming trends in attendance. A particularly severe drop in cinema attendance halted an abrupt end to large-scale multiplex and megaplex development during the late 1990s. At that time there was gross miscalculation of the market potential respond positively to increases in the supply of new theatres.
The demise of the drive-in movie theatre is a useful case study of market saturation and excess cinema screen supply that also faced new forms of competition from in- home technology and changing life styles. The problems of the exhibition industry are currently caused predominately by over development in a market that did not grow in real terms due to the cyclical lapse in the release of appealing new films. These effects were most marked in the United States although the experience was also common in other territories. At times there is a real ceiling on the average rate at which people will visit the cinema which cannot be penetrated by increased capacity or improved technology.
While some of the latest megaplex openings have been highly successful, the average productivity of screens worldwide at that time fell by as much as one half of previous levels. Older theatres can operate economically at lower admission levels but the investment in multiple screens serving markets already supplied in the 1990s relies heavily on expanded attendance volumes. For a period of twelve months or more there was relatively little new demand for movie going. For the investors the problem is heightened by the inflexibility of alternative uses of purpose built multiplex cinema complexes.
When these are part of an entertainment centre that has secondary tenants who are reliant on cinema trade, the problem is greatly magnified. The fact that there are differences within the market both within America and internationally suggests strongly that diligence in the market analysis stage is the most important ingredient of a development plan.
Since this paper was written in year 2000, cinema exhibition industry conditions throughout the world have altered dramatically with new ownerships and resulting management directions, revived growth in admissions due to more popular new release titles and a reduced rate of development. As a result there have been higher returns for the investors. The 1990s were a period of fast growth in the new stock of cinemas instigated mainly by the Hollywood interests leading to over saturation in many markets becoming evident in the late 1990s as described. Having stimulated cinema attendance, the US film production and distribution groups have sold many of their holdings in cinema circuits. A lucrative stream of income through international software including cinema, DVD, television and product sales has been greatly stimulated. |
