DIVIDED PICTURE

June 18, 2008

DIVIDED PICTURE

by Alisdair Ritchie, Dodona Research

European exhibition can be split into two clearly defined halves. On one side you have the mature markets of Western and Northern Europe and on the other the still fast-growing markets of Central and Eastern Europe.
In Western Europe, the standout performer in 2007 was Italy with admissions topping 114 million, the highest total seen this decade. Local pictures made the difference, claiming seven of the top 20 films of the year. In the United Kingdom, the performance of British films enabled the market to recover from its 2006 slump, with admissions rising over 3%.

From a wider standpoint, 2007 will be regarded as a disappointing year for Western European exhibition. In Austria, Belgium and Germany, cinema admissions dropped by over 8%, each returning its lowest result since the turn of the century, and in France admissions fell by 6%.

Evidence that these markets have almost universally reached saturation point can be found by comparing the investment made by exhibitors over the course of the last five years to the public’s response in terms of admissions.

The change in screen numbers in the larger markets of Western Europe is detailed in the table below. Naturally, some countries have benefited from more investment than others, but in the given time frame it is significant that only Germany has seen screen numbers decrease and in half the territories screen numbers have increased by more than 5%.

Number of Screens in Key Western European Markets, 2002-2007

Country 2002 2007 % change
Austria 564 570 1.1
Belgium 505 510 1.0
France 5,264 5,398 2.5
Germany 4,868 4,832 -0.7
Greece 440 445 1.1
Ireland 330 431 30.6
Italy 3,353 3,580 6.8
Netherlands 596 687 15.3
Portugal 490 610 24.5
Spain 4,039 4,296 6.4
Switzerland 540 575 6.5
United Kingdom 3,258 3,514 7.9

Source: Dodona Research

By comparison, the number of admissions has risen in only a quarter of these markets and only in Italy of the five largest markets. Portugal, Spain and the United Kingdom have benefited from significant investment since 2002, but in Portugal and Spain admissions have dropped by more than 15% and in the United Kingdom by over 7%.

Cinema Admissions in Key Western European Markets, 2002-2007

Country 2002 2006 2007 02-07
in mil. % change
Austria 19.32 17.27 15.69 -18.8
Belgium 24.38 23.93 21.85 -10.4
France 184.41 188.79 177.52 -3.7
Germany 163.91 136.68 125.43 -23.5
Greece 15.00 13.50 14.00 -6.7
Ireland 17.32 17.85 18.37 6.0
Italy 111.49 112.00 117.00 4.9
Netherlands 24.12 23.39 23.06 -4.4
Portugal 19.48 16.37 16.32 -16.2
Spain 140.72 121.65 116.93 -16.9
Switzerland 17.71 18.00 18.22 2.9
United Kingdom 176.00 156.60 162.43 -7.7

Source: Dodona Research

There are many reasons for these differences which are best described in our Cinemagoing research reports (see www.dodona.co.uk for more details), but it is evident that just building cinemas is no longer enough; you can build them, but it doesn’t mean people will go.

For the future, exhibitors can hope digital 3D cinema will provide the spark to light an industry that is currently marking time, but, as ever, uptake on this crucial issue is proving slow.

In Nordic Europe, exhibition is also a well-established and mature industry, and broadly comparable admissions are achieved from year to year. A drop of 10% in Norway in 2007 was the most striking result in the region.

Cinema Admissions in Scandinavia, 2006-2007

Country 2006 (mil.) 2007
Denmark 12.60 12.12
Finland 6.70 6.52
Norway 12.01 10.82
Sweden 15.29 14.91

Source: Dodona Research

In 2007, the big Hollywood summer sequels and strong local pictures combined for a largely upbeat year in Central and Eastern Europe. The Czech Republic saw 11% more admissions than 2006, spurred by a raft of local films that contributed half the top ten. Poland had another positive year; admissions have risen over 20% since 2002.

The Baltic tigers of Estonia, Latvia and Lithuania have all shown positive growth in recent years. The arrival of modern cinema has seen increased revenues from higher ticket prices in each country, but Lithuania stands out from the crowd with admissions up 250% over the last five years.

The most disappointing result was seen in Hungary, where admissions dropped for the sixth consecutive year, down over 30% since 2002, primarily due to adverse economic conditions. Admissions in Slovakia also fell substantially in 2007 compared to the exceptional year of 2006.

Russia’s appetite for entertainment coupled with rising economic wealth has seen a continuing boom in the exhibition sector. In 2007 admissions topped 100 million for the first time, with a 25% market share for local pictures, and there are now more than 1,500 modern screens.

Admissions in Key Central and Eastern European Markets, 2006-2007

Country 2006 (mil.) 2007
Bulgaria 2.36 2.47
Croatia 2.67 2.48
Czech Republic 11.51 12.83
Estonia 1.59 1.63
Hungary 11.67 11.09
Latvia 2.06 2.23
Lithuania 2.41 3.32
Poland 32.00 32.60
Romania 2.78 2.91
Russia 98.91 106.60
Slovakia 3.36 2.69
Slovenia 2.69 2.40

Source: Dodona Research

All the cinema markets of Central and Eastern Europe have further potential to expand. Admissions per person are generally low and populations per screen high. That said, there is a clear spectrum ranging from relatively developed markets like Slovenia, the Czech Republic and Hungary to ones where the development of a modern cinema sector has barely begun, like Romania, Bulgaria and Russia. While markets in all countries of the region can be expected to grow, this latter group will grow fastest. How fast? Well, consider this. Today there are just three multiplexes in Romania. Twenty more are already on the drawing board.

Cinemagoing Statistics in Key Central and Eastern European Markets, 2007

Country Admissions Population Admissions
per person per screen per screen
Bulgaria 0.36 66,228 20,699
Croatia 0.66 41,111 27,052
Czech Republic 1.24 15,178 18,873
Estonia 1.28 19,341 24,718
Hungary 1.20 15,829 19,004
Latvia 1.02 43,805 44,830
Lithuania 0.74 44,682 33,064
Poland 0.90 38,755 34,799
Romania 0.13 195,804 25,720
Russia 0.77 93,012 72,074
Slovakia 0.50 23,640 11,812
Slovenia 1.42 20,059 28,449

Source: Dodona Research