Plot's lost as multiplexes fail to pull in new punters

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The cinema industry is in crisis because a massive investment in new multiplex cinemas has not drawn in new customers, a report due to be published tomorrow will say.

The cinema industry is in crisis because a massive investment in new multiplex cinemas has not drawn in new customers, a report due to be published tomorrow will say.

The total number of cinema screens in the UK, including old city-centre sites, has increased by 26 per cent since 1997. But the number of admissions over the same time has only increased by 2 per cent, to 142.5m, a record in this generation.

The situation has been highlighted in a new report by Dodona Research published tomorrow. It describes a crisis in the cinema exhibition industry. "There is now near universal consent that the long-awaited meltdown of the UK exhibition market has arrived," it says.

Although cinema audiences are marginally increasing, the report says the increase is mainly in areas where a new cinema has opened and there was previously none.

After a boom in cinema admissions in 1997, due to films such as Trainspotting and The Full Monty, companies such as Warner Village, Odeon and UGC - who bought Virgin's cinemas - invested vast sums in building new multiplexes.

Steve Wiener, managing director of Cine-UK, said: "Last year wasn't a good one. All we need is good movies, but there were no great blockbusters. You can't rely on new cinemas to bring in new customers."

The industry hopes 2001 will be a better year for films in the UK as Bridget Jones' Diary, Tomb Raider and Harry Potter are likely to bring in crowds. The success of Hannibal has also raised operators' spirits.

The report says that cash profits for cinema companies are likely to remain static at 1999 levels until 2002. But the costs of building the extra screens will eat into the profits and may leave some companies barely breaking even.

One of the most ambitious multiplex projects was at the Star City leisure complex in Birmingham, where Warner Village built the largest cinema in the country, with 30 screens.

Rumours that the cinema was performing seriously below expectations and that several of the screens would be closed were denied by Warner.

But one half of the Warner Village project, the multinational Village Roadshow, has just reported a 44 per cent drop in half-year net profits. It was hit by a huge loss in its cinema exhibition division. Cinemas are starting to shut down. Last year the Nynex Arena 7 multiplex in Manchester was closed. In Dundee, the Odeon closed the smaller of its two multiplexes recently.

Another casualty in the affair could be the property companies who have invested in cinema redevelopments and were expecting large rental increases from a cinema boom.

A redeveloped city-centre Odeon in Sheffield has won a battle with the landowners, Quintain, over the property company's intended eight-fold rise in the rent for the site. An independent surveyor said the fair rent was less than the annual £50,000 currently paid.

Jerry Schurder, partner of leisure department at chartered surveyors Gerald Eve and adviser to Odeon in this case, said landlords had jumped onto a bandwagon following the success in admissions in 1996 and 1997. "In the US, people go to the cinema twice as often as in the UK. Therefore people thought 'we can continue to build more screens and grow the market and afford to pay big rents'"

One success in the cinema industry has been the increase in the targeting of audiences rather than just showing US blockbusters. Cine-UK pioneered the showing of "Bollywood" films and it is now attracting new audiences.

The Odeon has also started up a successful "Senior Screen" scheme, where OAPs can watch golden oldies in the afternoon at a reduced price with tea and coffee included.

Last year, there was a period of consolidation in the industry. Odeon was bought by private equity house Cinven for £280m, which merged it with ABC cinemas. Virgin sold its cinemas to French film company UGC for £215m. Unless this year proves more fruitful for cinemas it is likely that there will be more activity, albeit at much lower prices.