Cineworld

The Cineworld / Picturehouse Merger: The Final Decision And Next Steps

Posted on Updated on

cineworld-picture-house

After an agonising wait over the last few weeks, the Competition Commission have this morning publised their final report, and have given the news that rational supporters of cinema both feared and, if we’re being honest, expected: that Cineworld group must sell one of their cinemas in each of the three affected areas: Cambridge, Bury St. Edmunds and Aberdeen. Cineworld have in turn published a statement, which would seem to suggest that they will not be appealing the decision (no statement is made that they will appeal) and that they currently plan to sell The Belmont in Aberdeen, rather than either of the Cineworlds there, and also to sell the Abbeygate Picturehouse in Bury St. Edmumds. They have not yet made a decision as to which cinema will be sold in Cambridge.

They have also made specific reference to the cafe in Bury St. Edmunds in their findings, in that it does not need to be retained by any cinema supplier. Given that any purchaser will be required to be in competition with Cineworld by the terms of the findings, the possibilty of that cafe being replaced by another screen or a bland concessions area in an attempt to make the cinema more competitive must surely now be very real.

The Commission also had the offer of putting price controls in place on the Picturehouse cinemas, and all three local councils had shown both a willingness to do this and two had comfirmed they have operated similar schemes in the past. The Commission rejected this, effectively on the grounds that restricting prices wouldn’t encourage competition – when the purpose of competition is solely to restrict prices – and that the Office Of Fair Trading would incur costs. Instead, those costs are likely to be passed directly to consumers.

The Commission are also required to consider any benefits of the merger. What they are not required to do in law is to consider any benefits of the two chains that existed before the merger and have been retained by it, but that would be lost by selling one of the cinemas. Consequently, the findings have overlooked the current state of operation of these cinemas, focused on a single point in law which misrepresents how the industry operates as a whole, and have pursused this point to the detriment of cinema lovers in each of these areas.

This is terrible news for all three areas. I remain of the belief that Cineworld and Picturehouses offer better deals to their customers than any of the other operators, in three key areas: price, programming choice and other services, and I say that as someone who has been to cinemas of every major operator in the past three years. The Competition Commission have ploughed a single-minded furrrow through an industry they do not understand, and have come to the conclusion that allows them to have taken the path of least resistance rather than protecting the desires and needs of customers.

As part of their final report they have published a set of letters from customers, including myself, and even one from the MP for Aberdeen that was send directly to them. I can find no response from them on a single question that was posed to them. Spectactularly, there is a post on their website which actually goes to the extent of summarising the concerns of the 600 people who wrote to them directly, and the 13,700 people who signed the petition to date, and then doesn’t respond to any of it.

If you navigate to my letter, you’ll find that I asked four questions of them the day after the initial report was published. I also wrote to them before the deadline and posed some futher questions, which remain unanswered:

1. Was there no requirement to set a suitable threshold for competition in a given area? The areas concerned seem to have a luxury of competition compared to geographical areas of similar size and population density, and this decision is simply regressing them to the same level as their competitors.

When I reviewed the findings initially, I discovered that geographical areas of similar size to Cambridge don’t normally have competition in cinemas, they can normally only sustain one. Consequently areas such as Cambridge or Bury St. Edmunds, less than a quarter of the size of Cambridge, will surely struggle to maintain two cinemas if their offering is not substantially different, as it is now. Aberdeen is larger, but has two Cineworlds; the Commission have not instructed Cineworld as to which cinema must be sold, so customers are faced with the prospect of them retaining two Cineworld cinemas but selling a Picturehouse.

2. Why, when the OFT’s initial report (published in June) indicated that multiplex and art house cinemas operate in different markets, have these cinemas been deemed to be in sufficient levels of competition such that a substantial lessening of competition will arise?

Everyone I’ve spoken to, even those who see benefit to retaining competition in these areas, recognises that these cinemas operate in different markets. Everyone except the Competition Commission.

3. Why is it believed that introducing another party to these areas will have the effect of reducing prices or maintaining them at their current levels?

The only evidence that the Commission were able to provide is that the cinemas in each area monitor the prices of the cinemas of competitors. There is no evidence that they set prices competitively based on the actions of their competitors. A cursory examination of the marketplace suggests that cinema prices in each area are in a narrow range, and that competition is not as much of an influence on pricing as the local cost of living. (See my original post for sample evidence of this, looking at Cineworld prices over a wide area and also prices in Norwich which has more competition.) If the Commission wanted to be truly effectlve, they’d be looking at this issue on a national level. The likelihood is that whoever takes over each of these cinemas will offer a poorer deal for consumers, based on price and choice, and there is strong evidence to support this.

4. Why were membership schemes excluded from the final calculation as these not only create a customer loyalty to particular cinemas, but in the case of these two cinema serve to insulate their customers from price increases both locally and nationally and could act directly to negate the impact of the creation of an SLC?

The Commission’s own independently commissioned research found that 58% of Picturehouse customers are members. Cineworld is also the only multiplex to offer a membership which gives direct discounts or free tickets to its members (Odeon offer a points scheme, but the rewards are significantly less), and also has abandoned booking fees online. These discounts are significantly greater than the 5% increase in ticket prices that the Commission proposed in its survey would cause customers to change cinemas.

5. Is there any evidence of any other part of the country where competition alone is successful in influencing prices? On inspection, the prices seem to be set at a level more related to the general cost of living than the factors used in the correlation in the report, and comparisons with local areas with both more competition and no competition do not suggest any evidence of a strong effect of competition on prices in this sector. The subsequent fear is that any competitor purchasing either of the cinemas will not be able to be restricted from raising prices from current levels, and I would be keen to understand the Commission’s powers to influence in this regard.

Again, the focus of the Commission is very narrow, attempting to ensure competition which will do less to drive down prices than the current operators are doing at a national level. There is nothing to prevent another operator taking over the cinemas and charging whatever they want, as the Commission refuses to engage in any mechanism to control prices.

6. Given that any competing chains in both the multiplex and art house sectors are currently charging similar prices for single price tickets and less discounts to members, what controls is the Commission able to put in place to prevent a change of ownership relating in a direct increase in prices for some or all customers, which would appear to be highly likely on the available evidence?

Three options exist for the purchase of each cinema: another multiplex chain, another independent chain or an independent purchaser.

  1. Other multiplex chains have shown a reluctance to take on small cinemas, as shown in the initial research. But the only other chain competitive on price on a national average is Empire, and they would only be competitive for customers purchasing small numbers of tickets. Any other multiplex purchaser would see an increase in prices, a loss of choice and they would be unlikely to run the other services.
  2. The only other independent chains are Curzon and Everyman. Neither offer the same level of diversity in their programming in their provincial cinemas as Picturehouses, and both offer less discounts to members, so the prices would rise for the majority of customers.
  3. Other independent cinemas in the country do manage to offer similarly diverse programming, but there would be no guarantee on prices. It must also be considered that an independent wouldn’t have the resources of one of the chains should the cinema operation encounter difficulties.

By failing to answer any of these questions, the Competition Commission have failed their duty of care to cinema customers in these three areas. The absolute best case now is that another supplier will come in and take over these cinemas, but all evidence of the industry suggests that prices of single tickets will not be any cheaper, anyone running membership schemes in other areas will offer less discounts, that choice of films is likely to go down and that there is no guarantee of support for the other services offered. The worst cases are that new suppliers fail to make the same success of these cinemas that the current suppliers have, and once the Commision is out of the picture they will each die a slow – or possibly quick – death.

I do not believe this should be the end of the fight. The Cambridge MP, Julian Huppert, has shown a willingness to continue the fight and his support is most welcome, but hopefully the 13,700 people who’ve signed the petition will also be willing to add their weight to finding a satisfactory resolution to this. I will also be contacting MPs in other affected areas today to see what support they can offer, and would encourage others to follow the same course, especially in those areas outside of the cities themselves.

Rest assured that I do not intend to give up the fight to protect what any of these cinemas offer, and the next few days will be spent attempting to secure as much support as possible for the next stages of the battle. To be clear, I still believe that losing either a Cineworld or a Picturehouse in either area results in a poorer deal for consumers and will fight to the last to protect what we currently have. If you have any views on any of the above, or wish to contribute to the battle to save any of these cinemas, please contact me at movieevangelist@btinternet.com as soon as possible. It’s still not too late to sign the petition; although this initially referred to the Competition Commission, it still acts as a focal point and a show of unified support, and the more weight we can put behind it, the better.

http://bit.ly/SaveOurPHs

Thank you in advance for your support.

UPDATE: There will be a public demonstration at 17:15 on Wednesday 9th October outside the Cambridge Arts Picturehouse. If the numbers become too great, it will relocate to Parker’s Piece, almost opposite. It is hoped that Julian Huppert, MP for Cambridge, will be in attendance prior to 17:45. Please do come and show your support if you are at all able.

Competition Commission: Why We Can’t Afford To Lose Cineworld Either

Posted on Updated on

Cineworld auditoriumNearly three weeks ago, the Competition Commission published both some initial, and then more detailed, findings into the purchase of City Screen Limited by Cineworld Group plc, thus putting Cineworld and Picturehouse cinemas under the same ownership. This has been deemed by the commission to have created a substantial lessening of competition (SLC), and the only solution on the table at the moment is to force Cineworld to sell off one of its cinemas in Aberdeen, Bury St. Edmunds and Cambridge. There’s been much talk in the last two weeks about protecting what the Picturehouses provide in terms of quality, differentiation, accessibility and ancillary services – not least from me, as I helped to start a petition which has gained 10,000 signatures in a week and a half – but all that seems to be pointing to the logical solution being to sell off the Cineworld in each area. Right? WRONG.

I can say for certain that this blog wouldn’t exist without cinemas that offered the quality and diversity of the Picturehouses, but it almost certainly wouldn’t have existed without the Cineworlds either. Over the years, I’ve blogged on some crazy feats of cinematic endurance, such as seeing seven films in a day or 100 in a year, but stunts like that wouldn’t be possible without the benefits of a Cineworld card. But I’m far from the only person who sees films regularly in a cinema, and if you’re a Cineworld member the benefits are plenteous. The current price of a Cineworld membership is £15.90 a month and in the vast majority of Cineworld cinemas, that’s less than the price of two full adult tickets. You can then see as many films as you like, and that opens up a whole world of possibilities. And if you think I’m the only person taking advantage of consuming films in large quantities, then take a look at Cineworld’s twitter feed to see the kind of company I keep. The first year I saw 100 films in a year? Cost me just over £300 for the tickets.

If this is starting to sound like an advert for Cineworld, then this next paragraph is only going to make matters worse. Any members get 10% off concessions, which instantly starts to make the overpriced popcorn that little bit less overpriced. There are also Unlimited members screenings, where at least once a month anyone with an Unlimited card can get a ticket to see a big name film before it’s on general release. I’ve been to a few this year, and the likes of Trance and 2 Guns have been packed out. (And because it’s an Unlimited showing, there’s no charge, of course.) If you’ve been a member for 12 months or more, then it’s an automatic upgrade to Unlimited Premium, which means there’s nothing extra to pay for 3D films – normally a surcharge of around £1.50, in line with most other cinemas – and you now get 25% off any of the concessions, at which point a bag of sweets will cost you around the same as it would in a high end supermarket, rather than an average cinema.

But of course, the Commission haven’t taken memberships into account when judging the risks or benefits to consumers. Which is why they believe the cinema chain doing the most in the country to encourage loyalty in its members and to give them significant reductions in return is likely to increase its prices by 50p or less in an effort to drive customers up the road to the Picturehouse, in turn increasing the overall profits to the company. Yes, seriously. (Picturehouse being the only other chain of more than 10 cinemas in this country to have a membership scheme which gives direct discounts on actual tickets. ODEON have a points club, but you even have to use your points to pay their online booking fee. Anyone who’s publicly stated they would rather have an ODEON than a Cineworld, and I’ve seen a few, should think on that for a moment.)

Now, you might think that I only know that the grass is green on my side of the fence. But travelling for work as much as I do, I also visit cinemas of the other chains when I’m in the unfortunate position of working somewhere without a Cineworld or Picturehouse in reasonable distance and still want to catch a film. So in the past three years I’ve visited the following cinemas that aren’t a Cineworld.

Vue: Cambridge, Leeds, Edinburgh, Cheshire Oaks, West End, Romford

Odeon: Covent Garden, West End, Panton St, Newcastle

Showcase: Coventry, Peterborough

Empire: Leicester Square

Curzon: Soho

Others: BFI Southbank / IMAX, ICA, Prince Charles, The Aubin, The Barbican, Sheffield Screen Room, The Luxe (Wisbech)

[Picturehouse: Cambridge, Bury St. Edmunds, Hackney, Stratford, Liverpool]

I’d like to think I have a fair basis for judging the on site quality of other cinemas, and there is nothing in terms of the experience of visiting any of these cinemas that leads me to believe any benefits of one of them taking over one or both of my local Cineworlds would outweigh the cost. What all of these cinemas have in common for me is that I’ve only seen one film in them per visit, and rarely – if ever – visited more than one of them in a given month. That’s the reality of what could be facing residents of Cambridge and Bury St. Edmunds if we lose one or both. (Aberdeen has two Cineworlds, so the path of what to do there seems a little clearer, as being required to sell one cinema would leave them with at least one Cineworld.)

So what does this mean for the quality argument? Surely there aren’t enough good films around to justify seeing more than two a month anyway? As evidence to the contrary for that point, I now present a sample list from the last five years of high profile films, most of which I would rate highly, that I wouldn’t have seen in a cinema without the Cineworlds of Cambridge or Bury St. Edmunds had I been forced to restrict myself to just the two films that month I most wanted to see.

Before The Devil Knows You’re Dead, Charlie Bartlett, Adulthood, Choke, Doubt, Paranormal Activity, Where The Wild Things Are, I Love You Phillip Morris, How To Train Your Dragon, Heartbreaker, Cyrus, Back To The Future re-release, Rango, The Inbetweeners Movie, The Awakening, The Hunger Games, Magic Mike, Pitch Perfect, The Impossible, Cloud Atlas, Olympus Has Fallen, 2 Guns, About Time

But that’s not all that the Cineworlds offer. Outside of four cinemas in the West End, you can use your membership card at any cinema. So that three year list of cinemas from earlier? Here’s my comparable Cineworld list to the other chains from earlier.

Cineworld: Cambridge, Bury St. Edmunds, Huntingdon, Haverhill, Enfield, West India Quay, The O2 Greenwich, Runcorn, St. Helens, Stevenage, Wood Green

And if you add those nine other Cineworlds not affected, then the list of films I wouldn’t have seen without my Cineworld card expands once more:

Black Dynamite, Barney’s Version, Snowtown, Moneyball, Coriolanus, Young Adult, The Grey, The Descendants, A Dangerous Method, The Hunter, Anna Karenina, The Perks Of Being A Wallflower, Zero Dark Thirty, Spring Breakers, Byzantium, Behind The Candelabra, The East

And that’s just the good stuff. I get to sit through all kinds of nonsense, from Transformers: Dark Of The Moon to Gnomeo And Juliet, safe in the knowledge that I’m paying a flat monthly fee and I’m effectively seeing these films for free, typically at a rate of around 10 films a month. Does this sound like the kind of cinema operation to you about to engage in a large scale attempt to discourage customers away from its cinemas?

If you don’t want to lose Cineworlds in Cambridge or Bury St. Edmunds either, you only have until 17:00 on Tuesday 10th September (tomorrow at the time of writing) to make your feelings known. Contact them at CineworldCityScreen@cc.gsi.gov.uk to make sure they understand there’s no easy solutions to this issue, only a whole host more problems if they carry on their current course, and it’s consumers – not Cineworld themselves – who are the most likely to lose out in all this.

The Cineworld / Picturehouse Competition Commission Decision: My Interim Findings

Posted on Updated on

In the three and a half years I’ve been blogging, that may be the most serious blog title I’ve ever written. But suddenly we are living in serious times, with a threat to the cinematic options of thousands of people being presented today by the initial findings of a Competition Commission investigation into the purchase by Cineworld Group plc last year of City Screen Limited, the group which operates the Picturehouse chain across the UK.

I believe I stand a chance of being the single individual to be most affected by this decision, but I would be far from the only person to suffer if these changes are forced through. Since I moved to the area in 2007, I have made around 750 trips to the cinema, of which over three quarters have been to four local cinemas. I live twenty-five minutes from Bury St. Edmunds, where I am a regular at both the Cineworld and the Abbeygate Picturehouse, and thirty minutes in the other direction is Cambridge, where I occasionally visit the Vue cinema, but more regularly the Cineworld and the Arts Picturehouse. Today the Competition Commission announced their initial findings into an investigation they started in April, and their recommendation to prevent the adverse effects that could be created by the merger is to sell off one of the two cinema chains in three affected towns and cities: Aberdeen, Cambridge and Bury St. Edmunds. That means that either the Picturehouse or the Cineworld would be no more in those three areas.

Reading the documentation is a strange descent into legalese, which I would presume most people (myself included) would only encounter in the event of a house purchase or making a will. The key paragraph from the initial findings is this:

“…the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition (SLC) in the market for cinema exhibition services in the Aberdeen, Bury St Edmunds and Cambridge areas.”

So there is no requirement on the commission to prove an SLC, just that one may occur. This seems oddly arbitrary, but I’m not here to question the workings of the process. The Commission is, in case you weren’t aware (taken from their own website):

“…an independent public body which helps to ensure healthy competition between companies in the UK for the ultimate benefit of consumers and the economy. It conducts in-depth investigations into mergers and markets and also has certain functions with regard to the major regulated industries.”

I am happy to trust implicitly that the commission is not politically motivated, but my instincts are telling me that I cannot see who is well served by the prospects of the sale of these cinemas. From a personal perspective, either would be catastrophic. I have a membership with Cineworld which gives me free tickets and discounted concessions, and an average travel time to my two nearest cinemas of 27 minutes. If the Cineworlds were sold off, then my nearest two venues become Huntingdon (40 minutes) and Haverhill (50 minutes), increasing my journey times by 60%. I see an average of eight films a month at Cineworld and simply couldn’t afford to do that without Cineworld’s Unlimited scheme – no other chain or independent operates a similar scheme. For the Picturehouses, my nearest alternatives would be Norwich, Hackney or Stratford (all over an hour away), and suddenly independent cinema would be reduced from four films a month to probably one a quarter.

But I would be the first to admit that I am not at the centre of the bell curve in terms of cinema attendance, instead very much in the top quintile (possibly the top percentile). So in an effort to understand the fairness and implications of the Commission’s decision, I’ve looked at a number of key areas for a more average cinema attendance to see if their findings stack up. (I’m leaving out Aberdeen from my comparison as it’s not local to me, but many of these points may also apply.)

Comparable demographics

The first point I’d like to consider is what constitutes sufficient competition. If you look at the definition within the findings, the Commission has considered an area thus:

“For the geographic market definition, we established the boundaries of the markets based on 20-minute isochrones around the parties’ cinemas, but we recognized the need to apply this rule flexibly when assessing competition in specific local areas.”

Or in other words, it considers a twenty minute journey to be the reasonable upper limit for times to reach each cinema for these purposes.

I’ve compared Cambridge with a number of similar sized areas. If you consider the urban areas defined in the 2011 UK census, then of the nine others most similar in size to Cambridge, only three other built up areas have more than one cinema. Oxford is particularly blessed, having three other major cinemas in addition to its Picturehouse, but the median average of this sample is 1. Since the average cinema for this sort of area is 1, it seems likely that the average population of areas of similar size to Cambridge can typically only support one cinema, unless there is some other factor in the diversity of those cinemas. (Since Bury St. Edmunds has a population of only c. 35,000, it clearly falls into the same category, so can be considered fortunate to retain two cinemas at present.)

CC Table 1
In this table, Burnley is a slight oddity in that a cinema in another town is just within geographic reach. However, in the other three cases, those areas of similar size that can sustain an additional cinema – York, Oxford and Cambridge – all count a Picturehouse as one of their cinemas. These were all Picturehouses well established prior to the purchase of City Screen limited, suggesting a public demand for what the Picturehouse cinemas have to offer.

When considering the services offered by City Screen Limited, the Commission also considered the distribution services offered by the company. With reference to this point, they observed:

“…we found that Picturehouse’s programming services are advisory and customers typically make the ultimate programming decisions.”

This would seem to support that, in these areas, customers are seeking the offerings made by the cinemas, and that in areas that can support more than a single cinema that is only possibly because customers are seeking a more diverse offering.

Consumer choice and the question of direct competition

If you compare the programming lists for a ten day period at both Cineworld and Picturehouse in Cambridge and Bury St. Edmunds, that diversity shows through very clearly:

CC Table 2In that 10 day period (Tuesday 20th – Thursday 30th August 2013), both Cineworlds are showing 22 different films. Only 9% of those films are also showing at the Picturehouse in Cambridge, and although the Bury figure is higher, it’s only 18%. These are clearly two different cinemas offering to two different demographics, and these programming choices are being dictated by consumers. There are a couple of films showing at the Cambridge Arts Picturehouse that previously ran at the corresponding Cineworld, but this would just demonstrate the advantage of two cinemas allowing a longer run for films that appeal to a particular audience. If one or other chain were forced to pull out of this area, then the variety would be significantly diminished and consumer choice reduced.

Which makes it difficult to understand how these cinemas can be seen to be in competition. This is all the more baffling in light of two statements in the Commission’s findings. Firstly, this set of comments:

“Cinemas are of various sizes, and a distinction is generally made by the industry between multiplexes (which have more than five screens) and other cinemas.”

So the commission recognises that the industry itself differentiates at a basic level between the kind of cinemas represented by Cineworld and its direct competitors, and that of the Picturehouse chain. The Arts Picturehouse has three screens and the Abbeygate two, so there is a clear divide between the two arms of the new business. The statement continues:

“Operators of multiplexes tend to focus on showing mainstream films and to offer a largely undifferentiated service… Operators of smaller cinemas, which are generally located in town and city centres, may differentiate themselves from multiplex operators not only through the location of their cinemas and the mix of films they show (which will generally include both mainstream and specialized films), but also through the ancillary services and general ambience their cinemas offer to their customers.”

So there is a recognition here that not only do the Picturehouse cinemas offer a different cinematic experience to that of the standard multiplex, but also a different cultural experience. Both Picturehouses have a bar, offering hot and cold food and a selection of alcoholic beverages which can be taken into screenings.

However, having clearly established this differentiation in market and offering, the Commission inexplicaby – as in no explanation for this decision is given in the document – then decides to disregard its own differentiation in coming to a decision.

“We defined the relevant product market as the market for the provision of cinema exhibition services, and we saw no reason to include within the definition of the relevant product market other leisure activities and/or food and beverages.”

I have attended eleven Cineworlds and four Picturehouses in the last two years, and while a few Cineworlds offer an on-site bar, they typically don’t then allow alcohol or other foodstuffs purchased outside of the concessions stands to be taken into screenings. What I can testify to is that in general, a Cineworld is very comparable in terms of exhibition and concessions to the other major chains (Odeon, Vue, Showcase, Empire and Reel, as I have attended cinemas in all of their chains in the past three years), whereas the Picturehouse is a markedly different experience. No reasonable definition of what the cinemas are offering can disassociate the wider experience from the exhibition, and I would urge the Commission to reconsider this point. Visiting the cinemas themselves may offer additional insight into this point, if they have not yet done so (and no indication is given that they have).

The only other differentiation that I can find that relates to the findings is that where most multiplexes are defined as out of town, the three Cineworlds in question – Aberdeen, Cambridge and Bury St. Edmunds – are all effectively in town and within walking distance of their competition. The Commission gives no direct indication that this has been a factor in their decision.

The effect of a potential purchase and competitive pricing

Within the Commission’s findings, there is one key paragraph that outlines the potential impact of an SLC (substantial lessening of competition) that the decision to recommend a sale of cinemas seems to hinge on, having ruled out any possible impacts from planned expansion of either chain or from City Screen Limited’s distribution role:

“…may be expected to result in a substantial lessening of competition (SLC) in the markets for cinema exhibition services in the Aberdeen, Bury St Edmunds and Cambridge areas, leading to adverse effects, for example in the form of higher ticket prices than would be the case absent the merger.”

According to the BFI Statistical Yearbook 2011, in that year 62% of the UK population visited the cinema at least once a year, and 19% at least once a month. Let’s now consider the potential effect of a sale on the pricing for the cinemas in question for these two groups of people. 

Firstly, let’s consider the financial the group that visits once a year or more. That group is making irregular purchases, so is most likely to notice the effect of a change in a single price ticket. Let’s firstly compare the prices of a ticket for the main cinemas in both Cambridge and Bury St. Edmumds. The price shown is that for a single adult ticket purchased on arrival at the cinema for a showing this coming Friday evening (23rd August 2013) – it should be noted that all three chains offer concessions and have a day with reduced ticket prices for all customers, and there are similar differentials in price for those options.

CC Chart 1So if you compare the standard price ticket at Cineworld to that of the area’s main competitor, Vue, then the prices are favourable, and the Picturehouse seats are cheaper than a standard ticket at the Vue in Cambridge, even though I would argue that it’s not a direct comparison due to the programming point made earlier (the Vue is also showing 22 films in the ten day period, all of which are showing at one of its competitors with the exception of a single afternoon screening for seniors).

There is an even more marked difference if you compare the prices for tickets purchased online. Cineworld offer a national scheme called myCineworld, which is free and has no commitment to the number tickets purchased, and offers a 10% reduction and no booking fee. The Picturehouse chain also do not charge a booking fee in any of their cinemas for tickets purchased online, but Vue charge a 75p online booking fee. So the online comparison becomes:

CC Chart 2So while the cinemas under threat are currently undercutting their direct competitor in the Cambridge market, the argument made by the Commission is that the market conditions and the reduction of competition will drive higher prices. At face value, there may appear to be some weight to that argument, if you compare the prices of these two Cineworlds to other cinemas in the chain within a reasonable distance.

CC Chart 3However, the Commission is proposing that the lack of competition will drive prices up, and in each of those other areas there is no competition, the Cineworld being the only cinema in the area. This would seem to argue against that effect.

Next, let’s consider the East Anglian cousin of Cambridge and Bury St. Edmunds, Norwich. There are four cinemas in Norwich, all of which are in the city centre and would fall within the conditions that the Commission have laid out. The Picturehouse here has similar programming to Cambridge and Bury, while the other three are all offering standard multiplex fare. The Friday night price for each of these is as follows.

CC Chart 4There is a key observation to be made from these prices. Although the Vue seat here is cheaper than its comparable seat in Cambridge, the most expensive seat in the area is the same price range as a higher priced seat in Cambridge or Bury. Additionally, a significantly cheaper competitor in the form of the Hollywood appears to be having no effect in driving prices down in the others.

This would suggest that forces other than local competition are having an effect on price. One other possible reason for the higher prices in Cambridge (and by extension Bury St. Edmunds, which is only 35 minutes away by car) is the cost of living in the area. In this 2012 survey on house prices in the UK, Cambridge is shown to be the sixth most expensive in the UK. I would propose that the higher cost of living in the area is also having an effect on ticket prices. I would like to see what research the Commission has done into investigating or eliminating other factors in terms of the setting of ticket prices in these cinemas.

CC Table 3Finally on the single ticket, we must consider the alternatives. Three other major chains operate in the south of England: Odeon, Showcase and Empire. Presuming that there would be no advantage to Vue purchasing one of the Cambridge cinemas, compare the prices of the nearest geographical cinemas in each of the other chains. It should be noted that, in each case, the cinema is the only one within a geographical area of the size stipulated by the commission.

CC Chart 5Again, there is a wide variety of prices here, with no guarantee on this evidence that if one of these chains took over a cinema in question that it would cause the local market to become more competitive.

When all things are considered, the price range across all of these tickets is between £7 and £10. I would also like to see evidence from the Commission that those attending the cinema infrequently would be likely to be swayed in their decision by such small price differentials, as such differences may become negligible when factoring in other costs of attending the cinema such as the concessions, travel and parking.

The second consideration is for those attending the cinema more regularly. Two chains in the UK offer national membership schemes for their patrons which offer significant discounts for members, both valid at any cinemas outside of the West End for the rate that would be paid in Cambridge or Bury St. Edmunds. The Cineworld scheme costs £15.90 per month and entitles the holder to attend an unlimited number of screenings, while the Picturehouse charges an annual fee of £35, offers three complementary tickets and then reductions of typically £2 per screening on any further tickets bought. Both chains also offer money off concessions; Cineworld discounts include 25% off for members staying longer than 12 months, and Picturehouse’s 10% discount applies to all bar purchases, including food and alcohol.

The BFI survey indicated that 19%, or around a third of all people who attend the cinema, attend at least once a month. So let’s compare the costs of attending two or three weekend screenings per month across each of the major chains, including the cost of purchasing any memberships.

CC Chart 6At two showings per month, the Cineworld and Picturehouse chains are cheaper than anyone except the Empire, who are only £10 cheaper per year. Once the figure rises to three, then the Cineworld becomes the cheapest option, and with no restrictions on further attendances.

I believe, in the light of this, there are a number of questions that need to be answered before further action is taken.

  1. Why is competition a requirement in areas such as Cambridge and Bury St. Edmunds, when geographical areas of similar size do not typically have such competition?

  2. Why are the Cineworld and Picturehouse chains being deemed to be in competition when Picturehouses are generally complementing the offering in other areas rather than challenging it, and when the Commission’s own findings demonstrate that these are appealing to different demographics, have little overlap in terms of content,  and the Picturehouse has an appreciably different experience surrounding the exhibition?

  3. Why would introducing an additional party to these areas drive competition in prices when there is no evidence to support this, and when pricing seems to be driven as much by the local cost of living as by any perceived competition?

  4. Why would allowing another major operator to take over these chains be in the interests of consumers, when the price difference for casual attendance is negligible and for regular attendance is either similar or significantly cheaper?

You can find a copy of all of the commission’s initial findings here. If you feel strongly about this, I would urge you to make your feelings known, both to the Commission at cineworldcityscreen@cc.gsi.gov.uk before September 10th and to your local MP, Julian Huppert for Cambridge and David Ruffley for Bury St. Edmunds. Thank you for listening.