Research | The Big Picture

Research / Appraising the Market

Cinema Feasibility vs Cinema Viability

If you an operator, property developer or local authority looking to build a new cinema in your market or add to your portfolio, we can advise on all aspects. We know cinema can play a key role in revitalising or as part of the regeneration of a scheme or town centre. Because we recognise the need for strategic placemaking we look at the bigger picture and how cinema integrates into a scheme or can work with the adjacent offers. We also advise on the type of adjacent offers that work best with cinema. For cinema or cinema chain acquisition we can appraise both the markets and the operator performance. Focussing on key indicators, we can benchmark against other territories or cinemas. We analyse the data and advise on what is really behind the numbers, past present and future. We are current with market trends and know the value of cinema in different markets and the multiples they attract. We can work with you on due diligence.

When carrying out feasibility we never assume that any two markets are the same, though we do draw on previous experience and global best practise. We create business plans for a site or sites by understanding the market potential and using our industry benchmarks, updated to take into account local wages, taxes and any other issue particular to the project.

When looking at a cinema or potential we have a proven methodology to analyse the market. We can provide drivetime analysis tailored to the location, taking into account natural barriers and competition, to get the true local population. This also provides a clear view of the local demographic and informs the ability to spend. From this we can assess the size of the admission’s potential and begin to create the business plan. We cross reference all our admission potential with other calculation methods to ensure it is robust. Our market appraisal reports include industry information, so you have a rounded view of what is happening now and what is coming in the future. We also provide case studies for you to see where a similar scheme or cinema has worked.

Finally, we will also advise on what size and type of cinema would work best in each location and who the potential operators could be. this is essential so that you get the right cinema and operator that will work best for your development.

For developers and local authorities, our market appraisals arm you with the information you need BEFORE you go to market. it means you know what you need and what will work, before speaking to operators. It also ensures you have knowledge of what is important to them.

One of The Big Picture’s (TBP’s) key areas of expertise lies in feasibility and viability reporting, either for a new cinema proposal or an existing cinema, respectively.

Both types of reporting require a similar methodology as to how they’re carried out practically, but it is circumstance-dependent as to which may be needed. Both reports are, however, part of a bigger picture and to this end, a wider market appraisal may also be required.

We, at TBP, carry out a detailed feasibility or viability report according to a client’s “why”. Ascertaining the “why” is vital because this forces the client to think through what they’re hoping to achieve and is therefore pertinent to what the immediate - and then long term - steps will be. Without this, it’s impossible to quantify if the client will achieve their end goal.

In both instances, feasibility and viability reporting consider the infrastructure of the location that is already in place, any proposed infrastructure developments and surrounding adjacencies (complementary or competitive).

Feasibility Reporting

Cinema feasibility reporting is applicable in two situations: firstly, when a proposed cinema is looking to enter a "greenfield" or empty marketplace. Or secondly, where there may be another (competitive) cinema already in situ but there is potential for a new offering. The purpose of such a report is to tell the client - be it a local authority, property developer or retail owner - how likely their proposal is to be implemented successfully.

We will assess, and then predict, the potential success afforded by the individual circumstances. And, using the unique data tools we have at our disposal, analyse what the potential for admissions could be.

Our SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) will highlight any opportunities that can be taken advantage of or threats to be aware of in both a greenfield scenario or if a site is to be competitive. All eventualities are therefore prepared for to ensure a new cinema proposal is not only ideally suited to its location but is also backed by financially sound planning.

Viability Reporting

A viability report will explore the issues an active site may be facing in order to produce a long-term prognosis for the business. If an existing cinema site with an incumbent operator has any significant or fundamental problems, we will often be called in to assess the specific situation and advise on which direction the business should be taken in. Proposed solutions to resolve the issues, where possible, will be investigated and put forward.

A site needing a viability report doesn’t require a vastly different approach to that of a brand new cinema proposal; calculating the admissions potential is still an integral part of reaching a prognosis.

Prognoses can cover the realistic lifespan of a cinema, or if already failing, how it can be “resuscitated”. To gain in-depth insight into these areas, we will benchmark the cinema in question against other similarly performing venues. If a current site is underachieving, the comparison would have to be drawn with another similar cinema - like for like is key in this instance. If problems can’t be rectified without significant work and investment, we will make recommendations on a realistic course of action and, if investment is available, how much this is likely to cost.

Oftentimes, viability reporting is carried out as part of a bigger overall project when a property developer is intending to revamp a development that a cinema is part of. If the cinema is fading within a shopping mall, for example, we will step in and assess the following:

The state of the market and how well it’s coping.
The condition of the building.
The current and surrounding retail offers.
If there’s a gap in the market and, if so, what offer, and which operator would fit it best.

Market Appraisal

At TBP we are highly experienced in carrying out market appraisals, which take a more holistic look at the overall marketplace. Plans for a brand new cinema, or plans to improve an existing one, are heavily dependent on these assessments. The aim is to see if, and how, the proposed or active site can sit within the market framework as it stands, and how it can be positioned with the greatest chance of success.

A feasibility (or viability) report features as part of a market appraisal, depending on what the circumstances dictate. Whichever is relevant will be put together with the overall market assessment to form the basis of a business plan.

Any next steps highlighted by a market appraisal may then require the employment of external expertise. Any relevant third parties from our network can be engaged where necessary, such as architects or project management teams. This is all available through TBP but simply depends on the level of service required by our clients.

Building a Business Case

The purpose of a market appraisal is to build a business case to support and substantiate the opportunity for a cinema. For it to be as robust as possible, it’s necessary for us to look in detail at what any local competitors are doing, or plan to do, what the potential market admissions are, and to identify any gaps in the market.

Of course, a feasibility or viability study is a significant part of this appraisal. A particular area that we have valuable experience in is if no current cinema is present in the desired location. The Big Picture will gather the relevant information to establish what approach will be successful in this “greenfield” market. After compiling a deep dive of the marketplace in question and potential admissions, we will advise on the size (number of screens and seat capacity) and type of cinema (a shortlist of relevant operators) that we believe to provide the most suitable model for your circumstances.

The detail needed to provide our clients with a solid business case has to be thorough. Our data-based approach means that we can benchmark against current cinema statistics. We can therefore provide a comprehensive breakdown of box office admissions, film hire costs, average ticket pricing, F&B (food & beverage), and payroll as part of the business plan we produce.

The Big Pictures Market Research

Our research process does not follow a “one size fits all” methodology. Needless to say, site by site, there are a great number of variables that need addressing. Because we’ve dealt with numerous cases over the years, we have learnt to be flexible and take a customised approach.

TBP will of course use any established research or data that’s available from local authorities or property developers (in keeping with GDPR laws) while ensuring this is caveated with its original intention. We believe our relationships with our clients, whether local authorities, property developers or anyone else, to be collaborative in some senses, and so we’ll always enquire if the intention is there to carry out any research before our involvement. If that’s the case we’ll dovetail in our own questions and desired aspect for the study.

A first essential step is to visit any potential or current site to look around and visually quantify what the area has to offer, by way of the local demographic and surrounding adjacencies. We’re then "hands on" in compiling our own questionnaires carried out by our team, covering a wide range of surveys from street research to focus groups. We always use a minimal sample of 400 people and analyse which time of day and week is pertinent to what we’re trying to establish. For example, if there’s a location with no cinema or a poor current leisure option our objective will be to flush out the appetite for a new or improved offering by conducting street research at a peak time, perhaps on the weekend when local residents are not at work and are out and about in the community.

Levels of Service

The Big Picture offers a wide range of analytic, research and consultation services. We do, however, have a minimum level of core service in order for us to be involved in a project. We’ll determine at the outset of the project exactly what your objectives are to then produce an action plan, tailored to meet your goals.

We set this minimum level of service because we refuse to work on “guess-timations”, and instead work from exploratory research, data and benchmarked case studies. This takes time and investigation to fully gauge and understand the size of the market and a certain level of detail is crucial to making accurate predictions that important financial decisions rely on. Our SWOT analysis is key to a thorough understanding of this but the secondary layer of customer / street research we perform is where the in-depth detail is expanded upon.

As we compile the necessary information, certain documents are gathered which form a dossier that is presented at the end of the process. This spans a range of material including: demographic statistics, geographical maps showing drive time analyses and calculations, written & pictorial assessments of competitors (where based and what’s currently on offer), details of any incoming exhibition competitors and any upcoming major infrastructure changes or developments. If we feel anything notable is missing or unavailable, we’ll advise on what’s needed to fill the gap.

To document the affluence and potential disposable income of an area’s residents, available council or local government data and statistical analysis will often prove useful. Furthermore, we look to document the breakdown of age groups, employment and education levels in an area. If any retail research is available, we’ll use it if and where relevant.

Due Diligence

The due diligence we carry out is an overall process comprised of many fluctuating factors, rather than a stringent checklist, and it covers everything from research & advice to delivery of cinema. From project conception all the way through to project close, we offer different levels of service but our overall aim is to arm our clients with the necessary information and then to provide the level of necessary support required.

After the research and investigation phases are concluded, we produce a two-page draft report document which summarises all of our findings. The supporting documentation to this summary is available behind the report but the two page document lays out all recommendations and considerations as accessible as possible.

In order to go through the summary document, we’ll have a client meeting to ensure its contents are fully digested and understood. At this point, any final pieces of relevant information are encouraged to be brought forward and any questions are welcome. The aim of this stage of the process is to give clarity, to manage expectations and to identify any necessary further amendments or research needed.

We can, and have many times, presented this document to an executive board or local authority whose decision making may rest on the information coming from such an in-depth investigation.

The full research document should be thoroughly dissected but it’s very important that it isn’t then just confined to an office drawer, in part due to the ever-changing nature of the leisure industry. Forming the basis of an action plan, it should be regularly consulted in order to reach important conclusions that will guide your project. But it should also be utilised from an architectural angle, to work in conjunction with construction or refurbishment work.

Post Appraisal Steps

After the initial discussion of the document, TBP will advise on your next steps. If the following phase requires looking at individual operators we are well-placed to do that, and on an international level. It’s important to point out here that we are not agents but our years of experience mean we are adept at drawing up shortlists of names and are able to assist with selections processes from an agnostic position.

We are, of course, available after this stage for any further ad hoc advice. We can sit behind the council in any further negotiations and advise on costings and approach from a “back office” position. Our studies are carried out with the intention of supporting and validating your project - we see your success as our success.