Great film but pass the popcorn

Food and beverage sales provide vital revenue for the UAE's cinema industry as advertising income remains static. But the movies themselves are the biggest factor affecting fortunes.

The cinema industry also relies on food, beverage and advertising sales for its revenue stream instead of depending only on ticket sales. Lauren Lancaster / The National

Aqua-coloured aliens battling for survival in an Amazon-inspired paradise wowed cinema audiences last year.

Now Showing Stars of UAE's cinema chains

Grand Cinemas Screens: 171

VOX Cinemas Screens: 50

Cinemacity Screens: 29

Reel Cinemas Screens: 28

Cine Royal Screens: 23

With ticket sales topping US$2.8 billion (Dh10.28bn), the 3D epic Avatar shattered box-office records around the world and made it a bumper year for cinemas in the UAE.

A year later, the industry here is predicting that ticket receipts will soar again after a patchy first quarter.

"So far in 2011, [ticket sales are] about 8 per cent up on 2010," says John Chahine, the general manager of Italia Film, a Lebanese company that distributes English and foreign films in the UAE.

About 3.5 million tickets were sold between January and April, down 6 per cent on a year earlier, when Avatar was thrilling audiences with its science fiction special effects.

But since then, the industry has bounced back and cinema chains are confident they will beat last year's receipts of $10.6 million.

Andy Fordham, the brand marketing manager at Grand Cinemas, expects box-office sales to be between $13m and $14m.

"The UAE specifically has one of the highest worldwide [attendance] rates of cinemas per person," he says.

All this points to a positive outlook for cinema companies, especially as they plan to expand abroad after a period of rapid development in the domestic market.

But ticket sales are only part of the story.Food, beverage and advertising sales are vital to the industry.

Advertising revenue has been fairly static in the region.

In the first five months of this year, advertisers spent $9.8m in cinemas in the UAE, Bahrain and Lebanon, according to the monitoring company Ipsos MediaCT. That was slightly less than in the same period last year.

But that was offset by the sale of snacks, which is much more lucrative for the sector, according to Mr Fordham.

"If you didn't sell food and drink, cinemas wouldn't exist," he says. "The customer expects it. I don't think anyone would actually open up a cinema and just sell tickets."

To watch a film in the UAE costs about Dh30. Of that, the cinema keeps about half, with the rest going to the film's distributor.

That is why revenue from snacks is crucial, says Grant Bishop, a film-industry executive in Dubai.

"Globally, you could be seeing anything from 70 to 100 per cent of the cinema's share of the ticket price as gross revenue for food and beverages," he says. Expansion throughout the region is another key driver in boosting revenue and profit for the major cinema chains.

"There's definitely territories where there will be growth and more screens," says Mr Bishop. "It's very closely linked to mall openings … How many new mall openings will there be in the UAE? Very few."

Premier seating at VIP-style cinemas has also helped to increase revenue for the major players in the industry.

Offering business class-style luxury leather seats with added leg room and "service on demand" has proved successful.

"All the cinemas are certainly offering more premium products. Gold Class [tickets] go for anything up to Dh100 … You might find a gourmet hot dog, or Haagen-Dazs ice cream [delivered to your seat]."

Gordon Kirk, the general manager of Reel Cinemas, agrees. He says the chain is seeing increased revenue from food and beverage sales for its "business class" customers.

"June [revenue was] in excess of 50 per cent up on the previous June. People are spending more on [food and beverage]. And we're seeing a rise in the number of people going to the platinum screen," he says.

Yet some question the business model of premium cinema screens. While there are higher margins on ticket prices and food, there are fewer seats.

"VIP [cinemas] have 50 seats, not 300 to 400," says Samer Debsi, the general manager for the Cinemacity chain. "How much are they going to eat?"

Despite the rosy outlook for the industry, the market here faces challenges. The first is Ramadan, during which ticket sales drop by about 80 per cent, according to Mr Fordham. The second is censorship - some films are heavily cut or even banned in the Emirates.

"We respect the UAE culture and work closely with the censor to follow the country tradition by editing all nudity scenes," says Italia Film's Mr Chahine. "[For a] very low percentage of the movies, we … sometimes ban [the film], if it has 20-plus cuts, as most the time it affects the story of the movie and will be useless to release."

Yet the biggest factor affecting the fortunes of cinemas in the UAE is completely out of their control.

"You can have two vastly different years, just purely based on the quality of the cinema product," says Mr Fordham.

Cinemas can only hope that the next Avatar is just around the corner.