The supply and demand for cinema tickets: Some U.K. Evidence

Abstract

The U.K. cinema industry faces the problem of a perpetually shrinking market with annual admissions having ~ fallen from a peak of 1,635 million in 1946 (see Browning and Sorrell (1954)) to an unprecented low of 60.32 million in 1982 (figure from Monthly Digest of Statistics). The financial press and economists (see e.g. Holmes (1981)) have concentrated upon the associated "plight of the British Film Industry whilst devoting relatively little attention to the analysis of cinemas as business organizations. Traditionally, the British government has operated some form of subsidy towards the film industry generally for non-economic reasons such as patriotism. Thus protectionism has been in operation, with respect to films, in periods when it was not generally acceptable. In 1947 a 75% duty was placed on U.S. film imports but this had to be abandoned after an eight month embargo by U.S. film-makers. In place of this a levy on cinema seat prices was introduced in 1950 which effectively meant that American films were subsidizing British ones as the proceeds of the levy went to British film-makers. In recent times the proceeds of the levy have been partly due to meager attendance. The effect of this decline in subsidy has been cushioned by the use of tax-loss investment, by the private sector, on the start-up costs of film making. The effect of a declining cinema industry on the film industry is further dampened by sales revenue from television and video. There may therefore be two reasons why the decline of the cinema industry is viewed as unimportant. Firstly, the contraction of the industry might simply reflect a change in tastes towards other entertainments. Secondly, if the cinema industry is viewed simply as a distributive outlet for films then its contraction reflects a switch in the mode of distribution. Nonetheless, there is the question on how cinema outlets should conduct themselves