Movies making a reel stand

SBHD: The death of cinema has long been exaggerated. The movie industry is thriving because of, rather than despite, investment in new media.

Jogging makes you fat. Look at the people who do it, most of them are fat. So it’s an obvious matter of cause and effect – jogging makes you fat. Stands to reason.

The rationale of this case can, of course, be reversed. The lean do not need to jog. But what this rather specious piece of logic reversal demonstrates is that there can be perversity in accepted wisdom.

Take the cinema industry. A decade ago it was believed to be dead or dying. Attendance was at an all-time low. Even three years ago no one was advising cinema managers to buy Sasco Year-Planners. Sure, there had been a recovery in audiences because imaginative split-screen complexes and the like had moved the industry on, but, with the video revolution raging and cable on the way, cinema was still perceived to be making the best of a bad job.

Now, as I write, SG Warburg is drawing up its shortlist of potential bidders for Britain’s largest cinema chain, MGM.

At the weekend, Richard Branson let it be known that Virgin would bid some £150m for the company.

This should not amount to sufficient cause for cinema-goers to spill their Kia-Ora or drop their popcorn. The way Branson continues to push the Virgin brand makes a cinema chain an obvious target.

Cast your mind forward five years. You are taking your boyfriend, on his birthday, to see Baywatch The Movie (walk-on part: Richard “Torpedo” Branson). You’re driving, so you confine yourself to a Virgin Cola in the bar, while your partner has a Virgin Vodka. TV screens are playing videos of latest releases at Virgin Megastores (WH Smith, with its 75 per cent interest, has paid for this). Since there is no longer any Pearl & Dean, the trailers before the main feature are of movies showing on Virgin Atlantic long hauls.

On the way out, for a birthday treat, you pick up a packet of Mates, but that’s another story. The point is that cinema fits the cosmopolitan, youth-targeted Virgin branding machine.

But, hang on, look who Branson is up against in his bid for MGM: Michael Green’s Carlton Communications, global entertainment and brown goods combine Sony, existing cinema operator Rank and American property concern Craig.

This is not just a firesale (though it is certainly that as well – troubled MGM owner Credit Lyonnais needs a UK cinema chain at the moment like Nick Leeson needs a ticket to Singapore). The bidders really want to get into cinemas. In the case of Rank, even further into cinemas.

Carlton is backed by Goldman Sachs and Polygram. Virgin, meanwhile, has secured the support of the City of London in the form of Hill Samuel and stockbroker Panmure Gordon. The popular commercial wisdom is clear: cinema makes you fat.

This is mildly diverting, because it demonstrates that industry pundits are as wrong about supporting exciting new media opportunities as often as they are about condemning them. Everyone has heard about the people who said the talkies wouldn’t catch on or who turned down The Beatles. Less well known are those individuals who have proclaimed a new dawn, only for the market to decide that it wants to stay in the day before.

One such historic example was the launch of the Xerox machine in the mid-Fifties. It was meant to herald the death of print publishing. The fact that you are still reading this 40 years later would seem to suggest that the death of magazines at the hands of mass duplication was wildly exaggerated.

Now, if the canny likes of Goldman Sachs and Carlton are anything to go by (and they surely are), we are watching a renaissance of the cinema chain. And this is not just a result of its heightened multi-screen efficiencies. Those have, perhaps, ensured the cinema’s survival. The emergence of new-wave media rival bidders for MGM would suggests forecast prosperity rather than mere survival.

As I say, cinema has adapted its commercial proposition well over the past decade. It has met the challenges of retail video and the new delivery channels of cable and satellite. But what marks its prosperity in the eyes of the MGM bidders is a neat reversal of the very logic that originally condemned it.

The original rationale was, one has to accept, an attractive one. It went like this: consumers can buy or rent videos of movies and the lead times for new movies appearing in the shops is shortening, ergo cinema has had it. What is the big screen experience against the joys of freeze-frame? And, after the hurly-burly of the back row, there is the bliss of the sofa. Then, the promise of cable and satellite emerged to create a new common wisdom: the days of retail video were numbered by direct delivery, pay-per-view and video-on-demand.

For a variety of reasons, some of the latter promise is a long time in coming. In itself, that could only delay the demise of cinema, if one sticks to the faith of the new media evangelists, rather than prevent it.

But what has really pushed the revival of cinema are the very media industries that were meant to destroy it. What has happened is that investment in new media, particularly in the US, has re-fuelled the movie industry. The consequent revitalisation has meant that the traditional distributive channel has revived alongside the new pretenders such as video and cable.

So the vicious circle has been reversed to make it virtuous for cinema. It is thriving because of, rather than despite, investment throughout the industry. That situation cannot last forever, but for the time being the talkies have caught on. And new-wave corporations such as Virgin and Carlton know it.

It might present them with some problems. A vertically-integrated Carlton – in programming, TV broadcast and video duplication – could, by stepping into cinemas, slow the speed of the new media vanguard, and present itself with potential conflicts of interest.

Rank may also face competition issues of a monopoly nature if it proceeds with its ambitions for MGM.

But, from cinema’s standpoint, these are nice problems to have. And it’s good to see an accepted contemporary media thesis demolished, if only temporarily. The cinema industry isn’t dying any more than jogging makes you fat.

George Pitcher is joint managing director of media consultancy Luther Pendragon