Reflecting on Lessons and Legacy

BBC Sounds, music, radio podcasts . From that crazy viral video to bizarre trends that are taking over our social feeds. We investigate the stuff you're scrolling through in our brand new podcast Top Comment . I'm BBC correspondent, Mariana Spring, and I'm investigative reporter Matt Shay. Every week we look at the stories spilling out from our screens and into real life. To work out what's actually real and what's not top comment listen on BBC Sounds . You're about to listen to the latest series of Toast. Episodes will be released weekly on Thursdays wherever you get your BBC podcasts, but you can listen to the latest episodes seven days earlier than anywhere else first on BBC Sounds. Hello Hello and welcome to Toast, the BBC radio four series which celebrates amazing business ideas that promised a lot to customers, yet somehow still ended up toast. I'm the BBC business journalist Sean Farrington. With me is our resident entrepreneur Sam White. Sam, as you well know, has no idea what's coming up. So her response and conclusions they're off the cuff, they're authentic she's hearing what you're hearing and coming to conclusions off the back of all that this time we're off to the movies hearing how one of Britain's best known businessmen tried to shake up the cinema industry Sam, hello. Hey hey, how are you? I'm well, thank you. Got a few questions for you. Do you like going to the cinema? I do. Good. Have you ever been to Milton Keynes? I have been to Milton Ke, alythnoughes not Mil tok and Keynes cinema. Oh, well . What were you doing back in may two thousand three ? I was probably out drinking in Milton Keynes and not in the cinema. Well, who knows, the stars may have aligned because back then there was a new type of cinema that opened in Milton Keynes. Relatively few staff , no popcorn sold, no snacks, it was painted bright orange, it was a new child in a growing family of brands that operated under one specific name that had been very successful in the airline industry . Ooh , so is that Virgin? No, it's now easy jet. Yes . So yeah, this is the easy group, easy jet. There were businesses galore over the years that easy name, the most famous parent, of course, being easy jet . So this was called EasyJet Cinema? No . You aren't getting the marketing team. This is easy cinema. You were nearly there. Easy cinema . And so Sam, this one it was a bit of a flash in the pan. I'm guessing you haven't heard of this one. I have not heard of this one. Were the seats too small? Well let us see exactly exactly where the idea came from. I've been speaking to Stellios , the EasyJet and Easy Cinema, as it happens founder, and we're going to hear that interview in a bit, but first let's bring in our other guests . Angela Chan is Professor of Creative Industries at Royal Holloway University of London, but back in two thousand three, she was a BBC producer and director who made a fly on the wall TV documentary about the launch of Easy Cinema. Angela, hello, welcome to Toast. Hello Sean, hello, Sam. Hey and because we've got Angela on, we also had to get Stewart Niblock on. She was following Stuart around with a camera because he was then easy groups, head of new projects, responsible for getting the cinema refurbished and open on time. Stewart, hello to you as well. Thank you for joining us on Today. Angela, put this in a bit of context for us. Take us back to two thousand three. What the cinema industry was like back then? Well, Sean, the cinema was still the place to go for the latest Hollywood blockbuster, but cinemas were starting to get pricey . We've seen Cinnie World arrive, they were super sizing your popcorn. And the home market was still DVDs or even video rental, love film, were sending you DVDs in the post. Netflix had come on the scene, but they weren't streaming until four years after that . So this was a particular moment in time that it's hard for us to get in touch with. You know, we didn't have smartphones yet and online purchasing wasn't normal. So what Stellios was doing was really quite radical. What was it that made you think the launch of E asy Cinema might be good for a TV documentary? We were making a series called Trouble at the top . And of course, when you're making an observational documentary, you spend a lot of time following people around looking for trouble. But Stellios loved trouble . So it became a dance with him where he was trying to think up good stunts for us to film and we were sort of trying to resist as filmmakers, but he's irresistible and irrepressible . And I guess Easy Cinema was a David and Goliath story. He wanted to make himself out to be the little guy, even though he was a very successful entrepreneur by then. And the big bad distributors were his Goliath. So had all it the makings of a great film, but it wasn't quite what he expected it to be. And Stewart, what was it like working for him? You'd already launched easy rent a car for Stellios, hadn't you? Yes, and easy money and couple a of other bits and pieces. He's an incredibly incredibly dynamic and intelligent guy. You know, the way his brain works was both unique and at times quite inspiring, so great at kind of turning things upside down challenging as well. You know, he had his difficult moments. He was never shy of offering feedback but a really thoroughly enjoyable period of life for me and for everyone who's there to have that kind of opportunity. It's great. Were you just overseeing this project or were you actually getting your hands dirty trying to get it launched? A bit of both. Like most of the startups, we would do them at a kind of crazy pace. So yeah, you had to pretty much do everything from the planning, the recruiting, the initial talks with the distributors, finding cinemas right through to tearing out the box office because we wanted to show you could run without a box office and having to take concrete floors over three days before you opened and stuff. So yeah, you physically get involved in everything as well. Well this cinema at The Point in Milton Keynes first opened the pointed back in nineteen eighty five. It was a pretty significant building created by an American company. It was the UK's first multiplex cinema. It had ten screens , innovations like seats with cup holders, would you believe? And it paved the way for many more of those multiplex es to come, so in some ways revived cinema going across the country. And Stewart, by the time you got your hands on it, it was eighteen years old and fair few cups had gone in the cup holders, I bet. What state was it in? It needed some TLC is the very polite way of putting it. Right. So Stellios, your boss, the founder of Easy Group, was trying another new business model that could in theory change the fortunes of the cinema industry once again in this same historic building. So what was the plan? How did he pitch it to you? The logic was about using yield management to change pricing depending on demand. So in other words, on a cold wet Tuesday, you would pay a lot less than you would for launch night Friday of a blockbuster. So the concept was that off peak is cheaper than peak time , online bookings to drive out costs so no long queues . People book on their internet and print their own ticket and scan it in. We didn't have anyone formally checking tickets . And no selling food or drinks or stripped down model to strip out costs. But the ultimate part of the business model was like easy rent a car and easy jet . Having empty seats is criminal . So if you've got an empty seat on a fl ight or a car or a cinema, you're paying for the basic costs. And if no one's going to use that seat, something is wrong. And if you went to most cinemas then a lot now, you would see empty seats on a cold wet Tuesday afternoon, no ten people at a screening. So the logic was sell cheap to fill the empty seats, sell more expensive when it's on high demand movie. So just how cheap could you have got a seat in theory? twenty pill ticket. twenty pill tickets a ticket. Right. Sam. So easy jets, but in the cinema. I mean, it's a really clever idea. It makes total sense. The space is already there. You got the overhead c ost. twenty pence sounds like very, very cheap. I'm not sure about the economics on that one, but I like the idea. It's logical. Now , Stewart, in two thousand three , just under half of UK homes had internet access . So this concept of online only bookings, was it a bit of a courageous move? Yeah, it was courageous, but we knew from the Internet cafe business , we knew from EasyJet raiser rent a car that people were willing to use online channels to book. If it A saved them money and B made it easier than sitting waiting in a call centre or joining a queue. So bit a of background on Stellios for you, Sam. So Stellios Hagioanu, the creator and owner of this easy family of brands born and raised in Greece. His first job was in his father's shipping business before he started a shipping company of his own, and he branched out into EasyJet with its first flight in nineteen ninety five. So by the time Stellios had started expanding this range of easy brands, EasyJet was actually a publicly listed company worth well over a billion pounds. I guess you only need one of those give you a bit of confidence. You do, but where would the fun be in that? True, true. Well, let's hear a bit from the man himself , Stellios told me the idea for easy cinema started after he spoke with someone running Odean cinemas in the UK . They questioned whether the easy jet business model might work for the movies. EasyJet took prices of flying in Europe from one hundred pounds to fifty pounds in round numbers , one way tickets . More than twice as many people decided to take a flight . So the overall pie, if you like grew . So Isitch found customers and Ryanair found customers without needing to take away the customers from British Airways . The business of going to a movie theater is similar to an airline in a way. It has a fixed cost, it has a number of seats . You have to book them. You can choose a time and a location , the actual movie, which one do you want to see? Like a destination if, you like for the airline business. Why were you keen to get into the cinema industry? What made you think? Right. This is going to be the one for two thousand three. I think the business of movie theaters was a combination of there was a movie theater there, cheap available . You know, Odeon told me you can rent this cinema for three years for a lot of rural rent to test all these weird and wonderful things and theories you have . And the other thing I realized is it's extremely pa friendly . People are fascinated by movies, you know, the whole glamorous business of watching movies and therefore, I think pound for pound , that little experiment in Milton Keynes generated more free PR for us than any other experiment I've done. You know, they gave us a lot of publicity. Some of it positive, some of it not so positive , but you know what? I'm also believing there is no such thing as bar publicity. So the brand always emerges stronger. The other thing I did, perhaps in a typical stelius fashion, I made a split second decision. I said people seem to be complaining about the cost of the popcorn, for example . So I'm not going to spend time trying to find a cheaper way of making popcorn. Let's take the popcorn out . Let's say there is no pop corn in this cinema. And see what happens . Stuart, I just wonder if Stellios in there called it a little experiment. Did it feel that to you having to carry it out? Yes. I mean all the businesses were we looking at any at given time were experimental. They were let's try it and see. And if it works great, we can scale it, and if it doesn't, we can hopefully gracefully back out. On the cinema's opening night, Stellios was wandering around wearing a sandwich board with the End of Rip Off cinema is nigh written on it and the whole thing portrayed as a David and Goliath battle easy cinema on the side of the cinema go er, standing up to the established industry, trying to bring prices down, and for that opening week all seats were just twenty pence . Angela, you were there filming. What was that opening night like? Well, it was a happy sort of chaos, Sean. I mean, the turnstiles didn't work, but Stellios handles it with great ease, you know, he just opened the turnstiles and said, nevermind. He's hands on. He makes it work. And you know, it was big families that turned up. They were delighted with their twenty p tickets. They were delighted to bring their own popcorn and save money. And it's a smelly old cinema. Stellios even went around with a bin bag at the end of the night collecting the rub bish, you know, so it launched but it launched Elio style . Stuart, how was the opening night for you as it was all on you to get it open and up and running? I would actually argue opening night is the easiest because you can't change anything at that point. You just got to accept it is what it is and go with it. Yeah, the reports at the time Easy Cinema saying there was two thousand four hundred tickets sold in advance of the opening and the press association was saying that it had this quote of an easy cinema spokesperson saying seen in the context of a small market like Milton Keynes with an entirely new online system of booking for consumers who appear to be planning at least a week in advance . Easy cinema considers such a volume of sales to be promising . Do you remember emotions of it promising Stuart, that it could actually be that you were onto something. You know, the hardest thing with any of the businesses we set up then, day one interest. You know there's going to be enthusiasm for it, but the reality is over the coming months is when you really find what works, what doesn't. Easy cinema's first low cost movie theater was open. It had caused a stir. It was off to this promising start. Stellios had already transformed the airline industry. So what could stop his new cinema business from taking off . So on Easy Cinema's opening weekend, the big movie everyone wanted to see was the sequel to the Matrix, Matrix reloaded. Good film. Well, there was a bit of a problem , sam. Guess what it wasn't being screened? It was not being screened at Easy Cinema. So the UK's film distributors had refused to supply it . Mark Baty told us why back then he was chief executive of the film distributors association and was among those who'd met Stellios to discuss easy cinema's plans. We were skeptical , I think from the outset We wanted it to work . There is no benefit for distributors in people not seeing the films they're releasing. So the only money that the film distributor receives is a sh are of the ticket price. That's it, which is why in principle , any film distributor is going to be keen to do business with any cinema operator because the only way they get any income at all is when tickets are sold to see the film that they're releasing. It just doesn't work to say, well, we will take a small share of the box office if the customer is paying twenty pence per ticket , the VAT would be four pence on that. You'd have sixteen pence. The distributor might get, you know , five, six, seven, eight pence. Well, that isn't a business. You know, if you're spending millions on the production of a big film millions more to release it with marketing and publicity and bringing stars in and booking television spots and posters and all the rest of it, that just doesn't work. That was where the clash came with the Easy Cinema concept. A bit tricky if you haven't got them on board, sir . Yes, that is very tricky. So Easy Cinema had opened showing what were called second run films, ones that had been out previously were not the very latest releases. And that would continue to be an issue for this low cost cinema model . As Stellios acknowledged when I chatted him. Not having blockbuster movies played a role in the whole outcome of the experiment, but I wanted to see whether people would go and watch the B movie of pick. The main thing to remember and I'm saying that nearly nearly sixty now, so and I was my thirties back then , I think it's difficult to ask someone who spends a fortune in creating the product to give it to you on the cheap . Is this you talking to your thirty year old self? Yeah, in the sense that it's difficult to ask for someone to give you their crown jewels, if you like, at a discount . So now I understand why they said no. What was it about Stellios in his thirties that meant that maybe you didn't want to understand that quite so much . I was in the frame of mind it's worth trying. It doesn't matter if it works, if it doesn't work. I've tried in the thirty five years I've been in business, I must have tried hundreds of business models. And if it doesn't work, we'll change it. When you were leaning on these film distributors to try and get them to give up their crown jewels, as you put it now, you were threatening legal action. I had launched a legal action against British Airways, so I said, why not? Let's try it. Taking on the big guys, that's what I call it, taking on the big guys. Do you think if you had a different approach with the distributors, it could have made any difference? I don't know. It's impossible to tell without trying . And that's my point. I mean , the big companies, you know, when they try to experiment with something, they hire another expensive consultant and they spend two years researching it. They spend more than I spend in doing the whole experiment and then decide no . You know, I put a budget aside a few hundred thousand pounds. I said let's try if it doesn't work . We move on. Stewart, in the end, that legal action was never actually pursued. And you'd mention some of the film distributors previously. Did you think they might hand over those crown jewels? I think what a few of them said in well, face to face sessions was probably slightly different from what came out in the press nay of the time. So some of them showed more interest than others, but there were a few there who were willing to look at it. There is a challenge to all this, which Helius didn't mention. Back then in those d ark ages of technology, when you get a film , it came in six, five, six big canisters, big reels of film which get dropped off by special courier on the day they endhad the team splicing them together, dadad lo them in the projectors, check them all that good stuff. So they were very expensive for the distributors to actually create copies. There was a limited number of first run s anyway. So if digital distribution was around then , maybe they would have looked at it differently. Now Angela, you were making this TV documentary. You went back months after the cinema's launch . What did you find? Oh, it was like the wild west Shawn. There was a bit of tumbleweed blowing across the plaza in Milton Keynes. It was very quiet. There wasn't much more to film. And I couldn't help but think that for all the publicity stunts, to cast a distribut ors as the bad guy in this movie hadn't really helped. You know, they're investors, they care about their premium product . And although it had caught the public imagination, I'm not sure it had really helped the business. You need a bad guy , though, don't you, I guess, if you want to pitch yourselves as a business that's doing something on behalf of those customers . Maybe not if you want to stay in business. No, maybe not. So eventually some first run films were shown at Easy Cinema. Shrek two , Sam, maybe after one of your big nights out. Very good. Tickets for that were four pound fifty each , not the cheaper prices that had been previously promised. So they rode back on the stance against popcorn and drinks as well . They did start selling them at one pound each, so still cheaper than at other cinemas. Stuart, why this change of heart then? Because it felt like that was a key part of the initial pitch that would make it very different and encourage people to reduce their own costs. But yet, there you were selling popcorn, snacks and drinks. Yeah, prepacked. We didn't have six people making popcorn in a machine behind and running, filling it up cups. The staff costs of doing that are huge , but having taken the team that we're going to run the cinema competitor cinema. We worked there for a night. All of that stuff takes an awful lot of time, an awful lot of management and an awful lot of cost. So the prepack was saying, okay, if there is demand there , we'll try and fulfill it in a different low cost way. Now customer reviews that we've seen show that some people really appreciated being able to visit the cinema without spending that much money. Others though found it well, these were a few words in the reviews atty , slightly seedy. Could have been one of your nights out One former customer told us often going to a cinema is a relatively spontaneous decision and the, lower cost of booking early is not the main consideration. So when it came to deciding to watch a film on the day, a recent blockbuster at a glitzy multiscreen was often much more appealing even given the higher cost. Stuart, I know you moved on to other projects. Not a surprise if you're working for Stellos, but do you know what customer numbers were like in the end? I mean, they weren't great, but they weren't terrible either. I think when we got good movies, we get better demand . When we get bad movies, we get low demand. So yeah, it was neither great nor terrible. In two thousand six, three years after the cinema had opened, the lease was up . And Easy Cinema chose not to renew it . In the press they blamed high rent levels but they didn't expand elsewhere, so that was it. Easy Cinema's low cost movie theaters were toast . Stuart , what do you put that down to? There's a thousand things would go through my mind, but I guess keywords would be not being able to convince the distributors that we could grow the market rather than cannibalize the market. Technology was still less prevalent than it is today. We think nothing of booking anything. Back then, that was maybe more challenging . And it wasn't, you know, the super wow brand new cinema like some of the competitors have, so just a number of factors, but yeah, it just wasn't to be. Was there a moment where you thought you might be able to get these blockbuster movies on the cheap ? Because it feels like that was always going to be impossible to get . You say on the cheap the logic we demonstrated to them was that if we can get three hundred people watching a movie perhaps across two screens fill the screens and charge on average of two or three pounds each. That's better than having seventy five people paying five or six pounds each or seven pounds each. So it's the average pricing model. Everyone talks about the twenty p, but it's like the airline not, all seats are twenty pounds . So I think there was more to it that maybe we didn't quite convince the distributors on, but you know, that's life. Let's hear what the man himself thought. I asked Elliot , why he decided to close the cinema . Well, I believe in honoring our obligations. So we signed up for three years, you have to stay until the end and then you give them notice and they take the cinema back and then they cl itos downed for good a few years later. So it was the wrong location as well. Let's be honest. But the Easy Cinema website did continue. So that whole DVD rentals by post , where are you at now with the Easy Cinema brands. Easy cinema. com went on to become a DVD rental service and now it's going to become an app for rating movies. In Greece where we found the right business partner is a streaming service. So easy cinema. GR is the Netflix of Greece . And the other example of location, location, location is stumbled across an abandoned movie theater in the middle of Athens. Remember I was born in Athens, my birthplace . And this is the most charming open air cinema under the Acropolis . So I got a bargain, I paid for it a couple of million euros, I think, and I said, We're going to find the solution. So after a refurbishment, we managed to find an operator , that is the people who actually streamed the movies to operate the roof terrace of this open air cinema profitably in the summer as an experience . So I believe that although technically the format might become obsolete , there will always be some locations and some venues , movie theaters that would do well if they sell the experience. In the years after launching Easy Cinema, you sort of moved to this different business model where you've effectively outsourced these various easy brands under license to business partners who then make royalty payments to your UK company, Easy Group , that's had an income of twenty eight million pounds in twenty twenty five, it looks like. How has that gone overall ? Well, it's the best business AD I've ever had to keep the brand in my own company and to form joint venture partnerships with other people to exploit the brand in different areas. I cannot be an expert in everything . And the secret is to find the right business partner for each industry. Easy hotel is the most natural brand extension. But since then we've tried so many different things . The other thing we do now is we invite established businesses to join the family . So easy cleaning is a long established manufacturer of killing products. Not exactly the most exciting business in the world . Unlike movie theaters and cinema that people get excited about , this is selling bleach . So very boring if you like, but still there is money to be made. And remember, I generate a nice income stream which I donate to charity. So for me, that's very important to remember that I give back to society with that income stream. The Nestellus Phantropic Foundation is a UK registered charity . The total amount donated by Me and Izigroup is one hundred twenty two million euros since twenty ten. So a lot of good has come out of this brand arrangement . You ever think how life might have been if you hadn't called that first business easy something ? You know, the working title of the airline was Stella , because back then I was in a very egocentric phase in my life that the first shipping company is called Stellius Maritime Stell Mar. Okay, I'm going to start an airline called it Stella . So God knows if it was called Stell Cinema in Stell Hotel where they would have been better or worse. Stellios Hadji anu there talking to me a bit earlier. Could have gone either way, Sam a different name. Good on. Good on. Right, Sam, why do you think then easy cinemas, low cost movie theaters ended up toast? Do I have to just pick one? Look, I think the travel thing's interesting, right? Because you use an airline to get somewhere. It's not the experience in of itself. So it being cheaper or less frills, it's not a problem . Cinema is an experience and I think he landed on that with the later business model with open air . People go to the cinema because it's their treat night . And so in removing all of the frills , you actually take away the joy of the experience. So I think for me that was probably the key factor. If I had to pick a second and third, antagonizing the incumbents is never a good idea and I love that he's got the fight in him to have a crack at it, but it was probably the Kaplunk block that you didn't want to pull out. And on this whole story, what's the lesson you take away from hearing the tale . I mean, look, there's two things. One is actually the positive. I think he is an incredible entrepreneur and entrepreneurs need to run lots of experiments. The key thing and he said this is knowing how much money you're prepared to burn on the experiment and understanding at the start what success will look like. And I think he took that lesson, he turned it into something that actually did make him money. I think the second thing for me is around thorough market research if you really do want something to work. And the unit economics had to be incredibly strong for you to have really high level of confidence that you could sell the tickets at those lower prices and still fill the cinema because people will only watch that blockbuster once . And so if they choose to watch it in your cinema and they're paying a third of the price, you can totally understand why the distributors don't want you to watch it in that cinema, they want you to watch it in the one down the road that they're making more money from. So that would be my two key takeaways. There's something in it as well about if it's an experiential thing that you're going for. When you pay twenty p for it, does that take the shine off it a little bit? Well yeah, people go on dates, don't they? So I mean, the cinema is a classic date night. And if your date night it's like the equivalent of saying let's go out for dinner and I'm going to take you to Mickey D's. It's a challenging thing to still make into a romantic endeavor. Sam, thank you very much, Samuel as ever, and thank you as well to our guests to Stellios, to Stewart Niblocker and Angela Chan as well. Special thanks to listener, Max Rhodes who suggested we cover easy cinema and you can do the same. Email us toast at bbc. co dot UK we always like to hear your ideas. Next time on toast Paper Chase. It was a much loved retail chain that made cards and st ationery fashionable . So why did all its stores fold