Reflecting on the Business Failure

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 toasting I'm the BBC Business journalist Sean Farrington Resident entrepreneur Sam White, Sam, as you well know, has no idea what's coming up to her response and conclusions they're off the cuff think 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. G'veot a few questions for you. Do you like going to the cinema? I do. Good. Have you ever been to Milton Keyes? I have been to Milton Keyes, although not to Milton Keynes Cinema. Oh well What were you doing back in may two thousand three I was probably out drinking in Milton Keeenes 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 Kenes relatively few staff. No popcorn sold. No snacks, It was painted bright orange. It was a new child in a growing family of brands operated under one specific name that had been very successful in the airline industry Oh Virgin No it's not it's easy Jet. Y. So yeah, this is the easy Group, easy jet. There were businesses galore over the years under that easy name, the most famous parent, of course, being Ey Jets So this was called Easy Jet cinema? No. You aren't getting the marketing team. This is easy cinema. You were nearly there. Easy cinema. Yeah. 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. we're going to hear that interview in a bit. But first, let's bring in our other guests Angela Chan is prorofessor of Creative Industries at Royal Hollllowway 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 Tast Hello Sean, Hello, Sam. Hey. And because we've got Angela on, we also had to get Stewart Nibblock on she was following Stuart around with a camera Because he was then Ey Group's 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 T 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 Cinemas were starting to get pricey. We've seen Ciny World arrive, they were supersizing your popcorn. And the home market was still DVD's 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 you know, this was a particular moment in time that it's hard for us to get touch with. You know, we didn't have smartphones yet and online purchasing wasn't normal. So what Stelliios was doing was really quite radical What was it that made you think the launch of Ey Cinema might be good for a TV documentary We were making a series called Trouble at the T 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 you know, 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 Ey Cinema was of 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 it had all the makings of a great film, but it wasn't quite what he expected it to be And Stuart, what was it like working for him? You'd already launched easy Rnter car for Stellios,n't you Yes and easy money and a couple 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 Bing so great at kind of turning things upside down Challenging as well. you know, he had his difficult moments. he was It never shy of offering feedback. really thtly enjoyable period of life for me and for everyone who' 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 both like most of the start upps, we would do them at a kind of crazy pace So yeah, you had to pretty much do everything from finding the recruiting, the initial talks with its 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 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 mortipplexes to come. In some ways, revived cinema going across the country. And Stuart, 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 TLCs the very polite way of putting it 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 usings yield management to change pricing. pending in demand. So in other words cold wet Tuesday, he 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 onnline bookings to drive out costs, so no long queues on the internet print their own ticket and scan it in. We didn't have anyone formally checking tickets. and No selling food or drinks, a stripped down model to stripoe course, 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 flight 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, and a lot now You would see empty seats on a cold wet Tuesday afternoon, you ten people are 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? twentyet. twenty twenty p a ticket. rightight? 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. Youve got the overhead cost. 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 Stuart, 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 interternet cafe business, we knew from EasyJet raernt a car that people were willing to use online channels to bot FA saved the money and B made it easier than you know sitting waiting in a call center or joining a queue A bit of background on Stellios for you, Sam. S Stellios Hajioanu, 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 publicly listed company worth well over a billion pounds. I guess you only need one of those. Give you a better of confidence. You do, but where would the fund be in that? True, true. Well, let's hear a bit from the man himself. Stellios told me the idea for easasy Cinema started after he spoke with someone running Odean cinemas in the UK They questioned whether the easyJet business model might work The movies EasyJet took prices of flying in Europe from one hundred pounds to fifty pounds in round numbers, onene way tickets more than Twice as many people decided to take a flight So the overall pie, if you like IsyJ found customers and Ryanir found customers without needing to take away the customers from British Howers The business of going to a movie theater is similar to an airline in a way. It has a fixed course, it has a number of seats You have to book them, you can choose a time and a location 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, rightight? 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 theatater there, cheap available. You know, Ouddum told me, you can rent this cinema for three years for a relative rural rent to test all these weird and wonderful things and theories you have The other thing I realized is It's extremely P are friendly. People are fascinated by movies. you know, the whole lamor' business of watching movies And therefore, I think pounds for pounds. That little experiment in Milton Keines generated more free PR for us than any other experiment have 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 ba publicity. brand always emerges stronger. The other thing I did perhaps in a typical Stellius fashion I made a split second decision. I said People seem to be complaining about the cost of the poporn, for example So you know, I'm not going to spend time trying to find the cheaper way of making popcorn. Let's take the popcorn out Let's say there is no popcorn in this cinema and see what happens , I just wonder Stelleos in there called it a little experiment Did it feel that to you having to carry it out Yes. I mean, all the businesses we were looking at any given time were experimental where let's try it and see and if it works great, we can scale it and if it doesn't, we can Hopefully grracefully back out on the cinema's opening night Stelios was wandering around Wearing a sandwich board with the end of Rrip offff cinema is nigh written on it And the whole thing portrayed as a David and Goliath battle, easy cinema onn the side of the cinema goer, standing up to the established industry, trying to bring prices down. And for that opening week, all seats were just twenty pents 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 Stelios handles it Ease, you know, he just opened the turnstles and said, neverever mind, he 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 rubbish You know, so it launched But it launched Eellio style. Stewart, How was the opening night for you as it was all on you to get it open and up and running I would actually arue opening that is the easiest part because you can't change anything at that point. You just got to accept it is what it is And Gorw ye the reports at the time Easy Cinema saying there was two thousand four hundred tickets sold in advance of the opening and Press association was saying that had this quote of an Ey 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 being promising Stuart that he 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. Ey 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 taking off On Easy Cinema's opening weekend, the big movie everyone wanted to see was the sequel to the Matrix Matrix reloaded. Good film It was a bit of a problem, sam I Guess where it wasn't being screened was not being screened at Easy Cinema So the UK's film distributors had refused to supply it Baty told us why. Back then he was chief executive of the Film Distributors Association was among those who'd met Stelios to discuss Ey 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 share 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 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 pens. 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 cameame with the easy cinema concept bit tricky if you haven't got them on board, s 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 to him Not having blockbuster movies play a role in the whole outcome of the experiment, but I wanted to see whether people would go and watch the B movie The main thing to remember and I'm saying that nearly Nearly sixty now so And I was my thirtest back then I think it's difficult to ask someone who spends a fortune in creating their Proucts to give it to you on the cheip 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 Thats maybe you He didn't want to understand that quite so I was in the frame of mind It's worth trying. It doesn't matter if it works, if it doesn't work after try In the thirty five years of've been in business, I must have tried hundreds of business models. And if it doesn't work, we 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. But you were threatening legal action? I had launched a legal action against British Hers, 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 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 speent two years researching it. They spend more than I spend doing the whole experiment and then decide no 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 met some of the film distributors previously. Did you think they might hand over those Crown jewels I think what a few of them said and Face to face sessions was probably slightly different from came out it and Press the timees So some of them showed more interest than others But there weren't a few there who were willing to look at it. But there is a challenge to all this, which Cilius didn't mention then in those dark 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 the end h of the team splice them together, dada load 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 readals anyway. 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 shhn. There was a bit of tumbleweed blowing across the plaza in Milton Kenes. It was very quiet. There wasn't much more to film I couldn't help but think that For all the publicity stunts To cast the distributors 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 helpelp the business You need a bad guy though, don't you, I guess, if you want to pict yourselves as a business that's doing something on behalf of thoseose 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 too. maybe after one of your big nights out Very good. Tickets for that were four pound fifty each not the cheaper prices that have been previously promised So they rode back on the stuance against popcorn and drinks as well. did start selling them at one pound each, so still cheaper than at other cinemas Stewart, why this change of heart thing? 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 are selling popcorn, snacks and drinks Yeah, pre packed. We didn't have Six people making popcorn in a machine behind and running, filling up cups The staff costs of doing that are huge But having taken the team that werere going to run the cinema to a competitive cinema, we worked there for a night All of that stuff takes an awful lot of time and 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 are a few words in the reviews. Tatty. slightly seedy C 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 multi screen was often much more appealing even given. the higher cost Stewart I know you moved on to other projects, not a surprise if you're working for Stellios, 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 wass neither great nor terrible. In two thousand six, three years after the cina had opened the lace was up. and Ey Cinema chose not to renew it In the press, they blamed high rent levels They didn't expand elsewhere. So that was it. Easy Cinema's low cost movie theaters Wh Toast Stewart. What do you put that down to There's a thousand things that would go through my mind, but I guess keywinds would be been able to convince the distributors that we could grow the market rather than cannibalize the market. Technology was still prevalent than it is today 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 J 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 go three hundred people watching a movie, perhaps across two screens fill the screens and charge an average of two, three pounds each better than having seventy five people paying five or six pounds each or seven pounds each. So it's the average pricing model. like everyone talks about the twenty p, but it's like the airline, not all seats are whenoney bones So you know, I think there was more to it that maybe we didn't convinince the distributorors on, but, you know, That's life Let's hear what the man himself thought. askked Elliios why he decided to close the cinema. Well, I believe in honoring our obligations. So we sign 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 close it down 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 Ey Cinema brande? Eycinema. 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 part is a streaming sers So isy cinema.gr is the Netflix of Greece. The other example of location, location, location. I stumbled up across an abandoned movie theater in the middle of Athens. R remember I was born in Athens, my birth lived And this is the most charming open air cinem under the Acropolis So I I got a bargain, I paid for it couple of million euros I think and I said we're going to find this solution So after the refurblishment 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 believe that although technically the format might become obsolete, There will always be some locations and some V news, movie theaters that would do well if they sell the experience In the years after launching Easy Cinema You sort of have 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, I think it's the best business to say the have ever had keep the brand and my own company and to form Join 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 Ey 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 their family. So easy cleaning is a long established manufacture of cleilling products Not exactly the most exciting business in the world. unlike movie theaters and cinema that people get excited about This is selling bleach. 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 without income cent. Thestellisil Anthropic Foundation is a UK registered charity. The total amount donated by M and Ii Group 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 Stell Air Because back then I was in the very egoc centric phase in my life that The first shipping company is called Stell' Maritime, Stel Mar. Okay, I'm going to start an airline, call it St there. God knows if it was called Stal Cinemine el hotel where they would have been better or worse Stellios, Hajiduanu there talking to me a bit earlier. Coulda gone either way, Sam different name. Gooda done. Ga done. Right, Sam, why do you think then Ey cinemas's, low cost movie theaters ended up toast? Do I have to just pick one I think the travel thing is interesting, right? because you use an airline to get somewhere. It's not the experience in of itself. So it being cheaper or you know 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. 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 kplunk block that you didn't want to pull out. And on this whole story, what's the lesson you take away from hearing that 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, you know, 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 a 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. 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 nights 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 endeavour Sam, thank you very much, Sam, what as ever And thank you as well to our guests, T Stellios, to Stuart Niblp there 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 host at bbc. co. U. We always like to hear your ideas Next time on Tast, Paper Chase. It was a much loved retail chain that made cards and stationery fashionable. So why did all its stores fold Toast was presented by me, Sean Farrington and produced by John Douglas. You can find all our previous episodes on the Sice Bread feeed on BBC Sounds. Toast is a BBC Audio North production for radio four and BBC sounds Hello, it is Danny Robbins here for years now on Uncanny. We have explored real people's potentially paranormal experiences But one thing that listeners have often asked me is why don't we look at supernatural cases from the past You asked and we listened. ourur new series, Uncanny Cold Cases takes a deep dive into some of these stories from the mostost haunted House in England the original UFO abduction case Can we make sense of these strange stories that have haunted history Uncanny Cold cases. Listen on BBC sounds