KN92073

KEY NOTE LEISURE AND RECREATION : December 2003

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This report covers: leisure, sporting activities, keeping fit, games, cinema, theatre, gambling, in-home leisure, television, radio, newspapers, magazines, books, reading materials, home viewing, home listening, eating, drinking, short breaks, tourist attractions, DIY, home improvements, gardening, catering, leisure goods, leisure consumer, ten pin bowling, music,

Companies covered include: Advance Publications Incorporated, Ambassador Theatre Group, AOL Time Warner, Apollo Cinemas, Apollo Leisure Group, Arena Leisure, Bertelsmann AG, Black & Decker, BBC, BBC Worldwide, Robert Bosch GmbH, British Sky Broadcasting Group, Burger King, Camelot Group, Cameron MacIntosh, Cannons, Capital Radio, Carlton Communications, Cine-UK,Chrysalis, City Centre Restuarants, Clear Channel, Compass Group, Coral Eurobet, Daily Mail and General Trust, DTV Services, EMAP, EMI, Enterprise Inns, Esporta, Focus Wickes, Gala, Gondola, Granada, Guardian Media Group, GUS, GWR Group, Hilton Group, Hollinger International, Imperial Chemical Industries, Independent News & Media, Johnston Press, Kingfisher, McDonalds Restaurants, Mitchells & Butlers, National Amusements Incorporated, The National Magazine Company, The News Corporation, Newsquest Media Group, Nintendo Company, Northern & Shell, Odeon Cinemas, Pearson, Pub Groups, Punch Taverns, The Rank Group, The Really Useful Group, SBC International Cinemas, SMG, Stanley Leisure, Sony Corporation, Sportech, Stanley Leisure, Tesco, The Tote, Tower Records,Trinity Mirror, Viacom, Virgin Group, Vivendi Universal, UCI (United Cinemas Interantional), UGC Cinemas, The Walt Disney Company, JD Weatherspoon, William Hill,Wimpey Interanational, Whitbread, Wyevale Garden Centres, Yum! Brands Incorporated,

EXECUTIVE SUMMARY

INTRODUCTION

The leisure and recreation industry comprises a number of highly attractive markets, since virtually everybody has some leisure time, and there is an increasing desire among many to make that time as enjoyable as possible. However, players in the various leisure-related markets have to work hard to compete for their shares of the leisure pound. During periods of economic recession, this is no easy task, as most consumer spending is highly discretionary and people can simply decide not to go to the theatre or a restaurant, or forego buying the latest development in home entertainment.

There is a high degree of personal identification associated with many leisure-related activities; i.e. people often identify strongly with their choice of music, film, books, decorating style and even the pubs and restaurants they frequent, which many see as defining 'who they are'.

MARKET SIZE

Total consumer expenditure on the various leisure and recreation activities analysed in this report was worth a combined £119.23bn in 2002. This represented 18 percent of all consumer spending, a proportion that remained remarkably stable over the 1998 to 2002 period under review. Growth patterns across the different markets that make up the leisure industry have, however, diverged widely. The highest growth rate was seen in sports participation, while home listening was the slowest-growing market.

MARKET SECTORS

The broad range of markets that make up the leisure and recreation industry are diverse in nature and performance. They fall into two broad categories: leisure at home and leisure outside the home. The `leisure at home' markets include home viewing, home listening, reading, home computing and electronic games, and DIY and gardening; the `leisure outside the home' markets include eating out and drinking out, gambling, cinema and theatre, sport and exercise, and miscellaneous commercial entertainments, such as spectator sports, live concerts and shows, nightclubs and late-night bars, tenpin bowling and cue sports.

MARKET TRENDS

In the home, television broadcasting output remains highly important, given the amount of leisure time that is spent watching TV. BSkyB is still the only significant player in the pay-TV market. DVD (digital versatile disc) technology has created one of the fastest-growing markets ever in the leisure industry and sales of DVDs have now overtaken sales of video cassettes. Listening to music remains as popular as ever, although the industry continues to be adversely affected by the popularity of illegally downloaded music. The electronic games market is currently booming, as titles become increasingly sophisticated and their release is accompanied by high-profile marketing.

The sectors that make up the reading market have experienced very different growth rates in recent years. Book sales have been booming, reflecting the increasingly sophisticated marketing strategies used by the publishers, with titles that have links with films and television series faring particularly well. The newspaper industry has seen declining consumer revenues, owing to lower circulations, a price war and a downturn in display advertising.

DIY and gardening has become a dynamic market, as interest in the home and garden has increased and people spend more time at home, either relaxing or entertaining friends and family. Style and makeover television programmes have contributed to the growth of this market.

Outside the home, eating out and drinking out continue to be popular, with much of the growth in pub sales being driven by food, rather than alcohol. Growth levels at some of the fast-food chains are beginning to decline, as people are losing interest in their highly standardised menus.

Progressive deregulation in the gambling industry has already changed the consumer experience in venues such as casinos, which are now able to sell alcoholic drinks on the gaming floor and to offer live entertainment, such as jazz music.

The UK cinema industry is currently booming as more people visit the growing number of multiplex cinemas, which screen a broad range of films. Much of the commercial theatre industry is currently struggling, partly as a result of the declining number of overseas visitors but also because the high ticket prices commanded in some sectors are beyond the means of most consumers.

In the sports participation sector, there has been a decline in expenditure on competitive sports, partly due to the shrinking voluntary sector, which is important to sport at the grassroots level. The once-booming private health clubs business has begun to weaken, reflecting market saturation in some areas and a loss of some key target markets.

CORPORATE DEVELOPMENTS

During 2002 and 2003, the global leisure industry has continued to step back from its earlier strategy of creating far-reaching conglomerates stretching across a wide range of entertainment-related sectors; for example, Vivendi has announced that it is looking for a buyer for its Universal Hollywood film studio business, as well as for its television and cinema chain operations. This has been accompanied by a trend towards increased specialisation; for example, Six Continents has demerged its hotels and pubs/restaurants businesses, creating Mitchells & Butlers as the UK's leading restaurants/pubs group in terms of numbers of outlets.

Changing consumer tastes and fashions have affected the direction some industry players have taken. McDonald's has been forced to slow down its new restaurants programme and has introduced healthier options onto its UK menus in an attempt to bolster sales. Camelot, the operator of the National Lottery, has experienced lower ticket sales, despite its attempts to keep the business fresh by introducing new games, improving its marketing and extending its distribution channels.

The level of interest in the leisure industry shown by private equity firms has risen sharply, and has often resulted in management buyouts (MBOs). Sectors in which there is currently the greatest level of activity include private health clubs, cinema chains and betting operations.

The actual or proposed relaxation of the regulatory framework affecting industries such as the media and gambling has raised the interest of some foreign-owned companies. The US company Clear Channel Communications has stated that it is interested in increasing its UK radio assets, while a number of US-based gambling operators, such as MGM Mirage and Kerzner International, are already testing the UK market in anticipation of the deregulation of the casinos sector.

Profiles of a wide range of leading players in the UK leisure and recreation markets are provided in Chapter 4 of this Market Review -- Competitor Analysis.

THE FUTURE

The forecast slowdown in consumer spending is expected to have a considerable impact on the leisure industry, although the effect will not be spread equally between the various markets. Most markets are forecast to demonstrate reasonably healthy growth, but the combined growth of all markets over the 5 years to 2007 will not match the growth achieved over the 5 years to 2002.

Key Note forecasts that the fastest-growing market will be home computing and electronic games, where much of the growth will be driven by games software. The worst-performing markets are likely to be home listening and spectator sports, with slower growth also predicted for other commercial recreational and cultural services (such as concerts and nightclubs).

The proposed further deregulation of the gambling industry could change the face of casinos in the UK, if the Government gives the go-ahead for Las Vegas-style gambling and entertainment complexes.

TABLE OF CONTENTS

Text © 2004 Key Note

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Last updated by Amanda Porteous February 2004