It has been a source of irony that even as some Saudi films have been attracting global interest in recent years – with the likes of Wadjda and Barakah Meets Barakah being feted at international festivals – the films themselves could not be publicly screened at home.
That should soon change, following the announcement in December that the General Commission for Audio-visual Media will start licensing cinemas. The move, when it came, was widely anticipated, with industry executives having already begun to court the Saudi market. A delegation from the US’ National Association of Theatre Owners (Nato) had been in Riyadh just a week earlier.
Since the announcement, international operators have lost no time in setting out their ambitions. On the day, UAE-based Majid al-Futtaim, which owns the Vox Cinemas brand, said that it was planning to expand into the Saudi market “in the months ahead”.
Just a day later, the US’ AMC Entertainment Holdings announced an initiative with the local Public Investment Fund (PIF) to develop movie theatres in the kingdom, with AMC’s chief executive Adam Aron describing it as “a lucrative business opportunity”.
All this fits in with the wider reform agenda of Crown Prince Mohammed bin Salman. Whether the efforts prove to be a success depends on how the political and social environment evolves in the coming years, but the economic arguments for developing the leisure sector look clear enough.
There is certainly little doubt about Saudi demand for watching films. In a report issued in 2015, two years before the cinema ban was lifted, consultancy firm PwC predicted Saudi Arabia would have the highest film market revenue growth in the Middle East between 2014 and 2019, driven by streaming services.
Such forecasts fit neatly with the government’s own targets. Under Vision 2030, it is aiming for household spending on cultural and entertainment activities to increase from 2.9 per cent of GDP, equivalent to SR75bn ($20bn) in 2016, to 6 per cent by 2030.
What that might mean in cash terms depends on the growth rate of the wider economy. If it was to grow at a steady 1.5 per cent between now and 2030, the country’s GDP, measured at constant prices, would reach about SR3.15 trillion, implying SR188bn of entertainment and cultural spending by 2030.
Riyadh estimates cinemas could contribute SR90bn to the economy by 2030, creating 30,000 permanent jobs and 130,000 temporary ones. Market research agency Euromonitor says the value of personal and recreational services in Saudi Arabia was $15.2bn (SR57bn) last year, and could rise to $17.2bn by 2021, not including cinemas. The tourism industry should also make a substantial contribution.
The World Travel & Tourism Council (WTTC) estimates the tourism sector contributed SR78.8bn to Saudi GDP in 2016 and that should rise to SR117.5bn by 2027.
“In broad terms, tourism is clearly going to be a major part of the Vision 2030 agenda,” says James Reeve, chief economist at local bank Samba. “Religious tourism offers the most potential given the kingdom’s ‘USP’ of the two holy sites. The authorities are keen to leverage this as much as possible by encouraging religious pilgrims to visit the rest of the kingdom and spend money.”
Ensuring the tourism industry meets its potential will require hefty investment, but that appears to be forthcoming. Regional projects tracker MEED Projects estimates there are now $6.6bn-worth of hotel projects under way in Saudi Arabia, alongside $365m-worth of museum and library projects, $249m of theme parks, $123m of sports facilities and $15m of theatres. In addition, some $2.7bn is being spent on shopping malls, many of which will feature multiplex cinemas in the coming years.
These figures exclude some major schemes recently announced by the government on which work has yet to get under way. Among them are the Red Sea Resort on a site north of Yanbu, announced by the PIF in July 2017. Work is due to start in 2019 and the first phase will be completed by late 2022. The PIF says the scheme will create 35,000 local jobs and contribute SR15bn to GDP.
The fund is also developing an entertainment hub near Riyadh called Qiddiya, with an estimated value of $4bn, and the vast $500bn Neom project in the northwest, which will include an entertainment component.
It also announced in September it was setting up an entertainment investment company with an initial capitalisation of SR10bn. The PIF claims that, by 2030, the projects supported by this investment company will serve more than 50 million visitors, create more than 22,000 jobs and contribute SR8bn to the economy.
As for the rest of the leisure and entertainment sector, there is plenty of potential. Now, how the plans are executed is key. Jason Tuvey, Middle East economist at Capital Economics, notes that Saudi Arabia has “a patchy record when it comes to fulfilling megaprojects.” This is less applicable to cinema, however, and is unlikely to dent enthusiasm among cinema operators.
Nato chief executive John Fithian spoke for his industry when, on 11 December, he said: “We anticipate that the Saudi market will grow quickly. The growing and young population of the kingdom is hungry for the cinematic experience.”