Going to the movies has never been easier. Not in the US, not in Ireland, not in the UK, nor, indeed, in most of Europe. (Ireland ranks third on a European league table of number of multiplex screens per million, just ahead of the UK, and behind Luxembourg and Belgium). Nor, it seems, have movie houses ever been nicer places - queues are shorter, seats are more comfortable and the cost of tickets is rising more slowly than inflation.

However, for cinema group operators - and their landlords - life is getting tougher in the UK and US. A report from property consultants King Sturge, entitled Screen Wars, highlights the extent to which cinemas have become a new property sector within the past five years. But rising competition between operators is beginning to hit the industry's bottom line and that will constrain returns for its landlords.

"It looks as if it could be a bumpy ride for the cinema industry in the short to medium term," King Sturge noted. "In certain areas of the country there is over-capacity in relation to current consumer demand."

Earlier generations of theatre developers were freeholders of property but modern sites are mainly leasehold. In the UK, according to King Sturge, this has driven down investment yields to 6 to 7 per cent from 9 to 10 per cent in the early 1990s. Whether yields have much further to fall is in question.

Data from Screen Digest, an industry magazine, tells much of the story. In the UK the number of screens grew by nearly 20 per cent to 44.8 per million of population in 1996 from 37.9 per million just two years earlier.

In the US the number of screens grew to 128.3 per million of population from 113.5 per million at the end of 1996.

Despite the rise in the number of US screens, the number of tickets sold there fell 0.7 per cent in 1999. In the UK ticket sales were 2.8 per cent above those in 1998.

France, Italy and Germany, however, all experienced a drop in total ticket sales in 1999, the first decrease since 1994-95.

Allan Hardy, managing director of Screen Digest, said the invention of the multiplex cinema, the larger venues with many screens, had led to a renaissance in movie-going in the UK and elsewhere. In the UK, cinema attendance had been in a steep decline from the early 1950s onward, according to data collected by King Sturge, with the decline only halted in the mid-1980s, coinciding with the arrival of the first UK multiplex complexes.

"Cinemas were so disgusting, people wouldn't go," Mr Hardy said. However, multiplex cinemas, which could offer first-run films on several different screens simultaneously, greatly broadened choice and improved the experience for movie-goers.

However, the phenomenon has been a victim of its own success, in the UK and elsewhere, as witnessed by the Screen Digest data; each new screen is progressively attracting fewer viewers.

"You might think this means that people are going to stop building new cinemas," Mr Hardy said, "but, no, they are going to build even more."

King Sturge said 29 new cinema multiplexes were under development in the UK, with more being built in Europe.

According to analysts, scale is the key to the success of any chain. For operators, more screens under an operator's control means greater ability to bargain with distributors. That bargaining power translates into the ability to obtain exclusivity on first-run films, as well as lower charges for film rental.

King Sturge questions the strategy of some of the larger chains, many of which are US-based, in their push into Europe. For one thing, Europe has higher operating costs and therefore higher ticket charges.

"One should question some of the basic assumptions that had driven the Europeanled expansion," King Sturge said. "Our film visiting propensities are not as high as in America." Some large US chains were already facing financial difficulties, he added.

Moody's Investors Service recently downgraded to one of its lowest speculative grades the credit ratings of United Artists Theatre Company, saying: "The company's future is tenuous at best, and the very real possibility of a near-term bankruptcy filing due to tightening liquidity in the face of continued underperformance by its ageing theatre network."

Russell Solomon, senior credit officer at Moody's, said United Artists' problems were endemic to the industry.

"Oversaturation is the problem," he said. Moreover, some theatres were simply too big to be economic. "The optimal performance is in the 12 to 18-screen range," he said. "We think 24 screens is too big."

For landlords, according to Mr Solomon, the problem is that many cinemas cannot be converted for other uses. Cinema operators in the US signed unusually long leases - 15 to 20 years - and cannot extricate themselves from uneconomic sites. "At least a third of the (US's) 35,000-ish screens could go away tomorrow and the industry would be better off for it," he said.