It's Leicester's newest cinema but it needs a £250,000 public money bail-out to stay afloat - so is Phoenix Square just a money pit? Adam Wakelin finds out.

You've got superb screens, great films, the best 3D, some of the cheapest tickets in town and you open by showing Avatar, the biggest blockbuster of all time.

The set-up is dazzling. Yet by the third reel your guaranteed box-office draw is playing to a nearly empty house and talking of laying off staff.

What has gone wrong with Phoenix Square?

Screenings, as the Mercury has reported, are just 17 per cent full; blowing a hole in the £1.7 million budget that will take a quarter of a million pounds from the public purse to plug.

It's the £250,000 question: How can a cinema with so much going for it have so few going to it?

Ted Cassidy, chairman of charitable trust Leicester Arts Centre Ltd – which runs the cinema – and Phoenix managing director Andy Jones have their theories.

A global economic downturn, cinema attendances nationally in freefall since March, and being marooned in a struggling Cultural Quarter – all are put forward as explanations.

But do those excuses hold water? And, if they don't, should we really be asked to throw good money after bad?

Athena – the wedding, corporate and entertainment venue in the old Odeon nearby, is turning a decent profit without taking a brass farthing from the tax-payer. Art-house cinemas in neighbouring Derby and Nottingham don't have the begging bowl out. In fact, they appear to be doing rather well.

So, what's the real story here?

That 17% audience figure is not as dire as it first seems, says Steve Mapp, chief executive of Nottingham's Broadway Cinema.

Most cinemas – even the mass market multiplexes – don't expect to fill many more than one in four of their seats.

At The Broadway, they are running at 26% capacity – well above Phoenix Square's break-even figure of 21% – but there is a reason for that, explains Steve.

The Broadway has had the best part of 20 years to build an audience and it is surrounded by honeypot bars, cafes and restaurants that make a trip to the cinema more enticing.

Derby's Quad – which opened in 2008 and pulled in 10% more visitors than anticipated during its first year – is blessed with a similar abundance of desirable neighbours.

"You can't underestimate location and longevity," says Steve.

Phoenix Square's claim to be at the mercy of a UK-wide cinema slump is valid, according to Quad boss Keith Jeffrey. It too has been hit by the downturn.

There is nothing wrong with the Phoenix's mixed bag of intelligent Hollywood and niche arthouse movies, believes Keith.

In Alan Alderson-Smith, the cinema has one of the best film programmers in the business.

The drop in ticket sales is down to the recession and "a dearth of quality films" that were available to show during the months of May, June and July.

"You have to keep faith with cultural organisations, especially brand new ones," says Keith. "You can't just create something and expect it to be delivering massive numbers, particularly in the current economic climate."

Steve echoes Keith's plea for Phoenix Square to be given the time and the financial help to succeed. Both, though, may be in short supply.

It looks unlikely Leicester's city councillors will refuse to bail out the Phoenix next month.

Do that and they will effectively be filing the £100 million-plus Cultural Quarter project under E for expensive mistake.

Throw a dust-sheet over your digital media centre and Leicester's "South Bank" begins to look more than a little bankrupt.

In 12 months' time, however, with frontline services facing the axe and howls of outrage ringing loudly in their ears, our elective representatives may be considerably less willing to write another cheque.

Things will have to be turned around. And fast.

Take a stroll through the Cultural Quarter and you quickly see how difficult that's going to be.

Aside from the two big ticket buildings, Orton Square and the loft-living conversions, it is what it was – a few stringy-straggly streets of unlovely industrial units and weeded-up yards given over to car parking.

Smart, arty types aren't swapping bright ideas and business cards.

Instead, an old man in a tatty overcoat rummages through a skip as though it's the most natural thing in the world.

The buzz of bars and trendy eateries – for now, at least – is conspicuous by its absence.

And here's a thing. For a six-storey building that's half bright green, Phoenix Square does a remarkably good job of hiding its light under a bushel.

None of the street signs or banners strung from lamp posts – beautifully designed, referencing "film and digital media, living, office studios and workspace" – actually tell you that a cinema is in the vicinity.

The entrance is so hard to find it should really lead into the Lord Lucan Lounge.

A week of (admittedly bad) headlines and TV appearances should have done wonders for Phoenix Square's public profile.

Yet a quick straw poll of shoppers by the Mercury on Granby Street – less than half a mile away – found that many didn't know where the Phoenix was. More worryingly, about half didn't even know what it was.

Sometimes you can be too clever, a little too cultured. Sometimes, it pays to put a big sign above the door stating the obvious.

You're a cinema, one that out-specs every other place to see a movie in Leicester. Let drivers on the ring road know it – in flashing neon if necessary.

Chairman Ted is not entirely convinced. Phoenix Square is much more than a cinema, he says. It's a multi-media production hub.

But cinema attendance should provide 43% of Phoenix Square's income. The cafe-bar, which obviously relies on people coming in to see films, is budgeted to bring in another 22%. They are the bedrocks on which everything else rests.

"Does Quad have a 'cinema' sign above the door?" muses Ted.

"It does actually," says his managing director. "And it's bright pink."

Ted concedes it might be worth considering.

The nearby Athena is a very different venue, but it has continued to thrive in the absence of passing trade.

The fact that the further development of the Cultural Quarter has hit the buffers of recession doesn't seem to have undermined its business at all.

So what's the secret of its success?

"You need to understand your market," says a manager who, rather unconventionally, requests to be quoted as a Servant of Athena.

"Whether Phoenix Square or Curve understand their market isn't for me to say."

Athena targeted its core clientele at the outset, he explains. It provided a product that was second-to-none and it got them coming back for more.

Word-of-mouth has been more important than fancy Dan marketing, says the Servant of Athena.

When some customers complained about a lack of free parking, Athena secured spaces nearby. Problem solved.

It is the kind of can-do attitude that routinely puts 1,500 posteriors on its seats and has Athena fielding a record number of availability enquires.

"Operating a venue like this is not simple, but it is simple to do the simple things well," says the Servant of Athena.

"We don't try to be clever or do things we don't need to do."

Understanding your audience is crucial, agrees Steve, from the Broadway.

You need to know what they want, who you're missing, and what you need to do to get them through the door.

Sometimes, you also need to compromise your highest ideals.

The Broadway caught a bit of flak for screening Sex In The City 2, but it kept the wolf from the door while the country's blokes were cracking cans in front of the World Cup.

One of the most successful things Quad did, says director Keith, was have cut-price kids' screenings.

That got parents, who perhaps weren't obvious Quad customers, over the threshold. They liked what they saw, picked up a brochure, and came back for more.

Phoenix Square has already taken those ideas on board and is running with them, reckons managing director Andy.

A mass mail-out to schools before the summer holidays brought in a bumper audience of families to see Toy Story 3 at a reduced price.

A family cinema club is going to be launched on the back of that success. Mercury Mondays – a two-for-one ticket deal run in conjunction with this newspaper – has also proved popular.

Phoenix Square has done extensive marketing and trawled its bookings database to see who is coming and who isn't, Andy explains.

Roughly 80% of the old Phoenix Arts audience has been retained. The average attender is aged 42 and middle-class. The people they are missing most of all are students, says Andy.

To bring them in, the cinema will be doing promotions on campuses, it will be screening films in the student union bars, and it will targeting so-called "student champions".

They will get a deal on tickets with the hope that they tell their friends just how good the Phoenix is.

If the film distributors play ball, Andy also wants to scrap the surcharge on 3D glasses, effectively another reduction in the ticket price. He is also keen to scrap the online booking fee.

A south Asian cinema season in the autumn, reaching out to another lucrative but notoriously difficult to engage demographic, is another plan.

The marketing is going to become more direct and will focus strongly on the fact that Phoenix Square is the best cinema around, says Andy.

Ted, particularly keen to promote the Phoenix as a production facility, wants to build on good work already done with schools, colleges, community and minority groups.

A film made by local Somali kids brought in an audience of 250 for its premiere.

"We asked them why they don't use us on a daily basis," adds Andy. "They told us they didn't have the money."

The aim is to drive down costs and negotiate deals to change that.

The lack of on-street parking is an issue for some, says Ted, who is pushing for restrictions to be eased. "Everywhere you walk there are double-yellow lines," he sighs. "The whole area is smothered with them."

Phoenix Square and Curve are also trying to develop some complementary programming in a bid to cross-pollinate and grow one another's audiences, adds Andy.

The two venues also want to get more involved in the city's festivals, using Orton Square as a focus for celebrations.

All these ideas are hard to fault.

Ted bubbles with enthusiasm and Andy clearly knows the mechanics of his business inside out.

The team at Phoenix Square are as talented as you will find, believes Quad director Keith.

They have been dealt a difficult hand, he says, but they will make a success of the cinema. What they need, more than anything, is for people to hold their nerve.

Broadway boss Steve agrees.

"The Broadway has impacted on the ecology of this whole area," he says. "When we came here 20 years ago there was very little else around. It was a very rundown part of the city with very little footfall. It had a sense of dereliction.

"We've now got funky bars and small, independent restaurants. Given time, Phoenix Square can have the same impact. It just needs a bit of time."

You can support Phoenix Square, and save money, by using our Mercury Monday voucher.

It appears in the Mercury every Thursday, and allows you to see two films for the price of one at the cinema on the following Monday.

Read Adam's article on the future for the former Phoenix Arts centre

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