Hull Council's Cabinet yesterday agreed to seek formal expressions of interest from outside organisations in running struggling Hull Screen.

So far the only interest in taking on the facility has been shown by Kailash Suri, the managing director of the new Reel Cinemas venue at St Stephen's.

A leaked report says the opening of the new Reel and the nearby Vue cinema has seen a further widening of the "cinema experience" gap.

While Hull Screen is currently based in an adapted lecture theatre at the University of Lincoln's George Street campus, slightly outside the city centre and with poor parking, the two new cinemas are centrally-located, have better parking and are close to pubs and restaurants.

Last May, the authority controversially reduced opening hours at the cinema to three nights, stopped selling advance tickets at its former home in Central Library and discontinued marketing the cinema.

According to the report last year it cost £155,000 to run – and sold under £20,000 worth of tickets.

The council acknowledges that most public services – including leisure centres, parks and museums – rely on subsidies but says Hull Screen's deficit is "significantly" above the set level.

It adds: "Whilst the marketing capacity has considerable scope for improvement even if it were to be highly successful and increase attendances it would not be sufficient to achieve 'break-even'.

"The industry average in terms of occupance is 30 to 35 per cent.

"The current level of occupance is around six per cent with a per visit subsidy of £15.93."

The report says it would support a transfer to a new provider with a tapered funding agreement of between £50,000 and £70,000, reviewable after five years.

Council leader Carl Minns confirmed that they would be seeking expressions of interest in running Hull Screen, while retaining their long-term aspiration for a "properly-funded, properly-resourced arts complex that includes independent cinema."

And he revealed that they had decided to put money into marketing Hull Screen again. A new operator would be expected to run more screenings on more days.

He added: "I think it is vital that Hull has a thriving, vibrant arthouse cinema."

Meanwhile fans of the cinema, Friends of Hull Screen, have been relying on their own resources to advertise the cinema, including a new website at www.friendsofhullscreen.co.uk, which includes listings. From this Saturday members will also be running fortnightly stalls in the city centre, from 11.30am to 1.30pm, to promote the venue.

Susan Harr, co-founder of Friends of Hull Screen, who supports a move to Reel Cinemas, said it was "quite incredible" how long the council has taken to reach what was a "very simple" decision. She said: "It is not rocket science.

"There's nothing new, nothing that hasn't been kicked round several times, nothing that's not been discussed over and over again.

"There's nothing that suggests any Cabinet member is bothered with Hull Screen.

"There is no one engaged with the project to actually take it on and explore routes of funding."

Labour councillor Rilba Jones, who has campaigned to keep Hull Screen, said she was concerned that a handover to a commercial operator would dilute what Hull Screen had done successfully over the years – showing minority interest films that were "very important" artistically. She added: "It would be a great shame to lose such an important local asset."