Having survived world wars, the Great Depression, the global financial crisis, video piracy and the rise of Netflix, Australia’s cinema industry is facing its biggest challenge as it prepares to roll out the red carpet once again after a three-month COVID-19 shutdown.
With social distancing putting limits on occupancy and more people choosing to stream entertainment at home, research house IBISWorld forecasts cinema operators’ revenue to fall 26 per cent this financial year to $1.3 billion.
Profit margins are set to fall more than 11 per cent with total industry job losses to exceed 3500.
Luke Mackey, a director at Event Cinemas, Australia’s largest cinema exhibitor (94 cinemas and 835 screens), is confident the industry can survive.
“Cinema has stood the test of time for decades and 2020 is no different,” he said.
“Our research tells us that there is an overwhelming, pent-up demand for people to return to cinemas. This highlights that the cultural importance of cinema has never been greater and, like our customers, we are eager to reopen soon,” Mr Mackey said.
In April and May, Event surveyed 20,000 members of its Cinebuzz loyalty program. It found more than four out of five (83 per cent) intended to return to the cinema within three months and over 90 per cent intended to maintain or increase cinema visitation.
The survey also found that going to the movies ranked higher than going out with friends, going shopping or going to a restaurant – once restrictions were eased.
Social distance booking system
Unsurprisingly cinemagoers surveyed by Event were anxious that appropriate social distancing be maintained not only inside the cinema – where there should be a seat gap between bookings – but in the foyer and at the snack bar.
Event is expected to open most of its cinemas in the coming weeks – no firm date has yet been announced – with a custom-built intelligent social distanced ticket booking system.
This will allow family and friends to book seats together in a block but automatically distance an entire group from other customers, by blocking seats directly in front and beside them.
There will also be contactless booking and check-in, cashless operations on site including in the candy bar, multiple hand sanitiser stations, limits on the number of people in foyer and theatre areas, clear social distancing signage, sanitisation of occupied cinema seats after every session, as well as extensive communication on the importance of regular and frequent hand washing.
There will also be staggered screening times to prevent big crowds in the foyer and special seniors-only sessions.
JobKeeper key for survival
Other operators are also planning to reopen in similar fashion in coming weeks as restrictions on indoor venues are lifted: Victoria allows 20 people inside cinemas while in NSW, cinemas will be able to open on July 1 with no upper limit provided the one person per four square metre rule is maintained.
In Queensland, a 20 person-limit on indoor venues is expected to be increased to 100 people by July 10.
Independent chain Palace Cinemas, which operates 24 cinemas and 180 screens, will reopen nationally on July 2 with a slate of new release films.
Hoyts said it would open “in the coming weeks” while Village cinemas have reopened in Tasmania and some parts of Victoria.
Palace chief executive Benjamin Zeccola, whose father Antonio founded the chain, said there would initially be only three screenings a day, instead of six, to allow for intensive cleaning of all surfaces between screenings.
Due to social distancing requirements and patron number restrictions, initial seat occupancy would be between 20-35 per cent, Mr Zeccola estimated.
He told The Sydney Morning Herald, JobKeeper needed to be extended for another six months and state governments needed to continue to provide rental support to cinemas and other businesses.
“The moment JobKeeper is repealed and if any landlord wants full rent, that cinema will be unviable,” Mr Zeccola said.
Focus on ‘concept cinemas’
Prior to COVID-19, cinemas were already struggling due to the rise of Netflix, with total box office revenues flatlining at just over $1.2 billion between 2015 and 2019, according to the Motion Picture Distributors Association of Australia.
Cinema exhibitors in Australia earn more than two-thirds of their revenue from a share of ticket sales with 20 per cent coming from food and drink sold at the snack bar – the reason why popcorn is so expensive – and just over 7 per cent coming from advertising, according to IBISWorld.
Most will be banking on a strong line-up of Hollywood blockbusters in the school holidays to bring patrons back and the pent-up demand for munching popcorn in front of a big screen, as highlighted in the Event survey.
Movies slated to open include Marvel’s Black Widow starring Scarlett Johansson, Death on the Nile, Wonder Woman 1984 and Christopher Nolan’s Tenet.
But it won’t just be about the movie line-up.
To survive, IBISWorld’s Mr Chapman said operators would need to position themselves as providers of a unique experience that cannot be replicated at
This will mean a focus on concept cinemas, such as Village Cinema’s Gold Class (fully reclining arm chairs, food and beverage service straight to your seat) and Event’s boutique Paparazzi cinema which has just 46 luxury recliner seats, an in-seat waiter service and wagyu beef burgers.
“These cinemas allow operators to charge premium prices while offering customers a unique experience that cannot be replicated at home. This greater focus on premium offerings is anticipated to boost industry profitability over the next five years.”
A strong recovery is expected to kick in from the 2021 financial year in line with a general economic revival and improving consumer sentiment.
But it will take five years for total revenue to rise back above the 2019 financial year figure of $1.7 billion, according to IBISWorld.
Cinema operator revenue peaked in the 2016 financial year – the year when Netflix launched in Australia.
“Industry operators are still anticipated to face significant competition from other sources of entertainment over the next five years, including subscription video-on-demand services,” said IBISWorld analyst William Chapman in his April 2020 Cinema in Australia Industry Report.
“Legal and illegal downloads of film content over the internet will likely continue posing the greatest threat to industry operators over the next five years.”
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