Crisis at the box office: Australian cinemas teeter on Covid cliffhanger

Months after the initial Covid-19 restrictions closed all cinemas, Australian moviegoers are beginning to return for socially distanced screenings across most of the country.

But with most major international releases delayed, the large chains that rely on blockbusters face an uncertain future. And for independent operators, more accustomed to showing reruns of classics and local titles, the outlook is not much clearer.

As indoor attendance restrictions ease in states other than Victoria, some in the industry are confident Australians who have tired of lockdowns and streamed TV series will return to cinemas for the traditionally busy end-of-year period. But operators who are still paying rent and staff, now with a smaller contribution from jobkeeper, worry that revenue may not return quickly enough to save them all.

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Rent crisis

In 2019, Australia’s 524 cinemas – with 2,310 screens and 439,772 seats – recorded about 85m admissions, generating $1.23bn in box office revenue, according to Screen Australia data.

IBISWorld’s William Chapman says: “Australians have been pretty reliable cinema-goers, but as the cinemas can seat more people, will they want to see the films on offer?”

In a report on Australia’s cinema industry in April, the senior analyst made the bleak prediction that forced closures would drive down revenue, while Australians in lockdown flocked to the streaming platforms.

Chapman has since been analysing box office data covering the periods when cinemas have been able to reopen with reduced capacities – shaped by different indoor gathering restrictions in various states.

He predicts box office revenue in 2020 will be about 25% of the 2019 figure, and expects to see aggressive tactics to draw Australians back in over the coming months.

“I think cinema operators will definitely look at discounting tickets, and promotion offers, to try and entice people back,” he says. Before the pandemic, about two-thirds of a cinema’s revenue came from the box office, while food and drink accounted for about 20%, with the remainder coming from advertising.

While Australia has so far been spared the wholesale closure of multiplexes seen in the UK, Chapman believes the viability of large chains will ultimately depend on how long big international releases continue to be delayed and whether Australians “will have the money to spare on a ticket given economic issues and the comparative cheapness of streaming services”.

Village and Event can raise debt as publicly listed companies, he says, while Hoyts’ Chinese owner, the Wanda Group, “might have deeper pockets to fund losses”.

Kirk Edwards, chief executive of Village Cinemas, says the cost of rent is a particular issue for larger chains.

Because his chain – which includes 58 cinemas in Australia, including some jointly run with Event – exceeds the $50m revenue threshold, it has not been covered by rent relief codes. He says the larger operators, often in shopping centres, which demand higher rents, have struggled as a result.

“Cinemas in Australia pay $280m in rent a year and the industry employs 13,500 staff,” Edwards says.

“We do more admissions than all professional sports in Australia combined.

“My number one, key concern for all cinemas, is that we need greater support from landlords.”

Michael Hawkins, executive director of the National Association of Cinema Operators, says the industry is grateful for jobkeeper, but “without government support for rent for major chains, it will be very difficult for some operators to survive” if a second or third wave shuts cinemas again.

Delayed releases

Hawkins says delayed global releases have also put the survival of both large and small operators at stake.

“Let’s not sugarcoat it, we have concerns,” he says.

However he believes if operators can stay afloat for the coming months while relying on independent and Australian films, and re-screening of classics, then the backlog of delayed titles set for release will make 2021 “a very exciting year”.

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While acknowledging “one or two” films have broken with accepted protocol and gone straight to streaming – including Disney’s Mulan – Edwards says cinemas are part of a “global alliance” and have to accept that the release of films such as No Time To Die, the new James Bond title, has been pushed back to 2021.

Village’s program is about 40% “blockbuster titles”, Edwards says. But he believes the delayed Christopher Nolan film Tenet will generate $20m box office revenue in Australia, and is a sign Australians will turn out for delayed films when they are finally released.

‘Cinema has been told it’s dying for 100 years’

Eddie Tamir, whose company Moving Story includes three Melbourne cinemas – Classic Cinemas in Elsternwick, Lido in Hawthorn and Cameo in Belgrave – as well as Sydney’s Randwick Ritz, is confident independent cinemas can survive by screening cult classics and niche titles in the absence of “tentpole” global films.

“There’s a lot of doomsayers around, I call them ‘schadenfreudians’ of the cinema industry. Cinema has met many challengers, and has been told it’s been dying for 100 years.

“We’ll keep dying for the next 100 years too,” Tamir says.

While he is keen for restrictions to ease so that his Melbourne cinemas can reopen, Tamir takes confidence from the demand for sessions at the Ritz, which have included Tenet, as well as films from Fellini and Hitchcock and foreign language titles.

He has established a Video On Demand streaming site, and is selling choc tops and merchandise from one cinema’s box office, but says these don’t come close to covering losses.

Scott Seddon, the president of Independent Cinemas Australia, believes only inner-city independent cinemas can rely on the taste for smaller movies.

Seddon runs a five-screen cinema in Raymond Terrace, north of Newcastle in New South Wales, and a drive-in screen in the nearby Hunter Valley.

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He says regional cinemas rely on the major international releases.

“Having No Time to Die moved back to April next year was a big issue for us. We didn’t get much joy out of our reruns. Our audience wants new releases.”

Seddon says the outlook for independent regional cinemas is “all pretty precarious for the moment”.

He says the government now needs to provide greater support beyond jobkeeper and small grants to sustain vital community institutions.

“In a regional area cinema is much more of a focal point, it means so much more to the community. Lots of our customers have disabilities, have companion cards, and are older Australians.

“Their weekly outing is to come and see a film. So if we start seeing regional cinemas disappear that’ll be a huge loss,” he says.

Edwards, of Village Cinemas, also believes the value of cinema will be an important part of the Covid-19 recovery.

“The population is at breaking point with stress and aggravation. Cinemas are good for wellbeing, where they can escape that day-to-day hardship .

“It is a place where people go and get away, we’re a world of escapism.”