The end of cinema? It’s not happening. Image from Flickr by Juan Pablo Colasso.
Scott Seddon runs Scotty’s Cinema, a five screen venue with a cafe in Newcastle. He is a capable public figure for Independent Cinemas Australia and is currently building his warchest with Avengers: Endgame running continuously, along with other tentpoles, The Curse of the Weeping Woman, Top End Wedding and Carmen. The fact that he juggles so many tastes is a testament to his feel for his local community.
He gave an excellent speech to open the ICA Conference in 2019 which punctures a lot of myths, which have troubled him more over the last few years. After some formal greetings he moved on to the larger discussion.
2019 ICA President’s Report Melbourne.
[…]
It has been an incredibly busy year for ICA this year, as it has been for everyone in this fabulous industry of ours for some reason.
I started in grade 2, by correcting the mistakes my teacher made threading up the 16mm Cinevox Premier in Friday afternoon movies, so just about everyone who knows me, knows what I do, but over the last six to twelve months I am getting frustrated by hearing the same question…..:
‘Are people still going to the movies? I thought everyone was watching Netflix instead.’
Or
‘How much longer will you still be running?’
My frustration is that the statement is simply not supported by fact.
Global box office increasing
Since 2010 the global box office is up 42%. It’s almost a straight-line growth of 4% year on year and the Australian Box Office has pretty well followed suit. (I wish my Super fund had done the same).
Research over the past two years in North America and Europe has established an unequivocal link between time watching streaming services and cinema purchases. Across the board it is clear. The more hours people spend watching streaming, the more movie tickets they buy.
If people are abandoning the cinema in favour of Netflix, then why was the 2018 calendar year the biggest global box office year in history? …. 41.1 Billion US Dollars. And the North American figures show that the growth came from increased admits, not from increased ticket prices.
In Australia the Gross Box Office increased 3.6% on 2017 yet the average ticket price dropped from $14.13 to $13.86 in 2018. More bums on seats.
If competition with streaming services is an issue, the issue is that the competition for actors and directors is greater than that for consumers, with these new players bringing new production finance to the table.
The rise of streaming
We need to acknowledge that Netflix is a truly innovative and successful business, and much of the fruits of this growth are being reinvested in the production of original content. But in January this year shares fell 4.8% when revenue fell below projections for the first time. The customer base can’t keep growing forever.
In the North American market Disney removed their content from Netflix, to launch Disney Plus. There is also talk of Disney launching a second branch providing product specifically produced for streaming. AT&T, which grew from the old Bell Telephone Company, America’s equivalent of Telstra, have purchased Time Warner and are launching their own streaming service featuring Warner Brothers Movies and Television Product. The cross-marketing advantage with the largest telecom in the US is obvious.
Amazon Prime is the second major player. Unlike Netflix they have made a commitment to integrating a traditional theatrical release model with streaming. And they are doing it well.
NBC Universal announced in January that they will roll out their streaming service in North America in early 2020.
Then there are the existing services. Hulu, Philo, Sling TV, HBO Now, Play Station Vue, Pluto, Fubo …. The space is getting crowded.
Netflix is clearly the top of the pile and the controversy they are creating by demanding entry to film festivals and industry awards historically targeted at the traditional theatrical movie, has led the rest of the industry to afford them space in news services and passive advertising they could never otherwise have dreamed of being able to afford.
Now I want to make it clear that I am not standing here bashing Netflix or any other streaming service, my apologies to them if it sounds that way. I want to reinforce the point that there is a misconception in the community….. here in Australia and in most of the world, that Netflix will lead to the demise of the theatrical cinema and that is crap. It’s not true.
Finding a younger audience
When Adrianne and I attended CinemaCon in 2017 the crisis at hand was Screening Room. It was going to destroy the cinema.
In 2018 the crisis which threatened the theatrical cinema was Subscription Cinema. By the way Sinema officially closed down its operations in America last week.
I wonder if Netflix is the crisis of the year.
But the point remains that Cinema and streaming are not in direct competition. Indeed, they complement each other.
We need to communicate that message.
We need to tell our company directors, our staff, our patrons, our friends, our family, the media … everyone the truth. The cinema experience is a social need and it’s growing, not shrinking.
The challenge, however, remains to get the people off their couch, or it’s modern equivalent. It’s really exactly the same challenge we have had since 1896 when the picture show man trotted into town and connected the acetylene bottle to his limelight projector.
At CinemaCon this year the International Keynote Address on Exhibition was given by Jane Hastings, CEO and Managing Director of Event Hospitality and Entertainment. She kindly shared some interesting statistics. In Australia, like North America, much of the growth we are seeing in admits is from those illusive 12 to 25 year olds.
As we see more and more diversity on either side of the camera, so the diversity of our audience is also growing. In fact, Event’s research show that last year saw the youngest and most diverse audience they have seen in the history of the company.
Bill Dever is an American independent producer/director/writer/actor … A person who is passionate about cinema. Each week he writes a column about the business of cinema exhibition.
On 10th March he began by explaining that he had looked at the number of cinemas which had opened and the number which had closed in North and South America, Europe, Australia and so on and he noted that the number of cinemas which had opened in that past week was exactly the same as the number which had closed. He went on: (and I quote)
“The theaters that were opening were in major metro centers and the theaters that were closing were primarily in secondary markets. What was also evident was that most of the theaters opening were hyphened operations, movie and games, movie and bowling, and so on and so on. The theaters that were closing were long established theaters that were being slowly choked out of life by market conditions imposed by high box office splits and apathy by the surrounding community.” (end of quote)
The challenge of change
And that leads us to the current challenge. Change.
Change in our society. Change in the expectations of our citizens.
We have been enticing people off their couches and into our cinemas for over a century and what it takes for them to respond to our invitation continues to change. So, we continue to respond with what we offer people.
Last year I spoke about the fact that there was only one cinema seating company at CinemaCon displaying a new seat with 550mm odd centres. The rest were wider recliners and the like. The only narrow seats on display this year were reconditioned ones. I spoke about the trend or reseating with recliners, decreasing capacity by up to 60% but at the same time increasing box office by up to 60%. This year we heard reports on return on investment from these changes.
The consumer is getting lazy and more and more they want everything in the one place. The integration of food and beverage, particularly alcohol, into the cinema experience is a stark reality. The consumer doesn’t even want to go through the drive-through Maccas on the way to the cinema or back. Even the low-income earners want to feel pampered.
My daughter Kim and I visited a cinema in mid America. The manager kindly shared some numbers with me.
7 screens, 500 seats.
Immediate local population around 40,000
Secondary population a further 40,000
Competition. One ten screen and one twelve screen, operated by major chains, plus some independents.
Annual income – over $30 million with 70% from food and bar sales.
Sources:
Box Office: Gross Profit 46%
Food and Bar Sales: Gross Profit 76%
We are talking American dollars. A different culture. A different economy. But it is illustrating a trend we can’t ignore.
If you operate a cinema with a business model that involves selling people a ticket to sit in a seat and watch a movie and maybe sell them some popcorn and drinks, … as I do, you need to be aware that there is a change underway. I personally worry about my audience becoming older and smaller with time and I know I need to respond to it. The successful people in our industry are already responding to it. Look at the work Benjamin and the Palace team are doing right here in this building.
I don’t mean that if you run a 180 seat single screen in a country town you need to build a twenty lane tenpin bowling centre with a sports bar, Asian, Italian and Brazilian restaurants, a winery and a microbrewery. What it does mean is that wherever we are we need to look ahead and innovate and stay relevant to the population we serve in the 21st Century.
A few years ago, a group of independents put together a project showing outdoor movies in vineyards all around Australia. It has been suggested that the project was more about comparing the reds from every corner of the country… but one of them told me that he watched the movie. Of course, he didn’t pay for his ticket, but two glasses of red, a cheese platter and hire of two bean bags cost him $84.00 dollars and that was a light bulb moment for me.
There is a temptation for us to enter partnerships with other providers, be it the restaurant down the road, or Uber Eats, or the pub next door. We need to be sure that we don’t do all the work and take all the risk, but simply provide the means for someone else to make the profit. We don’t want to see our per caps on popcorn and post-mix halve and admits up 10%, the other parties make a profit, and everybody wins except the exhibitor and of course the distributor, and the industry.
Not all of us can afford to ring up a catering equipment contractor and spend $150 or $200,000 on a top-notch commercial kitchen, but we are independents. We can all get a Nisbets’ catalogue and roll up our sleeves and do a staged rollout…
Are we doing better?
I spoke before about the stellar performance of the global and Australia Box Office in the 2018 calendar year. Predictions are for 2019 to be just as good if not better. We seem to be getting off to a bit of a late start. You may have noticed. Last Wednesday Disney brought us Avengers: Endgame which seemed to turn the switch from famine to feast. I am quietly confident that the Northern hemisphere summer, and the fantastic product our distributor partners will be showing us this week, will put us on the right path for yet another great year for exhibition.
As for ICA. We continue to go forward. ICA, formerly COAA, formerly NATO, was formed in the late 1980’s and the first annual conference was held in Bowral in 1997. Each year we respond to new challenges and take new steps forward.
The establishment of our buying group is one such step forward. The result of many hours of work by our CEO Adrianne Pecotic and the Project Manager Keith Maloon. Keith is here. Always happy to talk to you BUT. !!! there is a non-disclosure agreement you will need to sign and please be sure that you understand it before you sign it.
ICA is an industry association focussed on outcomes which strengthen this industry. Behind all the members stand our board members who dedicate so much of their time for the benefit of members, and our three incredible staff. Lucy Robson our marketing manager, Pauline Negline our Administration Manager and the lady I will now introduce. Our CEO Adrianne Pecotic…
