The movies are back! Today in NSW, all cinemas can open at 75 per cent capacity for the fully vaccinated. While the impact of the pandemic on the screen sector has been far-reaching, theatrical exhibition has been among the most affected. Today is light at the end of the tunnel for many operators, and the line-up of films for the rest of year – which include the much delayed No Time To Die, Venom: Let There Be Carnage and Dune – offer promise.
Here, IF speaks to Hoyts Group president and CEO Damian Keogh and Event Cinemas director of entertainment Luke Mackey to understand how they have prepared for today, and canvass their opinions on the current theatrical landscape.
IF: How was your business impacted by the recent shutdowns, particularly given there was no JobKeeper this time around?
Keogh: Cinema has been one of the worst hit industries during the COVID-19 pandemic. In 2020, while Australia remained relatively Covid safe and the majority of cinemas were open, our business suffered from lack of quality content as Hollywood held back major releases. As the releases began to flow from June 2021 we went into lockdown in both Sydney and Melbourne (as well as Canberra), our two major markets. Cinema is a business with significant fixed costs with respect to rent, outgoings, and staffing, having no source of income at our sites in NSW, VIC, and ACT has caused significant financial strain.
Mackey: Cinemas have been one of the most impacted businesses globally. In most markets cinemas have been one of the first businesses to close, and the last to re-open, even though there is strong, reputable research that that demonstrates cinemas are one of the safest out of home experiences. Whilst many of our people were eligible to claim government support payments, the absence of JobKeeper has meant we have had to make difficult decisions and re-engineer our operating model to try and mitigate some of the impact.
IF: Are you disappointed that the Federal Government has not extended the SCREEN Fund to also include major exhibitors?
Keogh: We were extremely disappointed. The ‘major’ exhibitors employ 70 per cent of the people in the cinema industry, yet missed out on this funding – we are also not covered by any protections extended to SMEs regarding landlord negotiations for abatements or other easement of our financial burden. We proposed something to the government that would have seen the entire industry assisted, but the outcome was close to 70 per cent of our proposed assistance amount going to just 30 per cent of the industry, which just didn’t track. We were all forced to close. We all had staff to pay. We all had landlords and rent. Why the funding wasn’t extended to the companies that have the most sites in the biggest centres with the highest rent was an outcome that surprised us.
Mackey: We are disappointed that the Federal Government has failed to support the majority (70 per cent market share) of the Australian cinema industry, with the SCREEN assistance fund only supporting independent operators (30 per cent market share).
COVID-19 does not discriminate, the impact on every operator has been the same. Major exhibitors have the same financial pressures as every other cinema owner, but it’s multiplied by scale. The impact of COVID-19 on the local box office has been severe for every single cinema operator.
What have been the biggest challenges ahead of reopening your circuit? How will you navigate ensuring patrons are vaccinated?
Keogh: The NSW Government has provided a pretty clear roadmap for reopening, so we really just need to follow that to ensure we are complying with the health orders. We obviously have a lot to do ‘behind the scenes’ to get ready for reopening, mostly around the operational front, but we’re ready to go and can’t wait.
Respective states are doing their own versions of roadmaps which differ significantly and place additional operational burdens and complexity to re-opening our cinemas. It is frustrating that there is a lack of consistency in the required protocols.
Mackey: One of the biggest challenges the industry has faced is navigating and interpreting the varying state-based regulations and the differing government structures. It has been short notice in relation to snap lockdowns, closures and reopening, with much ambiguity. The latest NSW roadmap has been welcome, it has allowed us to forward-plan and manage the ongoing changes and pace of restrictions easing.
We have invested in creating industry leading COVID-safe operating practices, reviewed by infectious disease experts, and have invested in COVID-safe operational training to support our staff. We have also invested in our customer communications to ensure that at each relevant point of contact they are well informed of requirements. We are ready to re-open and look forward to welcoming back our staff and customers.
IF: In terms of programming, the rest of the month looks to be quiet ahead of a busy November and December. Are you anticipating there will be pent-up demand for titles that have been missed during lockdown, such as Shang-Chi and Free Guy? What are the challenges in programming a backlog of titles?
Keogh: We have already seen a lot of interest now that we have tickets on sale – a great outcome and really reassuring. Opening on the 11th in NSW will allow us to screen the titles that people missed seeing in the cinema, so it really is a wonderful situation to be in. Then from the 21st we start to see new content again, which really kicks off in a big way from November 4 with Marvel’s The Eternals, and then – the BIG one – No Time To Die, the next Bond movie, on November 11. We have major new releases straight into 2022.
Mackey: There is clear evidence that there is strong demand for going to the cinemas, especially for titles such as Shang-Chi which has generated great buzz and performed well globally, with strong pre-sales to date. There are also plenty of releases, like The Last Duel, Malignant, the latest Halloween, and Bollywood will be back on the big screen.
Our Cinebuzz customer research tell us there’s pent-up demand for out-of-home entertainment and quality content. We know that when we have a quality film, customers from all demographics are visiting the cinema. A good film and great experience is all the incentive that is required, as has always been the case.
IF: If we look to the performance of Shang-Chi and Venom 2 in the US, and the openings of Dune and No Time To Die internationally, the box office is starting to rebound. Considering global trends, what are your predictions for market recovery locally? Do you think customers will need to be incentivised to come back to cinemas post-lockdown?
Keogh: As we saw when we reopened last year, when there are solid new movies backed by meaningful marketing campaigns by the distributors, people come back – in droves! We have no reason to think it will be any different this time around!
Mackey: The recent results internationally clearly demonstrate the cinema is part of the cultural fabric of our communities providing a crucial meeting place for all customers. The box office results, our research is clear – there is pent-up demand for the cinema experience. There is plenty of content scheduled over the coming months, which should support a good recovery.
Over the 2021 Easter period, we were up 16 per cent when compared to the same period in 2019 pre-COVID. When we have a good film and are able to open, customers return because the cinema experience cannot be replicated. The cinema is all about immersion – the movie, the smell of fresh popcorn, the big screen and sound and the social connection – with friends, on a date, entertaining families. Cinema is an affordable entertainment option and has stood the test of time, amidst many challenges.
IF: Globally, the pandemic has seen theatrical windows shorten and an increase in hybrid/day-and-date releasing. What are your thoughts on this practice continuing as the theatrical market recovers?
Keogh: A lot of things have happened during COVID, including some playing with the theatrical windows. It’s hard to say where all of this will end up, but I have faith that all parties involved will do what’s best to ensure movies of all shapes and sizes will continue to be experienced where they’re meant to be – in a cinema.
Mackey: The industry strongly supports a theatrical window. There’s a growing consensus among studios that the theatrical window is important to the overall performance for the complete lifecycle of a film. The surge for home entertainment is a product of the pandemic, and while we’ve recently seen studios trial various models with cinemas shut during this time, it’s been widely reported studios are returning to theatrical windows for key titles.
Studios make 40-50 per cent of revenue from the theatrical box office, which is why we have seen blockbusters delayed as studios wait for cinemas to reopen globally. No Time To Die, for example, has not been made available to stream – which highlights the strength of exhibition and cements confidence that audiences will return to cinemas – which we are already seeing internationally. Studios have also publicly acknowledged that a film that plays in-cinema has a more premium perception, elevating the title.
IF: Arguably local film helped exhibitors in their recovery at the start of 2021 via films like The Dry, Penguin Bloom, High Ground etc. With an influx of Hollywood titles the market will be noisier through next year, making it harder for local films to get cut through. To that end, what are your thoughts on the upcoming Australian Feature Film summit, which looks to bring producers, distributors and exhibitors closer together?
Keogh: A movie’s country of origin need not preclude it from being successful, nor assist it in being successful. The movies you’ve mentioned were extraordinary movies that had clearly identifiable audiences, and huge marketing campaigns behind them. I don’t believe for a second that their success was due to Covid; I think their success was in spite of it. The Australian Feature Film summit is a wonderful thing, as local industry at all levels should be engaged earlier, so it is great to see this happening.
Mackey: Event Cinemas has long been a strong supporter of the Australian film industry, being the largest individual contributor to the industry via the Australian box office.
Event is proud to be a founding member of the Australian Feature Film Working Group and Claire Gandy (GM content) has played an integral leadership role in bringing the Australian Feature Film summit to fruition. We want increase collaboration with Australian distributors, producers and creatives to amplify the Australian stories on our screens.
We also have a proud history of engagement with industry bodies and festivals, including supporting Screen Producers Australia, the Australian Writers Guild, Sydney Film Festival, the Australian Women’s Film Festival, Dame Changers and screenwriting initiative Pitch: Regional landscapes. We will always find opportunities for Australian films.
Read our interview with independent exhibitors Dendy Cinemas, Palace Cinemas and The Hayden Orpheum Picture Palace here.