As access to film and television services grows through download and streaming services, what is happening to traditional cinemas?
It may not seem that way to paying customers – who still line up to see the latest hot box office hits and frequently fork out $20 or more for a ticket – but cinema owners are feeling the pressure to stay afloat in a sea of new competition from legal and illegal online services.
In fact, prominent Australian cinema chain owner Benjamin Zeccola recently said that the cost of cinema tickets has risen to help ward off more closures as more and more venues struggle to stay afloat.
Zeccola is the chief executive of Palace Cinemas, which operates 22 upmarket cinemas around the country, including the Kino Cinemas in Melbourne, the Chauvel Cinema in Sydney and Palace cinemas in Adelaide, Brisbane, Byron Bay, Canberra and Perth.
Ticket prices vary between these cinemas depending on the location, but some standard adult fares are $19.50, while student and pension prices range from $12 to $15.
Following reports that some consumers are using higher ticket prices at cinemas to justify illegal downloads, Zeccola has told Fairfax media that cinemas face huge challenges to keep costs in check and that ticket prices were one piece of a much larger puzzle.
“It’s upsetting that people use ticket prices as a justification for stealing a film,” he says in an interview with Fairfax’s Garry Maddox, adding that after the cost of hiring a film, a cinema might be left with just $6 to $7.
“Then you take out the cost of labour, rent, marketing teams, advertising and all the other infrastructure. You’re left with nothing.”
The High Cost Of Going To The Movies
Zeccola may have a personal interest in the financial side of the cinema business, but his experiences do highlight actual trends in the industry, with a March 2014 report from market analyst IBISWorld showing box office takings have generally fallen since 2010.
It also paints a grim picture of the future for cinema owners and staff if things don’t change soon.
“In the 10 years through 2018-19, IBISWorld estimates industry value added (the industry’s contribution to national GDP) will increase at an annualised 1.0%, a rate slower than overall GDP growth of 2.5% annualised,” the report says.
“As a result, the industry is in the mature phase of its life cycle due to fluctuating industry revenue and attendance levels, which resulted in stagnant growth over the five years through 2013-14.”
But the other side of the picture is that some cinemas do still see profits, even if they are flat or lower than expected.
Last year, for example, IF Magazine noted that both Village Cinemas and Event Cinemas posted impressive gains in profits in the financial year ending June 30.
Village Roadshow Limited’s annual results show that pre-tax earnings were up by 14.4% to $58.5 million on revenues of $255 million.
Similarly Amalgamated Holdings Limited (AHL), which owns Event Cinemas as well as Birch, Carrol & Coyle and Greater Union, reported its Australian cinema interests lifted pre-tax earnings by 11.5% to $60.1 million on sales of $403.6 million.
The companies are partnered in Australian theatres and own and operate a number of multiplexes, but industry analysts have said the results are impressive compared to the relatively flat Australian market in 2013.
“Our cinema statistics show that Australian box-office revenue was relatively flat for FY13, making the result across the Village and Amalgamated circuit all the more impressive,” Ord Minnett analyst Nicholas McGarrigle says in an IF article at the time.
Then again, these cinema chains are part of the top four in the country, which combine to make up over half the national screens in Australia. So if people are going to go to the movies, it’s much more likely to be a Village or Events cinema than one with a smaller share of the market like Palace (which makes up about 4% of the country’s cinemas).
It’s also worth noting that the prices at top four cinema chains in Australia – Birch, Carrol & Coyle, Greater Union, Hoyts and Village – are similar to those of smaller chains that may feel the costs more, but also need to stay competitive.
So what does all this data mean for cinemas in Australia? It’s unlikely cinemas will disappear while there are still some profits to be made, but chains could become more creative with costs and services.
As well as potentially upping ticket prices, things like candy bar promotions, bars and other extras could become a bigger part of the picture. Indeed, Zeccola has said that the inclusion of advertising and bars at Palace cinemas have been a key part of their survival.
“If you took away screen advertising, we wouldn’t have a cinema that survived,” he says. “If you took away the bars, we wouldn’t have a cinema that survived.”
While ticket prices might be enough of a gripe for some consumers, considering them from the perspective of the owners’ shows just how many challenges the industry faces. But at least there is still the option of going to the movies – even if consumers have to be more selective due to the higher costs.
The post Growing Cinema Competition Complicates Costs appeared first on Quid.