- Many cinemas have had to use space for function events or stream non-traditional programming
- Cinema revenue collapsed due to the pandemic from $1.78B in 2019 to just $665M last year
- Cinemas have been gradually losing popularity due to competition from streaming services
Among those impacted by the Covid-19 pandemic, perhaps cinemas have been among the most hardest hit. Many operators have had to continually readapt their offerings.
While some movies have tried to wait out the crisis – notably the latest James Bond feature – some have bowed to the inevitable and released everything through various streaming services. Warner Brothers famously pushed out all of its scheduled 2020 movies onto HBO Max in December last year. In a test to see if theater goers would flock back to the cinemas to see movies in person, Tenet had racked up hundreds of millions of dollars in losses for the company.
Research and advisory firm m3property has reported that cinemas have been letting out their premises as a function space or using them to screen entertainment such as live transmissions of cultural and sporting events in order to keep some business coming through the doors.
Additionally, they have been booking private and corporate functions as well as fundraising events.
“COVID-19 closures, social distancing, health concerns, streaming and delays in the release of blockbuster movies have driven this result,” said Casey Robinson, research director at m3property.
“The industry will evolve with the rollout of the digital format and 3D movies enhancing the cinema experience for customers and which should help consolidate a competitive position.”
Casey Robinson, m3property
Cinema revenue for the 2021 financial year is expected to fall to $665 million. That’s a far cry from last year’s $1.16 billion during 2019/20 and the peak of $1.78 billion the previous year. Average takings per screen fell 67% from $531,900 in 2019 to just $179,000 during 2020.
IBISWorld suggests revenue will bounce back during the 2022 financial year with an additional annualised forecast of +21.1% for the five years to 2025-26; although this growth will be coming off a relatively low base.
Even if the 2026 forecast of $1.73 billion is met, this only puts revenue broadly in line with the 2019 financial year.
While film screenings account for two-thirds of industry revenue, food and beverages make up a fifth (20%) with screen advertising generating 6.9% and other services – such as video games and other entertainment – accounting for 6.4%.
Ms Robinson added that while there were 84.7 million admissions in 2019 – equivalent to every Australian viewing more than three movies a year – this fell to 28.2 million last year, or about one movie per Australian.
However, Ms Robinson added the industry had been facing many external challenges before the pandemic – such as streaming subscription services – which had already been attributed to declines in business.
“There was strong growth in the provision of commercial cinema screens during the mid- to late-1990s however, this has flattened out since the turn of the century.. the number of screens declined from 2,310 screens in 2019 to 2,241 screens in 2020. During this time, the number of cinemas nationally declined from 524 to 483.”
Additionally, the location of cinemas has changed – more cinemas are now located in suburban locations as opposed to the inner city and regional areas – correlated with strong suburban growth within the Australian population.
“While population growth has also been robust in CBDs over this period, overall screens in city locations had a lower rate of increase, likely because there are more alternative entertainment options in inner city locations as well as the different demographics with fewer children per family in inner city locations.”
Don Semken, national retail director of m3property, added that cinema operators nevertheless continue to commit to new leases and refurbishing their venues.
“These changes are generally consistent with the broader retail thematic, with a focus towards quality and experience, and the contraction of floor space in the pursuit of the flight to quality,” he said.
“In addition, larger operators are beginning to offer streaming services, consistent with the broader acceleration and adoption of omnichannel networks throughout the retail industry.”