Cinema Biz Booming, But Cost Has Been High

Australia’s multiplex-driven exhibition industry is thriving, but at what cost?

Past and future investment in Australian multiplexes is estimated to be at least $A300 million, pumped in by the Village Roadshow/Greater Union/Warner Bros. joint venture, and Hoyts, which bought out its multiplex partner CIC Theaters last year. Indies such as Terry Jackman (with his highly successful Loganholme eight-plex) and Peter Thompson (with his Fremantle six-plex) have also invested considerably.

Since 1986,24 multiplexes have come on line, adding 178 non-metro screens to yield a total screen count of 851,67 up on 1989. Admissions jumped almost 12% to 40.9 million last year, representing an average 2.4 admissions per head of population.

Suburban b.o. biz rose by an impressive 39.3% to $A119.4 million; country revenues jumped 31.7% to $A49 million. City b.o. meanwhile dropped almost 5% to $A86.2 million.

But when does biz growth yield dividends on the majors’ investments, including the marketing expenditure pumped into establishing each site?

Exception to the rule

It all takes time, they say, especially given that some multis click – such as the new joint venture complex at Innaloo, which has become its best performer in the space of months – while others lag. And, notes one topper, Innaloo is “the exception to the rule.”

“It’s a longish payback period,” says G.U. m.d. Paul Oneile. “We’d like to work on a breakeven of a little over two years, and returns on investment in the third year.”

Adds Village Roadshow supremo Graham Burke: “It takes one to three years to build patronage. You just can’t put a 2,000 seat, eight-screen complex in an area and expect people to change their life patterns overnight. Multiplexes are changing the face of exhibition forever, and we think we’ll see a very good payback.”

And at Hoyts, which opened Australia’s first multiplex, chief exec officer Peter Ivany says there’s still three to four years to go before gauging success. “We’re starting to see signs of a growing business, but it’s not overnight.”

Saturation is nigh

But, insiders agree, the saturation point is fast approaching. Most prime sites are already taken or earmarked; Burke reckons only 40-50 extra screens are left across Oz. Both circuits have slowed down from their initial burst, with Hoyts looking to add one complex a year, the joint venture two.

And, exhibs admit, mistakes have been made. Multis started here at a time of high interest charges and building costs. “We now know a lot more than we did before the heady days. We’ve discovered they’re not all Chadstones,” says Oneile, referring to Hoyts’ first and very successful site. Adds Ivany: “Looking back, I wouldn’t have spent as much money on some sites.”

Exhibs believe the ongoing viability of the multis also depends on increased productivity and reduced overheads, particularly in staffing. Ivany says Hoyts has a better rate of return on its U.S. circuit because of lower labor costs. Australia’s small population and manning level practices mean sites are more expensive to run and more admissions are needed.

“When we’re talking about investments of $A2 million a screen, eight to nine screens each time, in a country of relatively small population, multiplexes have to work that much more efficiently and effectively,” says Oneile. He says GU currently is having “very fruitful” discussions over manning levels with the relevant union, the Australian Theatrical & Amusement Employees Assn.

Growth meanwhile is generally put at another 5 million admissions (three admissions per head) the mid-’90s, with multiplexes accounting for an increasing amount of the majors’ revenue. At Hoyts their contribution to b.o. revenue has increased to 31% and Ivany figures on a 50/50 split within three years.

And one factor stimulating growth remains to be tested: the Warner Movieworld theme park, which opens in Queensland next month. A multimillion dollar joint venture between Village Roadshow, Warner Bros. and Seaworld, adjacent to the Warner Movieworld studios, the theme park will stimulate moviegoing, opines Burke. “It’ll infect people with enthusiasm. People who go to Movieworld will see more movies. They fuel each other.”

Expansion of other sorts also continues, with GU at presstime bidding for the remaining shares it doesn’t own in Queensland circuit Birch Carroll & Coyle to “tidy up” its ownership, per O’Neile, who adds GU is in the midst of another acquisition which he won’t disclose. Hoyts meanwhile continues to expand its U.S. operation and Village Roadshow is looking to bolster its fledgling South East Asian operation, which sees a 10-plex under construction in Singapore.

Despite their declining revenues, the majors’ city sites remain essential profile raisers while serving a 12-to-30s audience. They also generally earn more on a per screen basis (due to higher ticket prices and seating levels), but they’re more expensive to run.

Consolidation continues

The three majors however continue to consolidate their metro presence to contain costs. GU this month opened a five-plex in Adelaide – the first major city venue to be opened for some years – that rolls a handful of sites into one, and has similar plans next year in Brisbane. It’s still looking to combine its major Sydney site with Village Roadshow’s to create Australia’s largest multi (up to 18 screens on some plans).

Indie exhibs no doubt get an indirect benefit from increasing business without the majors’ exposure (and the majors would say the same for distribs). Says Paul Dravet of Hayden Theaters, an eight-screen circuit in Sydney: “1990 will be one of our best years for a while.”

Indie sector also saw a consolidation of strength this year when the 100-screen cooperative, United Cinemas, joined with film distrib/producer Boulevard to market and program centrally, and even acquire titles.

Main arthouse venues also report solid business.

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