Exhibition: success and challenges

More than a billion dollars might be enough to think the exhibition sector is healthier than ever and, although optimistic, there are still pressures and challenges for cinemas – particularly for the independents.

Box office takings in 2009 crossed the $1 billion line, and by February 2010, James Cameron’s Avatar (Twentieth Century Fox) had become Australia’s highest grossing film of all time, and the first to enter nine- digit territory with $114,763,630 in takings. It seems like the exhibition sector has a billion reasons to celebrate.
“We have never been pessimistic about our business. Movie-going is very much alive and very well; just look at recent weeks with The Twilight Saga: Eclipse, Toy Story 3 and Shrek Forever After. Box office has also increased for the last four calendar years,” said a very  positive Anthony Thiessen, marketing director for Hoyts.
With more than 400 screens in Australia and New Zealand, the cinema chain will continue its deployment of digital cinema and Xtremscreen – its “biggest and loudest” experience – in further locations, plus the launch of new healthy food options at their candy bars.
The future looks bright for the big exhibitors, but an important question must be asked. Is this box office bonanza reaching the independent exhibition sector?
STRENGTH IN NUMBERS
The answer is yes, at least for those who were early  adopters of 3D. The expensive process of digital transition has been a pressing issue for the exhibition sector for years, but the strong push for stereoscopic 3D has reached a new peak, both in terms of the number of titles available – and competing for the still limited amount of 3D screens – and their outstanding box office performance. Avatar proved that the transition is no longer a luxury, but a necessity.
“It has been a rolling wave that has gained in height  over the last couple of years, and we’re now looking at a global tsunami of digital transition,” said Mark Sarfaty, president of the Independent Cinemas Association of Australia (ICAA). In late May, the ICAA partnered with its New Zealand counterpart, the New Zealand Motion Picture Exhibitors Association. The alliance represents 600 screens in 160 locations, and gives its members a new negotiating power to fight with a regional response to film piracy, digital cinema transition,  changes to cinema release models and the development of alternative content.
On that scale we’re able to negotiate positive outcomes for the digital transition, with technology providers and distributors in terms of obtaining a virtual print fee (VPF),” said Sarfaty.
“The major exhibition circuits have finalised their VPF deal and the independents are close to finalising their VPF deal through the ICAA, which will closely match that of the major exhibitors. That is important and appropriate because any disparity would result in a consequential shift in the exhibition landscape; if the independents were not able to obtain a VPF, the digital transition would see a number of cinemas closing,” he explained.
In addition to the opportunities created by 3D, digital transition also allows ICAA members to provide alternative content such as sports, theatre and concerts. According to Sarfaty, most commercially viable cinemas will be transitioned to DCI within the next three years, and while distributors will still supply 35mm, they will have very little incentive to continue to do so. “We can see the day when 35mm will no longer exist, and that’s between three to seven years from now,” said Sarfaty.
While most independents are preparing for when that day comes, some remote and regional screens – usually operated by local councils or community groups, and not as a thriving commercial business – are struggling and face extinction. ICAA will lobby on their behalf to obtain support for those members. “Together we must find ways to support those screens because none of us want to see communities left without such a valuable social hub,” said Sarfaty.

In box office terms, ICAA represents 85 percent of Australian independent cinemas. It is through their combined forces that the organisation has been able to develop policies for accessibility and digital transition, and they’ve been able to play a representation, advocacy and mediation role between members and distributors.
Plans for business development include the creation of an iPhone app covering all the screens represented by the organisation, which is a more attractive proposition for the user than downloading an application that covers only a couple of cinemas.

The joint effort will also amortise the cost across all members. Based on Government population projections, ICAA anticipates that there will have to be a significant increase in the number of cinema screens to support population increase, something that the  organisation is starting to plan.
“Given that this is going to happen in medium density environments, those cinemas will have to be smaller than shopping centre style cinemas. That’s an excellent area for independent operators,” explained Sarfaty.