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Challenging times for cinemas with all of Australia’s screens closed

Challenging times for cinemas with all of Australia’s screens closed
March 27, 2020

With the ban on mass gatherings to slow the spread of Coronavirus has led to the closure of all cinemas nationwide, cinemas operators are seeking relief from landlords amid fears that smaller, independent theatres may not survive.

Benjamin Zeccola, Chief Executive of Palace Cinemas, which has 17 sites across the country, said the company would soon need to borrow from the bank, leaving it saddled with an unhealthy amount of debt once it began trading again.

The company is not eligible for the Federal Government's business support payments, Zeccola said, because it had a turnover above $50 million.

Speaking to the ABC, he advised "I just don't see the need for there to be a cap. All businesses are struggling."

Advising that the company’s turnover did not represent liquidity, and that cinemas, which have high staffing and infrastructure costs, operated on "wafer-thin" margins, Zeccola stated “the other area that is the most frightening thing for many businesses right now is landlords.

"We are on pause. Everything is frozen. There are no customers. There is no income. There can be no rent for months. And I don't think that's sinking in. I think the Government has to step in to support employers."

In a statement to the ABC, Hoyts said it was too soon to know for certain what the impact on the industry would be.

Kristian Connelly, who runs Cinema Nova in Carlton in central Melbourne, said while there was uncertainty for the business and its 50 casual and permanent staff, the cinema was well-placed to survive the shutdown, largely because they were coming off a strong summer period.

He commented "I suspect that there will be a degree of rationalisation across the entire industry where we will see some closures.

"The smaller independents seem to be likely to be under greater pressure than some of the larger players."

With independents make up 31% of all cinemas, the largest share, according to Screen Australia data, and account for most of the regional venues.

Scott Seddon, President of Independent Cinemas Australia and the owner of two venues in the Hunter region in NSW, said he hoped no independent cinemas would close for good, but that it depended on measures like rent relief, Government assistance and forbearance from the banks.

Seddon told the ABC, “many independent cinemas were badly affected by the bushfires because their towns were closed.”

Cinemas would also need to make sure they could regularly fire up their projectors throughout the shutdown, he said, because older units particularly can degrade if they go several months without being turned on, potentially leading to a replacement bill in the tens of thousands of dollars.

It has already been a difficult decade for cinemas which, having survived threats from piracy have had to deal with the arrival of Netflix, Disney+ and other streaming services made for a crowded screen entertainment market.

Box office sales were slightly down in 2019, according to a Screen Australia report.

Last year, before coronavirus emerged, some analysts were predicting minor growth in cinemas in the coming five years, while others saw a decline, with rising ticket prices failing to make up for a lack of innovation that would increase competitiveness.

Now, with film and television production having ceased around the world, some studios have started sending films that would otherwise have gone to cinemas straight to streaming services.

Screen Australia Chief Executive, Graeme Mason added “whilst Australians are still able to access their local shows on TV, streaming and online, the exhibition and distribution market is suffering badly right now.

"So, when cinemas open again, and they will, we will need to vote with our wallets and go support our exhibitors and filmmakers."

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