Welcome to our first newsletter for 2025. As we bid farewell to 2024, it's an opportune moment to reflect on how Australia's cinema industry has fared over the past year and draw insights from this year's Box Office turnover and film offerings.

Let me preface this with a disclaimer: I’m not here to write an “everything's rosy” story. Cinema, at its core, is a supply and demand business. Consumer habits are evolving, leading to mixed results—some areas are thriving while others are struggling. This newsletter focuses on small cinema owners and the culture of cinema, with the aim of presenting an informed analysis of the data available to us. Of course, each cinema has unique circumstances—catchment, demographics, and competition—and applying these insights will depend on your specific situation.

Setting the stage

Before we look at the Australian Box Office for this year, let's get an overall temperature of how the cinema industry is travelling.  This will allow us to put Australia in context of the wider trends.

NOTE:  These are just hard numbers I am bringing to your attention. It is up to the reader to give them weight.  This is just painting the background before painting the subject.

• Population growth (2019–2024): Australia’s population has grown by 6.7%. In theory, this should translate to a proportional increase in Box Office revenue, excluding inflation or other factors.
• Inflation: The Consumer Price Index (CPI) has risen by 23.96% since 2019, meaning a $1 item in 2019 now costs $1.24.
• Ticket price increases: Based on information from Screen Australia, from 2019 to 2023 (2024 not yet available) ticket prices increased 17%. If we add CPI for 2024 we would expect ticket prices to have risen approximatey 20% since 2019. Note: as ticket price increases, the same Box Office results requires lower attendance to achieve it.
• Attendance: Screen Australia has unfortunately removed attendance level data from its web pages many years ago, but using some mathematics on data they do make available (number of visits per person per year), we can estimate. The attendance level dropped 23.81% from 2019 til 2023. Given that 2024 had higher ticket prices and lower box office, we can make a guess that this figure is now more than 25% less than 2019.
• Overall comparison: Based on population growth and CPI/Inflation, we can also estimate what Box Office would likely have been. We can estimate how much Box Office turnover we should be making if conditions stayed the same from 2019 onwards.  From this we can then calculate the percentage current Box Office makes compared to what it should be.  That result is 57%.  Or in other words, we are operating our cinemas on 57% of the Box Office take today compared to 2019.  
• Finally, the U.S. trend in attendance levels.  Taken from Bloomberg article “Ten Predictions About the Future of Movies, TV, Music and Sports” The graph below shows that attendance levels have trended downwards since 2003, and current U.S. attendance is about 40% lower than pre-pandemic levels.
  Screen Australia also has data that echos the same sentiment on a page called “Cinema audience attendance patterns” as visits per year also marches slowly down.
  

The data above is based on government websites, then building a spreadsheet to produce the numbers. I must admit, I knew the result would not be great but, I myself did reach for a stiff drink on completion.

NOTE: I will step in here for readers not familiar with the cinema business. A cinema generates revenue through more than just selling movie tickets.  Concessions / candy bar are also a large part of the income.  At first glance, 43% down on relative box office expectations is extremely poor.  Yes, the industry is struggling, but so are many others industries in this poor economic climate.  Very few cinemas have closed so far, but we as an industry need to acknowledge conditions and consumer behaviour has changed.  How we run our cinemas needs to be updated to best take advantage of these changes.

The slate for 2025 is also looking significantly better now the effects of the Hollywood strike have now passed, A more typical slate, with more tentpole films, is expected to rise the Box Office take 6-8% compared to 2024.  This is good news but is unlikely to hold off a contraction in the coming years.

Cinema is a “Supply and Demand” game.  We will always have cinemas, but the disruption by the pandemic, streaming and cost of living crisis, has placed the industry in a position that a contraction in sites is an expectation, specifically for well screened regions.  There have been closures but also openings in green field locations.  A contraction is yet to occur but still expected as economic conditions continue to worsen.

2024 Australian Box Office: Resilience Amidst Adversity

Historically, cinema has been known for being resilient in recessionary conditions.  With recent conditions of negative GDP growth per capacity in its 7th quarter.  Consumers are very much dealing with a cost-of-living crisis.  Unexpectedly, this has resulted in an upswing over expectations.

Based in weekly Numero Data

In 2024, Australia achieved 76.91% of pre-pandemic Box Office levels, only 1.81% down on 2023 levels.  At the start of the year, there was an expectation, due to the Hollywood strike and its effect on content, box office would be 5% down on 2023 levels.  We achieved only 1.8% down largely thanks to a extremely strong result towards the end of the year, however, put in context based on pre-pandemic levels, we are still a very long way from where we used to be.

Taking a closer look at the box office results brings up the following key observations:

• Shrinking "regular moviegoer" base: The 2023 and 2024 bottoms, or lowest points in the graph, are an indication of consumers who visit cinemas regardless of content. That market has shrunken considerably. The bottom is now 40-50% down on pre-pandemic consumer behaviour.  I count this as an extremely important metric that gives us insight into changing consumer behaviour.  This is attributed to streaming, which offers convenience, particularly for older, time-poor audiences.
• The rise of niche entertainment complexes: Traditional multiplexes are no longer the dominant model. High risk and lower profitability are driving the shift toward smaller, more versatile "entertainment complexes" that combine curated cinemas with other leisure offerings. Traditionally, a cinema would make enough money off the regular attendance consumer, and make bank on the blockbusters.  But as the regular movie goer are now diminished, if we have a string of blockbusters that flop, the multiplexes are in serious trouble.  This is the key reason multiplexes are no longer considered the future of cinema.  Yes, many will still survive, but business conditions have changed to no longer make them the profitable path. Multiplexes are now far more risky, and risk cost money.  This explains why Entertainment Complexes with fewer screens are now the trend in overseas cinema openings.  Everyman is an example of an overseas cinema chain of note in this regard.  In the UK, Everyman has been opening many locations that offer multi enertainment offerings with far fewer screens than traditional cinemas, while major chain locations have been closing in reaonable numbers.
• The death of sub-run films:  Small cinemas rarely take films after their initial release week. Instant reviews, streaming, and compressed distribution windows have dramatically reduced the viability of sub-run or third-week screenings, making it riskier to book marginal films. This is an extremely important development for smaller cinemas and the development of new cinemas going forward.  This is where the business of cinema has changed considerably already, but still has a long way to go.  SCO did a lot of work with one major distributor to open the door on this issue, while most of the smaller distributors have followed, reducing or ending policy and minimum guarantee (MG) that reduces the risk for a small cinema to take a film.  The traditional policy and Minimum Guarantee (MG) are designed to favour the larger multiplex and reduce competition by smaller cinemas around them.  However, in this environment, unless cinema business models change, we are likely to see a far greater contraction than otherwise would be required.  As some sites close down, these conditions will make it difficult for smaller sites to fill the gap.  For example, when opening a new small cinema, traditionally you are only given subrun for a few years. I experienced this, and it made it difficut to attract customers. That is no longer a path to starting a viable commercial cinema.
• Adult audiences continue to decline: Betterman is the best cinema centric film consumers will not see at the cinema this Christmas.  We can learn a lot from this film and other adult tageted films this Christmas. As a cinema operator, there was always an expectation Betterman would have a difficult time.  The premise of the film is difficult for the consumer to grasp. Those who see it love it.  Word of mouth is great.  But the target audience, older time-poor consumers, are deciding on mass to wait for the streaming version.  So far, this Christmas, films targeting older demographics have dramatically under performed.
  During the Christmas period, cinemas focus on PG/younger audiences, but it is the combination of counter programming and having multiple demographic segments coming all at the same time during a holiday period that allows cinemas to hit higher Box Office attendance levels.
  There is an expectation that when the holidays end, the older demographic will return, however, the trend seen in the far lower levels we now see between peak periods is an indication that we are not likely to see a strong return, and is the most obvious concequence of how streaming has changed consumer behaviour and the box office totals.
• Holiday success driven by family films: Did parents encouraging kids to “GET OFF YOUR SCREEN” save cinema this Christmas?  I hate to say it but I think this is a major factor.  Kids films over indexed relative to all other genres.  This is a trend we need to understand and take on board.  It will affect what films Hollywood green lights in the future.  Not in a path I consider healthy for the industry.  Hollywood will follow the money, however, the more cinema focuses on specific targeted demographics, reboots and sequels, the more risky it will become as consumers can be fickle. Counter programming is key to maximise attendance levels and broad appeal to consumers.  We must also remember, the holiday periods are limited.  We still need to attract more mature audiences outside the holiday periods.
• Economic pressures shape attendance: The economic conditions and cost of living crisis has resulted in cinema indexing higher than expected.  This may appear counterintuitive, but yes, consumers have chosen to spend considerably less on large holiday expenses.  This has resulted in them staying home and spending more money locally.  Speaking with regional cinema operators, I have noted that there is a major and unexpected trend - holiday locations with cinemas have seen a reduction in attendance while non-holiday locations have seen a significant lift.  It shows how cinema is still considered an inexpensive form of entertainment outside home with the cost of living crisis resulting in an uplift for many sites and the industry as a whole, however difficult times will continue for many years.  As wage growth is still way behind inflation, every day that goes by, consumers have less disposable income and reduces the potential audience for cinemas.  The cinema industry has shown amazing resilience in 2024, however, with yet a cheaper alternative again, streaming at home, available to consumers. At some point consumers may start cutting back on cinema too. We need to take this into consideration going forward.

As can be seen above, maintaining a commercially viable cinema in these difficult conditions takes more effort.  The fall in Box Office in an economy with rising costs is making it very challenging. Sites are likely to close, but others will survive, and more are likely to open in green field locations.  I write this newsletter as a guide on how to read the signs of how to best shape your cinema business to give it a better chance to succeed in these challenging times.

Adapting to a New Reality

I know distributors and other industry pundits from around the world also like to read our small newsletter targeting Australian small cinema.  My message to them is this: the business of cinema needs to adapt to the new reality of consumer demand.  Traditionally with film prints, and expensive operational costs, the model was designed to favour larger multiplexes as they could service more ticket sales with minimal running costs.  As consumer behaviour has changed, this model is now failing to appeal to the consumers who have now developed a more refined taste.  Streaming has taught consumers to only accept exactly what they like to watch or listen to.  It is now, like in the music industry, far harder to make a film that has broad appeal.  This is a key reason lower screen numbers per site are now the norm for cinemas.

This environment makes it more difficult for larger multiplexes, and more sustainable for cinemas with a medium number of screens. Small cinemas with 1-2 screens are a labour of love, or, as part of a larger entertainment complex, a viable path.  However, the Policy and minimum guarantee applied in many regions significantly reduce the viability of smaller cinemas.

Now digital, minimum guarantee of $100 is very realistic while some distributors have abolished it completely. A policy of one or none is also no risk to the distributors.  Allowing these far more lenient conditions allow a smaller cinema to take a risk on a film they think may catch on in their catchment.  Otherwise, they become a cinema that only ever books tent poles and bounces from tent pole to tent pole as risks become too high.  It is better to minimise costs. This, however, also reduces the viability of the location.

Many smaller distributors have realised the win is simply getting a cinema to take the film. Larger distributors still would prefer to protect legacy models that are resulting in poor outcomes and diminished cinema culture., which plays into the streamers' hands.

Like the freedom a consumer has at home to watch any film from any distributor, so too should cinemas operators be able to go in as hard or as soft as they wish, depending on how they decide to promote a film to their catchment.  A catchment whch they know personally, and that respects them for the localised curation offered. Subrun, in general, is poison to a commercial cinema, however,  we understand why limited releases are still common for niche content. For broad appeal content, distributors should consider giving all cinemas access to their content in a way they can make money. By continuing to offer films at subrun to smaller cinemas, many people will choose to watch the film on streaming instead.

Times have changed, and we need to change with them.  Curation and the ability for a cinema to have control over what films they show and for how long is the path to maximise consumer involvement in cinema.

As always, happy to discuss my rants with anyone interested.

P.S. In a recent previoud Newsletter I spoke about issues concerning End Of Life (EOL) issues with cinem equipment. See THIS newslatter, This was also discussed in a popular UK cinema podcast.  I recommend those interested have a listen (Mostly covered in the later portion of the audio podcast): In The Pub With Mike Bradbury - Episode 15 - Wake-On Lan

P.P.S. SCO still have some free CRU DX115 units to give away if anyone is after them.  (Destination pays for shipment costs only)

Regards,
James Gardiner
Small Cinema Owners
www.smallcinemaowners.com.au