Independent Cinemas Australia has released a new report identifying major issues facing Australian cinemas looking to renew their screens for a new generation.
In its analysis of cinemas across Australia, comprising around 390 cinemas and 2,092 screens, ICA found that many cinemas that may be due for screen equipment renewal will not have the operating profit to cover this as necessary.
Applying an indicative renewal cost of around $100,000 per screen, the report found a modelled national renewal exposure of $209.2 million required. Major cinema circuits will reportedly need around 2.08 years of aggregate modelled operating profit to meet these renewal requirements, while those on the independents require 3.99 years of profit, and those unaligned need 6.07 years of profit.
The report flags the possible future issue that cinemas in need of renewal will not be able to continue operation as their current operating profit will not support the cost of new equipment.
ICA research identifies challenges for cinema renewal – quick links
How cinemas were renewed in the prior decade
As the report points out, the challenge facing aging cinemas in the modern era is different to that facing the previous generation due to a lack of funding infrastructure.
When cinemas converted from 35mm film to digital projection, this transition was supported by the Virtual Print Fee, an industry-wide subsidy paid by film distributors which partially covered the cost of newer equipment.
‘The VPF redirected part of the distributor’s avoided print cost towards the equipment required to receive digital releases,’ the report outlines.
‘An integration or financing entity arranged capital for approved systems; exhibitors entered long-term agreements and made required contributions; and participating distributors paid a virtual fee when eligible films were booked. The accumulated payments progressively repaid the financed equipment cost and ceased when the agreed amount or term was reached.’
This allowed for cinemas to replace their equipment with direct support. Now, the challenge is not in the transition of film equipment, but with replacing existing, aging machines that may not be reliable anymore. As the report says, the VPF is no longer a viable option as this was put in place for genuine cost-savings on the part of the distributor. Replacing old equipment is simply a cost to be taken on.
ICA’s Digital Mark II Model proposal
Following its research, ICA has developed a proposal to help ease the burden of this potential transition, with a focus on allowing cinemas to continue operation. As it points out, these are essential parts of Australian culture, often serving as meeting points and allowing the Australian arts to thrive on screen.
To ensure cinemas are able to operate well into the future, ICA has proposed an array of possible solutions including: ‘ordinary commercial investment where capacity exists; standard matched co-investment to move much of the independent fleet into a feasible renewal horizon; and a tightly assessed enhanced stream where commercial capacity and public access have most clearly diverged.’
As it makes clear, this isn’t a proposal for funding, but encouragement for greater support for cinemas in Australia, as well as understanding of the impending challenges they may face.
‘Cinema infrastructure is the point at which screen production becomes public experience,’ the report says. ‘It is where Australian stories enter the lives of Australians; where we laugh together, fall silent together and, sometimes, even applaud together. It is in these shared moments that films cease to belong only to their makers and begin to earn their place in our national culture.’
‘That is what is at stake. Not simply a generation of projectors, but a generation of shared experiences.’
ICA has said it wants to work ‘constructively’ with the Australian government and industry on a response to this challenge, to help support cinemas and maintain public access to screens across the country.
You can read the full findings of the ICA report online.
