Australian cinema exhibition lost $340 million in the first quarter and the count is not over

Australian cinema chains lost approximately $340 million in box office and concession revenue in the first quarter of 2020. The figure is derived from filings by EVT Limited (Event Cinemas), Wanda Group subsidiary Hoyts, and Village Roadshow’s exhibition division, measured against their corresponding Q1 2019 performance. January was normal. February was soft. March was a cliff.

The federal government ordered cinemas closed on 23 March. Most chains had already begun reducing sessions in the week prior, with Event Cinemas cutting its screening schedule by 60 per cent from 16 March and Hoyts closing its Gold Class and Lux offerings on 18 March. By the end of the month, every commercial cinema screen in Australia was dark. They remain dark at the time of writing, with no confirmed reopening date.

The chain-level numbers

Event Cinemas, the largest exhibitor in Australia with approximately 480 screens across 45 locations, reported an entertainment division revenue decline of 58 per cent for the quarter. The company’s half-year filing to the ASX confirmed that the entertainment segment, which includes cinemas and related businesses, moved from profit to loss in the second half of its financial year. Exact cinema-specific losses were not broken out, but industry analysts estimate Event’s cinema operations lost between $140 million and $160 million in the quarter against 2019 comparables.

Hoyts, which operates approximately 400 screens across 32 locations, does not file publicly in Australia. However, parent company Wanda Group’s quarterly disclosure to the Shenzhen Stock Exchange noted that its overseas cinema operations recorded a 52 per cent revenue decline in Q1 2020. Applied to Hoyts’ estimated annual Australian revenue of $350 million, the quarterly loss sits in the range of $90 million to $100 million.

Village Cinemas, the joint venture between Village Roadshow and Event, operates approximately 220 screens across 17 locations in Victoria and Tasmania. Village Roadshow’s ASX filings reported a cinema division revenue decline of 64 per cent for the March quarter, reflecting Victoria’s earlier and more aggressive public health response. Estimated losses: $55 million to $65 million.

The independents behind them

The chain numbers are large and abstract. The independent cinema numbers are smaller and specific, and in many cases they are worse.

Palace Cinemas, the largest independent chain with 19 locations nationally, had been in voluntary administration since October 2019, prior to COVID. The pandemic accelerated what was already a distressed situation. Palace’s administrators confirmed in April that the closure period would require a revised deed of company arrangement, and that several sites were at risk of permanent closure.

Dendy Cinemas, which operates premium locations in Sydney, Melbourne, Brisbane, and Canberra, furloughed its entire casual workforce (approximately 400 staff) by 25 March. Management staff were placed on reduced hours. The company confirmed it was accessing the government’s JobKeeper program where eligible but noted that many casual employees did not meet the 12-month employment threshold required for eligibility.

Lido Cinemas in Hawthorn, Cinema Nova in Carlton, the Astor Theatre in St Kilda: each of these venues operates with smaller financial reserves than the chains, higher per-screen overheads, and a programming model built around the arthouse and specialty releases that were the first titles to be pulled from distribution when cinemas began restricting capacity.

The staff question

The exhibition sector employed approximately 12,000 people nationally at the end of 2019. By mid-April 2020, an estimated 9,500 of those positions were either terminated or stood down without pay. The major chains announced stand-downs in stages: Event stood down 8,000 staff across its broader entertainment division on 24 March. Hoyts followed on 25 March with a company-wide stand-down affecting all cinema employees. Village’s staff reductions were communicated on 26 March.

JobKeeper, announced on 30 March, provided a wage subsidy of $1,500 per fortnight to eligible employees of eligible businesses. The program was designed for the economy broadly, not for the exhibition sector specifically, and its eligibility criteria created gaps. Casual employees with less than twelve months’ tenure were excluded. Employees of foreign-owned parent companies faced additional complexity in establishing eligibility. Hoyts’ ownership by Wanda Group created uncertainty about its employees’ eligibility that was not resolved until mid-April.

What is not being measured

The $340 million figure captures direct revenue loss to exhibitors. It does not capture the losses to the businesses that depend on them. The distributors who deferred release dates. The marketing agencies that cancelled campaigns. The cleaning companies, food suppliers, and equipment maintenance firms that lost their cinema contracts overnight. The suburban landlords whose anchor tenant stopped paying rent.

It does not capture the cost to the films themselves. Approximately 15 Australian features were in various stages of release planning for Q2 and Q3 2020. Some have been pushed to late 2020 or 2021. Some have been redirected to streaming platforms at terms that reflect the desperation of the moment rather than the value of the work. Some are in limbo, waiting for a theatrical market that may not resemble the one they were made for when it eventually returns.

Three hundred and forty million dollars is a Q1 number. The cinemas have now been closed for nine weeks. The Q2 number will be worse.