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Filmed Entertainment

Filmed Entertainment

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Box-office revenue in Australia fell by two-thirds year-on-year in 2020, as COVID-19 led to a three-pronged challenge for the sector: forced closures, a lack of supply of blockbusters, and the increase in usage and prominence of video streaming services.

2020 was undoubtedly a challenging year for the filmed entertainment industry. While the lockdowns dominated much of the year, once cinemas could re-open, operators sought to innovate by hosting film festivals of reliable back-catalogue movies, movie marathons, and alternative use of their facilities. After lockdowns eased at the end of 2020 across most of Australia, there were some encouraging signs of a recovery in early 2021, notwithstanding the lower than expected performance of the Christopher Nolan epic Tenet. Wonder Woman 1984 and domestic productions such as The Dry performed strongly in Australian cinemas, albeit with longer than normal run times, while screens in the rest of the world largely remained shut. 

The pressure from the streaming giants was magnified in 2020, as audiences were forced to stay home, driving the need for innovative thinking across the sector.

The mandated closure of cinemas as part of lockdown provisions effectively tied the hands of operators, yet many used this time to refine their approach and model. With the Federal Government’s JobKeeper program allowing for the retention of some staff, the majority of operators had the opportunity to develop their value proposition in the face of the pandemic. This included preparing for a world post-COVID where core customers had not experienced cinema viewing for months and there was a need to remind them of the value of a cinematic experience in a theatre. Enhancements to seating, sound and experience continued throughout 2020 and are ongoing through 2021.

This value proposition, coupled with “only in cinema” releases and a slate of upcoming blockbusters, may help cinema begin its recovery of consumer and advertiser spend, with a total post-COVID rebound of -1.1 percent CAGR in the forecast period to 2025 based on the midpoint forecast scenario.

Perhaps the greatest threat comes not from the residual impacts of COVID-19 but the evolution of the streaming service providers. These providers experimented with the "direct to platform" model during the pandemic that bypassed the cinemas. While players such as Disney+ have said they do not see this as a permanent change in distribution, the appeal of the big screen needs to be re-emphasised to entice people off their couches and back into cinemas.

The recovery of the filmed entertainment sector will be as much driven by the return of blockbusters as it will by the confidence of consumers to return to cinemas during a delayed Australian vaccine rollout.

Blockbusters started returning in early 2021, most notably, Godzilla vs King Kong, which relied on cinemas’ big screen and big sound appeal. What comes through the pipeline in the coming months will largely determine the speed with which the sector can recover, along with the uptake of vaccines and the audiences’ preparedness to return to a cinema environment with other patrons.

The upcoming blockbuster pipeline includes a range of big titles including, No Time to Die, Top Gun: Maverick, Black Widow, Marvel Eternals, Dear Evan Hanson, In the Heights, Ghostbusters: Afterlife, Space Jam: A New Legacy, The Suicide Squad, Free Guy, Dune, Last Night in Soho, House of Gucci, Sing 2, West Side StorySpiderman and The Matrix 4.1

The silver lining for the silver screen was the boom in production activity in Australia’s COVID-safe environment, although faster vaccine rates in traditional production strongholds of the USA and the UK may take the shine off what has been a peak production time for local production.

While cinema seats have been slow to refill, there has been a sustained boom in production activity. With the spread of the pandemic contained far more effectively, Australia began increasing numbers of international productions have been basing themselves in the country, attracted by the COVID-safe working environment as well as some generous tax incentives. 

The addition of new production facilities and studio services continues to grow. In the forecast period, it is expected that the traditional homes of production, Sydney and the Gold Coast, will expand to include the new Docklands precinct in Melbourne, as well as the new Byron Studios2 in the NSW Northern Rivers region, and most recently the suggestion of another studio in Coffs Harbour, NSW.3

Provided the supply of blockbusters – including the much delayed James Bond film No Time To Die – can resume, box office revenue is set to continue its recovery at a -0.2 percent CAGR between 2019 and 2025 based on the midpoint forecast scenario, reaching A$1.2 billion in 2025. 

Q1 2021 Highlights

  • In NSW, post-COVID stimulus Dine and Discover vouchers have drawn people back into cinemas, with movie tickets one of the main uses of the Discover voucher category.

  • Promotion of blockbusters such as In the Heights and Godzilla vs. King Kong as “only in cinemas” titile is drawing people off the couch and back to the big screen.

Forecasts at a glance

Physical Sell Through Market (A$ millions)

CAGR 2019-2025 based on the midpoint forecast scenario

Physical Sell Through -13.6%

Box Office Spend (A$ millions)

CAGR 2019-2025 based on the midpoint forecast scenario

Box Office Spend -0.2%

Cinema Advertising Market (A$ millions)

CAGR 2019-2025 based on the midpoint forecast scenario

Cinema Advertising -3.0%

Transactional VOD Market (A$ millions)

CAGR 2019-2025 based on the midpoint forecast scenario

Transaction VOD 6.4%

Total Filmed Entertainment Market (A$ millions)

CAGR 2019-2025 based on the midpoint forecast scenario

Total Filmed Entertainment -1.1%

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