Five consecutive $100 million-plus months show Australians are returning to the big screen. But ageing digital projectors are creating a major replacement bill that could put cinema access at risk across regional Australia.
Australian cinemas are booming.
The national box office has topped $100 million for five consecutive months, including a record May and a record August.
Australians are going to the movies. But behind the screen, a major equipment bill is on its way.
Independent Cinemas Australia (ICA) estimates $85.4million of digital projection equipment needs to be replaced across 243 independent cinemas and 854 screens.
The businesses are viable. The equipment is ageing.
The reason so much equipment needs replacing at once goes back to Australia’s rapid conversion from 35mm film to digital cinema more than a decade ago. Hollywood studios wanted the change because distributing movies digitally was much cheaper than manufacturing and transporting thousands of physical film prints.
Through a system known as the Virtual Print Fee, or VPF, some of those savings were used to help cinemas pay for their first digital projectors.
It worked. Australia converted rapidly, which meant a large part of the country’s projection equipment was installed within a short period of time.
Now that equipment is reaching replacement age, and it is happening at around the same time. The original funding system was a one off, leaving cinemas to finance the next generation of equipment.
“This isn’t a problem ten years down the track. The replacement cycle is here,” ICA CEO Nick Hayes said.
“Cinemas are replacing projectors now, and many more will need to do so in the next few years.”
THE PROJECTOR COSTS THE SAME WHEREVER YOU PUT IT
The replacement challenge is greatest for smaller and regional cinemas, particularly those in rural and remote areas, because the cost of the technology does not fall with the size of the community.
“A projector for a screen in Broken Hill costs essentially the same as a comparable projector on George Street in Sydney,” Hayes said.
“In regional, rural and remote Australia it can actually cost more once you add the travel and accommodation costs of getting specialist technicians there to install and service it.
“And if you operate four screens, you have four projectors to replace. The equipment bill doesn’t discriminate by how many people live around your cinema.”
That means a regional cinema can have strong audiences, pay its bills and be a viable business, but still struggle to finance hundreds of thousands of dollars of essential equipment within a short period, especially after weathering the twin storms of Covid and Hollywood strikes in recent years.
It is a capital problem rather than an audience problem — and ICA’s research shows that if it is not solved, the consequences will extend well beyond the cinema itself.
ONE MILLION REGIONAL AUSTRALIANS COULD LOSE THEIR LOCAL CINEMA
ICA has modelled what would happen to cinema access if the independent cinemas under the greatest equipment-replacement pressure were unable to finance new projection equipment.
Around one million regional Australians — more than one in nine people living outside the capital cities — could lose their local cinema.
Forty-six regional communities could be left without a cinema in town. ICA is not predicting that individual cinemas will close. The modelling measures what would happen to surrounding communities if cinemas facing the greatest replacement pressure were unable to replace their equipment.
“In a capital city, if one cinema disappears there is usually another one reasonably close by,” Hayes said.
“In regional Australia, the local cinema can be the only cinema for a very long way.
“That is where an equipment financing problem for one business becomes an access problem for an entire community.”
A FINITE PROBLEM WITH A FINITE SOLUTION
ICA’s No Cinema Left Behind proposal sets out a national solution to the current replacement challenge.
The principle is straightforward: the cinema industry continues to fund a substantial share of its equipment renewal, while government co-investment closes the gap where otherwise viable independent cinemas cannot finance the replacement alone.
The level of support would reflect the cinema’s capacity to contribute. Cinemas able to fund more of their replacement would do so, with greater assistance directed to those facing the largest financing gap.
“This isn’t about government buying projectors for cinema businesses,” Hayes said.
“Cinema operators will continue to invest in their own businesses.
“The goal is to make sure every viable independent cinema has a realistic path toreplacing the essential equipment it needs to stay on screen.”
ICA has kept Screen Australia closely informed as its research has established the scale of the digital renewal challenge. Screen Australia has assisted ICA’s understanding of the issue, but does not currently have a funding program or budget for cinema infrastructure.
ICA is also working with the Australian Government on options for a national response.
WHERE AUSTRALIAN STORIES MEET AUSTRALIANS
Australia invests at least $1.3 billion dollars in creating Australian screen stories. But that investment does not end when a film is made. It has to reach an audience. Cinemas are where Australian stories meet Australians — and in many regional communities, the local cinema is the only place audiences can experience those stories on the big screen.
“Cinema is the last mile of Australia’s screen investment,” Hayes said.
“We invest in making Australian stories. We also need to make sure Australians still have somewhere to see them.”
Protecting cinema access protects the public value of Australia’s investment in Australian screen content.
And unlike many of the challenges facing the screen industry, ICA says this one can be quantified and addressed.
“We know the equipment that needs replacing, we know what it costs and we know where the greatest pressure sits,” Hayes said.
“This is a finite infrastructure problem with a finite solution. The time to fix it is before an ageing projector becomes a closed screen.”
