WILL CINEMA BE A CASUALTY OF THE STREAMING WARS?

CRAIG ROBERTS

Head of Strategy & Insights

in Entertainment

February 12, 2020

Despite more and more Australians taking up streaming services, cinema has just delivered the third-highest box office year on record.

There’s a lot of talk in the media and entertainment industry about the “streaming wars”.

In Australia, it’s Foxtel versus Netflix, Stan, Amazon Prime, Disney+, Apple TV and the constant analysis of declining TV ratings across live sport. But there’s less talk about what impact the rise of streaming over the past few years is having on the oldest form of on-screen entertainment – the cinema.

At Gemba over the past summer, we have seen firsthand the unique and compelling experience that getting out of the house to watch a great movie can provide, as we help our client Westpac deliver Sydney’s Open Air Cinema at the Domain. From a brand perspective, this amazing location provides the chance to deliver a high-quality, premium experience for current and prospective customers wrapped around the shared passion of going to the movies. And there’s no shortage of movie fans wanting to shell out serious money for a unique experience.

Like digital tech, the cinema going experience is an evolving beast. Major cinema chains have not sat back and waited for Netflix to eat their choc-top, so to speak. The CEO of Village Entertainment, Kirk Edwards, has emphasised his organisation’s innovation strategy as a way to keep the cinema experience relevant.

 

 

“Innovation is at the heart of the Village Entertainment brand, delivering first-to-market entertainment solutions for movie-going audiences. From established couples in Gold Class to young families in Vjunior (including a slide), Village Cinemas enables social connections bundled with the magic of storytelling.”

Gemba consumer research has consistently shown that movies are the top shared passion point for Australians across the sport and entertainment landscape. Interestingly, streaming movies now outstrips cinema attendance as the preferred ‘small screen consumption’.

But going out to the cinema remains the most popular out-of-home entertainment option for Australians, alongside live music, ahead of zoos and food & wine festivals. It also out-strips any single sport in terms of passion – AFL, cricket, NRL and tennis all have broad national appeal, but none are as consistently popular across age groups, genders, regions, or wealth demographics as the movies.

 

 

In an entertainment landscape that is increasingly crowded with choice of content, channels, sports, events, memes, gaming and more, are the traditional cinema chains’ efforts to modernise the experience enough to hold back the rising tide? The data suggests that despite the rapid take-up by Australians of streaming services, the old-fashioned movie cinema has held steady. Australians spent over $1.2 billion at the box office last year, making 2019 the third-highest grossing year of all time.

With Netflix penetration growing from 20% to almost 50% of all Australian households in the past five years, plus Foxtel, Stan, Prime and others providing more and more high-quality content, total box office returns for cinemas have remained stable (see chart).

 

 

Gemba research shows that almost a third of Australians have attended a cinema in the past four weeks. Primary motivations are for relaxation, because it is fun and enjoyable, and as a social experience to spend time with friends or family. Compared with at-home streaming, going to the cinema is perceived by movie-lovers as significantly more fun, exciting and social.

 

Blockbuster appeal

The global appeal of major blockbuster movies and the 90-day exclusivity window for cinema releases still gives cinemas a powerful bulwark against the streaming services.

Sure, Netflix and the others are clearly pushing into this space with original, high-quality content. Exclusive series such as Apple TV’s Morning Wars, Prime’s Star Trek spin-off Picard, and Star Wars universe series The Mandalorian on Disney+ might be expected to cut into viewers’ capacity to go to the movies. Netflix’s The Irishman, a traditional Scorsese film featuring De Niro, Pacino and Pesci that had limited cinema release but was made available to Netflix subscribers everywhere, received nominations for BAFTAs and Oscars, including for Best Picture.

But Hollywood keeps pumping out massive hits into cinemas – Avengers: Endgame broke Australian box office records for opening day (A$10.3m) and opening weekend (A$34.1m) in 2019. The Lion King remake, Joker, Rocketman and Star Wars: Rise of Skywalker had the cultural currency, the widespread appeal and the big-screen impact to get Australians off their couches and into cinemas.

A different angle to this continued strength of cinema could be that Australians with Asian and sub-continental backgrounds are highly passionate about going to the movies, more so than Australians of Anglo background. Australia is the third largest market outside India for Punjabi movies, behind the UK and Canada.

Beyond the content itself, improvements to the customer experience with relatively simple but effective innovations such as mobile ticketing, in-seat candy-bar ordering and loyalty programs, keep cinema evolving with modern consumer expectations.

Based on Gemba’s consumer research and our work with both distributors and brands in the industry, there’s every reason to expect that the cinema will continue to remain among the top passion points for Australians, even as at-home streaming continues to grow. Video didn’t kill the radio star, and nor does it seem like streaming has landed any mortal blows on cinema.

To find out more about Gemba’s research, insights and strategy for the sports and entertainment industry, visit http://thegembagroup.com/insights/

(Disclosure: Village Cinemas is also a Gemba client.)