Hoyts CEO Damian Keogh on Stan, streaming and playing poker with the studios; TEG's Geoff Jones on resuscitating live events
Film studios have "hardly bent over backwards" to help their 111-year old distribution partners during Covid, says Hoyts CEO Damian Keogh. But production bottlenecks mean a huge slate is set to drop for the next year or two - and the boot will be on the other foot. Hoyts is also countering the studios shift to streaming with local plans of its own. Meanwhile TEG is planning the mother of all comebacks for Australian live music and sport.
- Cinema revenues back 65% in 2020, but CEO Damian Keogh hopes for big second half.
- Studios prioritising streaming businesses a challenge, Hoyts cutting "Covid deals" to stay afloat.
- But huge slate means a big film "almost every week" later this year, "and the shoe will be on other foot".
- Hoyts speaking with local streaming platforms such as Stan, looking at classics and live music combos.
- TEG's Geoff Jones says 2021 a write off for big sports events, but big pick-up from 2022.
- Australian artists leading the charge for music this year, with Guns N Roses selling fast for November.
- "Big, big six months for live music in Australia and New Zealand from October onwards".
The Van Gogh exhibition in Sydney sold more than 270,000 tickets. It was phenomenal and showed people want to get out there and do stuff.
Big world versus small screen
The last time Mi3 sat down with Damian Keogh was March 2020, when the pandemic was taking root. The US stock market had just suffered its three steepest drops in history, businesses around the world were freezing spend, standing down staff and slashing wages, and in Australian supermarkets, people fought over toilet roll.
Keogh was placing Hoyts into “survival mode” as it shut cinemas for the first time in its 111-year history and laid-off 3,000 staff. He was hopeful that life might return to some kind of normal after mid-year, but things didn’t quite pan out that way.
Across 2020, a $1.2bn Australian industry tumbled 65% to $400m. Dependent on Hollywood studios for feedstock, it remains hamstrung by a production hiatus. Keogh says Hoyts is currently making about 37% of what it normally would, though he is hopeful that will get closer to 80% in the second half.
But in less than a year, the world has changed. Post-Covid, the big entertainment companies have even greater incentive to push films more quickly to their burgeoning streaming platforms, especially as key markets remain overwhelmed by the virus.
That shift does little to help markets such as Australia, where prudent “hard and early” virus management means recovery is underway. The intensification of big studio ‘streaming wars’ now presents a bigger competitive threat.
“It’s a bit of a concern,” admits Keogh. “The studios are grappling with this balance of building a home entertainment direct-to-consumer model, along with the traditional model … But the most lucrative window has always been exhibition.”
He points out that pre-Covid, global box office takings in 2019 stood at US$43.5bn. “That was a record level,” says Keogh. “So I think the studios need to find their water level and the right relationship [between the two distribution models].”
He thinks that shakeout has some way to go, which is causing some drag.
“In the short-term, we’re inheriting from the US some interesting discussions with the studios. Out business has been around for more than 100 years and through that time, there’s always been some reliance on our landlords and on our studios,” says Keogh.
“Our landlords have certainly assisted us through this. The studios haven’t exactly been bending over to help us, and that has been a bit frustrating,” he adds.
“It’s also a signal that we’re in a global business. So what is really happening in Hollywood, we’re inheriting down here.”
“The studios are grappling with building a home entertainment direct-to-consumer model, along with the traditional model … But the most lucrative window has always been exhibition.”
Covid deals, card sharps, diversification
Like businesses world over, Hoyts has had to adapt to the environment. For example agreeing with HBO to screen Wonder Woman even though it would be available on streaming sites 30 days later, instead of the usual 90 days.
“We’re doing Covid business deals,” admits Keogh. “I’ve been pretty open about that. We need content to put bums on seats to keep our cinemas open and pay employees.”
But he thinks the pendulum will swing back sooner rather than later – when the production bottleneck results in a monster line-up.
“Hopefully by July, when the release slate starts to get back to normal, we’re going to have a big movie almost every week and the shoe is going to be on the other foot,” says Keogh. “The studios will be coming to us asking for more screens. It’s a commercial negotiation, and at the moment they are holding a few more cards than us. But things will turn around.”
In the meantime, the pictures that have made the big screen have reaped the benefit, including homegrown crime drama The Dry, starring Eric Banner. As a result, Keogh says the film “stands a good chance of getting to $18m [in local takings] making it probably one of the top five or six box office movies in the history of Australian cinema”.
As the studios diversify, so too is cinema. Keogh says Hoyts has had discussions with streaming services such as Stan about content deals, and is also experimenting with new formats that combine retro classics and live music - with Dirty Dancing and band Never Ending 80s first up in February.
“We’re evaluating our whole content strategy and our model will evolve. But what we recognise is that cinema is an out of home social activity where people want to watch content that is relevant to them,” says Keogh. “While it'll always be dictated largely by the blockbuster and the first release movie, there's certainly a big appetite for people to go and see things with like minded people.”
Keogh thinks the Australian public is now “Covid confident” and ready to return to the cinema, though some states are more wary than others. For example SA and WA were up 50% year on year in the September school holidays, whereas Sydney was back 30%.
“But the more there is zero community transmission, the more people are willing to go out and do things and I think we are seeing that in general life.
“What enthuses me is the great numbers we've had on things like Wonder Woman and The Dry. That definitely shows that if the content is there, people will come out.”
Live events: Still alive
TEG CEO Geoff Jones is a little less bullish for the immediate future of entertainment. While New Zealand is “almost back to normal,” Australia “is coming back, but it is going to take some time”, says Jones. Globally, there is a huge amount of ground to regain for the firm acquired by US entertainment giant Silver Lake in October 2019, reportedly for north of a billion dollars.
The global nature of the business – and the lead times involved – make that a tough ask.
“If we knew when things were going to get back to normal, we could plan. But we don’t,” says Jones. “In our industry, certainly concerts, that content emanates in the main out of the US and the UK. Both of those countries remain basket cases with Covid.”
With Australia’s borders remaining largely closed, homegrown operations are pretty much the only game in town for the immediate future.
“We've invested a lot in Australian content and in March we start a series of Australian outdoor and arena shows, all of which have sold really well,” says Jones. He cites the 270,000 tickets sold to the Vincent Van Gogh exhibition as a sign that Australians are hungry for cultural experiences, and to just “get out there and do stuff”.
“So we are cautiously optimistic, but we have a long, long way to go. The live entertainment industry has been as badly hurt as the tourism and travel sector, if not worse.”
Guns N Roses, Keith Urban, insurance problems
As well as signing up Australians Delta Goodrem, Guy Sebastian and Amy Shark for arena tours this year, TEG Group “took a punt” before Christmas on booking Guns N Roses for this November. “Luckily, it’s selling really well,” says Jones, though that’s probably down to the derisking power of TEG’s data analytics business rather than luck. Meanwhile the punters are also lapping up Keith Urban, booked to perform at eleven arenas in December. “So the prospects are strong,” says Jones.
He thinks sales data indicates the tide is turning even in markets like Victoria.
“The boxing day test against India at the MCG, which usually comes second [in terms of demand] only to an Ashes match, didn’t sell out. In my view, that says the Victorian public were not quite ready,” says Jones, with sales also crimped by interstate restrictions.
“But the sales for Guns N Roses and Keith in Melbourne and Victoria suggest that they are getting their confidence back after a very long lockdown.”
Yet it’s not all plain sailing in terms of bringing international acts to Australia, even if borders can be negotiated.
While the likes of Guns N Roses and Keith Urban aren’t quite there yet, Jones says the post-Covid world poses a new challenge for the more mature performer.“Insurance is a massive issue now. Many of the artists who are the highest selling and most profitable are in their seventies – and artists in their seventies have issues from time to time. So that's a potential thing going forward,” says Jones
Big sports: kicking goals next year
Jones touts “huge” appetite from international sports teams to come to Australia. He says while this year is a write off, the rest of the decade looks good.
“To be frank, we're not looking to [do big international sport] now until 2022. But we've got a great pipeline for 2022, 2023, up to even 2029 in some instances,” says Jones.
Overall, he sees the entertainment business “really hotting up, all things being equal, from October. From there to March will be a really big six months for music in this country and New Zealand.”
That's just the jingle a long-suffering public – and entertainment industry – needs to hear.