Central Coast Council has agreed to extend special rental conditions for Metro Cinemas Lake Haven to help keep the business afloat as the broader cinema sector continues to struggle.
The cinema’s rent for the period February 1, 2023-January 31, 2024 will be set at 15 per cent of the business’s monthly turnover (as opposed to the 18 per cent originally recommended by Council staff).
The operations of the cinema, which was built on behalf of Council with the needs of the youth of the northern Central Coast area in mind, remain financially challenged, a report to Council said.
“This is consistent with challenges in the broader cinema sector arising both from the lingering effects of COVID-19 (which has had a significant effect on indoor public gatherings of all kinds) and long-term trends in the entertainment industry (the rise of digital entertainment services and the move from cinema-based movie distribution),” the report said.
Temporary rental arrangements based purely on turnover were initially introduced at the height of the COVID-19 restrictions to meet Council’s obligations as a commercial landlord under COVID regulations.
This was in order to provide the operator with more time to return the cinema complex to self-sustaining commercial viability.
But as the movie industry worldwide continues to face challenges, with the consumer attraction of movies only gradually recovering, many cinemas are closing up shop or are being radically remodelled to accommodate changing viewer preferences, the report said.
“In the case of the cinema complex at Lake Haven, the community implications of a potential closure need to be taken into account, as a significant part of the purpose for establishing the cinema in the first place was to improve the spread of positive opportunities for both daytime and night-time social gatherings in the local area,” it said.
“For the next 12 months, maintaining the viability of the cinema’s operations is considered highly desirable, provided that some level of commerciality can be maintained.
“Metro Cinemas is in an unusual situation.
“Other Council tenants have generally been able to return some level of normality whilst the cinema industry remains heavily burdened by COVID-19 and remain one of the worst affected businesses.
“From January 2019 to December 2021, 81 cinema complexes closed in Australia representing 15 per cent of total cinema complexes.
“The major Australian cinema groups are considering their options by selling assets and closing non-performing sites.”
The report said challenges facing the cinemas included: a drought of blockbuster movies which were not made due to COVID lockdown restrictions; film studios screening movies on their streaming services rather than cinema; and the non-return to cinema of Generation Z, the largest cinema audience pre-COVID.
Council previously resolved to offer a purely turnover based rental to Metro Cinemas Lake Haven in place of the fixed base rent on a temporary basis in November 2021, April 2021 and June 2022.
The percentage of turnover that applies to the rent has varied over time between 15 per cent and 20 per cent.
“Council staff have had a series of meetings and correspondence with the operator of Metro Cinemas Lake Haven about both the immediate and medium-term prospects of the cinema complex,” the report said.
“It is evident from those meeting that, for the cinema to remain financially viable in the short term at least, a turnover based rental is essential and that (in the absence of incentives such as NSW government entertainment vouchers) the maximum level of turnover rent that can be sustained is 18 per cent.”
Council will monitor gross turnover over the next 12 months to see if viability improves and further discussions will be held with the operator in relation to its proposed strategy to improve financial viability.
Council will also look at longer-term options to improve the commerciality of the arrangements under which the cinema complex is operated.
Source:
Central Coast Council meeting, Jan 24