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Lower revenues but higher profits predicted for Oz cinemas

Australian cinemas face a small but steady decline in revenues over the next five years due to piracy, streaming services, digital and pay TV, according to a new report.

IBISWorld predicts the exhibition industry will post $1.7 billion in revenues (up just 0.1%) and $167.2 million in profits in 2014-2015.

The market researcher expects revenues will decline by an average of 0.1% per year to $1.6 billion by 2019-2020 but profits will rise over the next five years as unprofitable companies exit the industry and the cost savings of cheaper film distribution through digital technology are realised.

“The cinema industry is in a state of flux," says IBISWorld’s Cinemas in Australia report, sub-titled Switching screens: Consumers are turning away from cinemas to internet downloads.

“Cinema operators face intense competition from other sources of entertainment, such as video streaming websites and platforms such as iView, and from internet film piracy.

“Increased competition from other sources of entertainment has put downward pressure on profit, which has led some smaller cinema operators to exit the industry. These exits have slightly offset the effects from intensifying competition, leading to a marginal increase in industry profit over the past five years.

“The industry is expected to continue to face intense competition from internet downloads and improvements to home entertainment over the next five years.

“However growth in internet connections is slowing and the Federal Government has expressed intentions to implement legislation to curb video piracy.”

In demographics, it estimates the 18-24 and 25-34 age groups each account for 23% of cinemagoers, with 14-17s at 11%, 35-49s at 22% and 50-plus at 21%.

The report, which tracks 460 exhibition businesses, calculates cinemas derive 67.7% of their revenues from their share of the box-office, with 17.9% from food and beverage, 5.4% from screen ads and 9% from other sources.