Wayne Smith.
Wayne Smith has just stepped down after 15 years as MD of Reading Entertainment. IF asked him to respond to claims that Reading triggered widespread ticket discounting and to reflect on the company’s growth and the future of exhibition.
Q: You say it’s time to correct the many misconceptions and untruths that are out there regarding Reading. I assume you are mostly concerned about criticism of your policy of ticket discounting, which many exhibitors and distributors say forced competitors to slash their prices?
A: Firstly I and many others view a general admission price of $22 as unsustainable. The average family on a basic wage simply cannot afford this sort of pricing; it’s just not a compelling value proposition.
Secondly, I say that Reading is not a discount exhibitor; that’s coming from people who argue that $22 is where the industry should be as a price point. Reading has a well-considered, orderly and balanced pricing structure underpinned by a unique marketing strategy that puts the customer first. My strategy has been to establish a sustainable business model, deliver growth and create for Reading a true point of difference from the major exhibitors.
The catalyst to Reading implementing a Value Pricing Model was Event Cinemas, which in 2011 introduced at Southport $8.50/$6.50 pricing. Event’s Glendale cinema followed closely behind with the same pricing. After 12 months of Reading experiencing a material loss in admissions and box office at Harbour Town and Charlestown, we had to respond head on to Event’s pricing strategy.
The only difference was that I addressed a competitive response in a holistic way by re-engineering Reading’s entire business model which I call our Value Pricing Model. Using Harbour Town as an example, the end result was that customer numbers increased from approximately 450,000 admissions in 2012 to more than 1 million in 2017.
My strategy was to implement a pricing matrix that had, at its core, maintaining an average ticket price at the highest possible position, which actually was not that far below where the average ticket price was prior to implementing Value Pricing.
Most informed industry players know that $10 is not Reading’s true price point. A significant portion of Reading’s business is generated via its Premium, Gold Lounge and Titan (large screen format) offers. So it’s not a one size fits all. Although it’s fair to say $10 was a marketing platform that was a ‘means to an end’ which was backed up by a consistent refurbishment and re-positioning program.
If you look closely at where Reading’s cinemas are located mostly they are not situated in competitive trade areas. In Melbourne, Reading’s cinema locations couldn’t be situated further towards the city’s extreme perimeters.
Reading doesn’t have the safety net of being located with the country’s top 20 shopping centres. For example, when Reading acquired Melton and Sunbury those cinemas were bankrupt. Today, those same assets are an example of how to do something well.
Q: Another criticism I have heard is that because Reading owns most, if not all its locations, it could afford to lower ticket prices and rely on concessions to make money. That is not so?
A: This statement is also incorrect. In the mid 1990s, in order to gain a presence, Reading did acquire several independent freehold cinemas. In 2018, of its 20 Australian locations only four are sites that Reading owns outright. In New Zealand it’s more towards a 50/50 split.
Reading’s supply, operating and real estate expenses are similar to what other exhibitors experience so there’s no smoke and mirrors in this regard. I’ve just tried to be smart in the way that I’ve structured the business.
Where Reading’s strategy has departed from other exhibitors is that the company has re-invested along the way to acquire a broader real estate portfolio that expands into the retail and shopping centre world.
Q: Can you chart the growth of Reading in the number of screens/locations during your tenure?
A: Industry players will recall the anti-competitive conduct that Reading was exposed to in the early years which, via the company’s persistence, resilience and good business standing, has been overcome.
When my tenure commenced in early 2004, Reading had 92 screens at 11 locations. Today, Reading has 203 screen at 29 locations in Australia/NZ.
So in my time Reading has grown by 111 screens at 18 locations along with various other real estate assets. Reading has sought out quality deals plus it’s closed several underperforming cinema assets in order to arrive at the Reading circuit of today. The strategy was always quality over quantity.
Q: How would you say Reading is positioned and how do you regard the future of exhibition?
A: Clearly it’s a highly competitive industry and nothing in business can be taken for granted. What I think Reading can be most proud of is that with a small team of 15 people we built a highly credible and successful business that today has 11.2 million customers and combined Aus/NZ annual cinema revenues of about $A160 million.
The company’s underlying foundations are sound, with what we’d like to think is the largest social media footprint via a massive Facebook database that rivals some of Australia’s largest corporations. Reading’s key relationships with the studios have never been better and its market share growth in recent years has exceeded the industry average.
The future of exhibition is solid. As an industry, exhibition has evolved via significant reinvestment by all players in both technology and the consumer’s entertainment experience. As long as that continues and the commodity that we sell remains a relevant and compelling offer, people will still want to experience ‘out of home’ entertainment on the big screen.
Q: After 15 years as MD why did you decide to step down?
A: After a career of 22 years at Hoyts and 15 years at Reading where I have leased, developed or acquired 54 cinemas comprising 447 screens, it’s now time to do something a little different and allow generational change to take place. For the moment I’m staying on as a non-executive director with Reading so, I’m still active in the industry but I’m no longer a day-to-day employee.
Q: Who is succeeding you?
A: A long term colleague of mine, Mark Douglas, is stepping in to fill my shoes. Mark is a highly experienced executive who, like myself, is a property specialist. Mark has had exposure to most aspects of the Reading business and will quickly gain the respect of his industry peers.
Q: What will you do next?
A: My wife and I own a successful vineyard and accommodation business located at Redesdale about 75 minutes from Melbourne which is where we live. My time is divided between that business and the cinema world where I’d like to think I’ll still have a few more years of active participation.