Tuesday, June 11, 2024

Ster-Kinekor shutters 2 cineplexes as it seeks tie-ins with streamers on tentpole premieres.

by Thinus Ferreira

Sterk-Kinekor has ended its latest retrenchment process, shuttering two cinema complexes and letting go of 52 workers as it now wants to work with video streamers like Netflix, Showmax and Disney+ to try and do theatrical releases of some of their tentpole film and series premieres.

The South African cinema chain - owned by the British-based Blantyre Capital and Greenpoint Capital after exiting business rescue in November 2022 - initially told staff that it looked at closing up to 9 of its cineplexes and getting rid of up to 236 workers, or a third of its total workforce.

Ster-Kinekor - which competes with Nu Metro and a few independent cinemas dotted across South Africa - blamed plummeting cinema attendance in the country for having to close cineplexes and downsizing on staff.

Ster-Kinekor has 41 remaining active cinema complexes, with the local exhibitor industry facing immense pressure, similar to what is happening in the United States and the United Kingdom, due to the surge in digital video-on-demand streaming services like Netflix, Showmax and Disney+.

While the number of luxury and budget screens in South Africa has remained flat and indie exhibitors manage to remain afloat, there's been small growth in the novelty drive-in circuit the past four years.

In response to a media query, Ster-Kinekor confirmed to me that it completed its Section 189 retrenchment process at the end of May and instead of nine or more cinema complexes shuttered just two: the Boardwalk in Richard's Bay and the Greenstone Mall in the north-east of Johannesburg. 

According to Ster-Kinekor, it reduced the staff headcount at its head office by between 20% and 25%.

The cinema chain declined a request to interview CEO Mark Sardi and in a response said that of the other cinema complexes it identified for possible closure, the company "is currently in discussions with landlords and partners to consider different entertainment and education strategies within the cinema space".

Ster-Kinekor says it has now launched a "Throwback Cinema" campaign in which it is releasing classic titles at R50 per ticket. This will continue this month and during July with another eight titles.

Streaming: If you can't beat them, join them
Ster-Kinekor says it believes "that we can cohabit in the same ecosystem as streamers and work together", noting that "we have access to data that suggests that if a title launches on our platform first, it will stick longer with the streamers".

According to the company, "this principle of partnership applies across the board whether it be streamers, our landlords, or the movie distributors – the world has changed such that we need to work together".

"Coming out of the Section 189 process, as tough as it's been, has shown us the goodwill that exists among our partners, the mall landlords, our distributors and others with whom we engage."

"We are also protected by what we call the theatrical window, where the film is not allowed to be shown on any other format other than our own for a specific period - typically a 40 to 45 days. Again, once we've screened a title in cinema, people can catch it again on a streaming platform."

"We all work within this symbiotic environment where we can coexist alongside one another and benefit from greater collaboration."

Ster-Kinekor says that apart from Eskom's debilitating load shedding, there's also been the Hollywood writers' and actors' strikes that shut down the "movie factory".

"The consequence of the strike meant that 1.2 million admissions would be delayed by 12 to 18 months. And so, the combination of these two unanticipated events – more intense load shedding and the strikes, resulted in the position that we found ourselves in earlier this year, where we needed to restructure the business in the short term to survive in the medium to long term."

SA cinema cheaper than overseas
"During the Section 189 process, we took the opportunity to revisit and rethink our value proposition," Ster-Kinekor explains.

"Consumers say going to watch a film in cinema is expensive, and that is their reality. Going to a movie in South Africa is around half of what it would cost in the US or UK, but that is immaterial to cinemagoers who, when going to a cinema plus the food and beverages, perceive it to be an expensive outing."

"We need to demonstrate to our customers that it is a unique and valuable experience," the company says.

"We are currently working on new ideas and concepts that we will start testing at select sites over the next few months."

"We have to manage this 12 to 18 month period where the content might be a bit thin in some months, while managing pricing and offering real value to the customer."

"Some exciting new thinking and ways of working smarter have come out of the restructuring process from our teams. We are also fortunate that our investors and shareholders are also active in other markets across the world, so we draw on their US and European experiences to bring best practice to our local market."

"We know that when the content is right, people will visit the big screen. So, is cinema dying? An emphatic no. Cinema is globally one of the very few industries that has survived both a significant technological disruption event - streaming - and a pandemic and we remain resolute that there's still very much a place for it."

"What we need to look at now is how to position it as a more affordable experience for the family, friends and couples."