Cinema Scapes: Mapping the Affects of Vertical Integration on Melbourne’s Screen Culture – Leanne Downing

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For over 20 years, Melbourne has been a key site of Australia’s film exhibition industry. Boasting one of the highest per capita attendance figures in the world, the significance of Melbourne’s cinema industry was fortified during the late 1990s with the construction of several megaplex cinema venues. Melbourne’s Megaplex boom provided an expedient front for a tightly regulated vertical integration strategy which saw the intertwining of national film distribution, exhibition and production interests. Leanne Downing talks to ACMI’s Head of Film Programs, Richard Sowada, about vertical integration and its continued affect on Melbourne’s screen culture.

Leanne Downing: As the founder and director of the Revelation Perth International Film Festival and now Head of Film Programs at ACMI, you’ve earned a reputation as one of Australia’s most respected independent film curators and screen event organisers. Can you tell me more about your involvement in Australia’s film industry?

Richard Sowada: Sure. I started working in the film industry by accident in about 1990 after running front of house in various live theatres in Western Australia. From there, I fell into running front of house at an independent cinema in Perth, which at the time (1990) was one of the most successful in the county.

When I started working here in Melbourne, I wanted to be involved in independent distribution. I found it very difficult to break into the environment… it’s a very conservative business and it was very difficult to not be perceived as anything but a loose canon. So I started working on showing films myself in spaces outside of cinemas. From actually doing the artwork myself, to contacting the media, to going along with a bucket of glue and a roll of sticky-tape … it was a very direct, grass roots marketing knowledge that I was building up. Then I did a little bit of work for the Melbourne Film Festival and that evolved into a much boarder journey through the industry, which encompassed a whole range of things including production, distribution, exhibition, screen culture, production funding, curating, tour managing, conference directing, content advisory for conferences and that kind of thing; so a pretty broad spectrum.

Leanne Downing: I assume that you are drawing on many of those experiences in your current position at ACMI. Is there anything specific about what you do now that relates to the issue of vertical integration?

Richard Sowada: Yes. There are a number of things. A few years ago screen culture was able to survive outside of the commercial marketplace, to a whole different set of dynamics. There was a whole range of distributors and educational film sources that viewed screen culture activities as very different from commercial activity. You didn’t have to pay the same: You didn’t have to pay anything most of the time. Things were very subsidized. However, the way things have changed now [post vertical integration], is that sales agents, for example, don’t delineate between commercial activities and screen cultural activities in the same way they used to. If you want a film, you’ve got to pay. Straight up. Likewise, the demise of true independent exhibitors saw screen culture activity having to move squarely into commercial exhibition spaces whose audience and financial imperatives are very different. So, there are these new dynamics that screen culture has to obey which pushes it firmly into a commercial environment, where you have to think commercially: How you gonna pay for these things and who is actually making the money?

As a natural flow on from having to operate in the commercial sector, screen culture is then seen very much as a competitor by commercial entities despite the fact that it obeys a different set of dynamics and is not set up to compete. Its very independence makes it a danger .

Leanne Downing: Continuing with that idea of competition: Can you tell me about your experience of film exhibition in the 1990s; was the onset of vertical integration obvious to independent exhibitors at the time?

Richard Sowada: No. In the independent sector, about twelve years ago when it really started to change, it wasn’t obvious what was going on. There was a circle of independent exhibitors and distributors all happily coexisting and all having flyers for each other’s films in each other’s cinemas. Each had their own specific style and demographic; they knew each other and were friends, although there was a hard competitive edge.

Then literally overnight there was a major change. Two companies at different ends of the audience and business spectrum began a partnership and within the space of a few months, the entire landscape had changed. It wasn’t by stealth; it was by shock and awe… Bang! The moves were made and the deals were done. And it was very quick. There was no real warning.

The rapid nature of the changes was not just within the external industry structures, but also within the internal structures of the venues that were acquired. Some of these changes were literally overnight and were a real surprise to those involved. There were also major shifts in ‘program volume’ for exhibitors and independent distributors whose output and turnover were substantially and radically shifted upward in less than a year. They brought into play a whole new acquisitions dynamic very quickly, which had some significant financial pressures attached. So that was the speed at which the industry changed. Bang. Gone.

Leanne Downing: My observation is that the exhibition industry has a history of dragging its feet when it comes to responding to change. Did they do that in this instance?

Richard Sowada: Well, it wasn’t that they were dragging their feet because this change was not like a technological change where you could see it and read about it. It wasn’t that kind of thing. It was just so far out of the box that it was unpredictable. It wasn’t that they were amateurish at all, because they weren’t. And they weren’t complacent either, because they were showing good movies and getting good houses and that sort of thing. I suppose you can’t guard against those kinds of shifts in the way business is done. Y’know, like if you are walking down the street and someone steals your handbag, you are just not prepared. And it’s not because you are not aware of the business, but you are just not prepared. So I don’t know what they could have done, because it’s hard. By the time that everyone realized what was going on, it was just too late to counter. It’s a serious hard nose business. It’s not by stealth and it’s not about sign-posting strategy. It’s about going hard from the very beginning. That’s it. There’s no other way.

Leanne Downing: How did the industry respond?

Richard Sowada: It was very difficult for the independent sector to respond positively. For some it took a decade or so decline, for others it was much faster. As an observer at the time I’d say that in terms of Village Roadshow, they didn’t really seem to change aside from developing production and other interests, but they would have been tracking the shifts as everyone was. It would certainly have been in everyone’s interests to start to guarding themselves against technological shifts and looking at their structures; and certainly some very valuable and long-lasting lessons were learnt and competitive structures put in place for longer term contingencies. You could probably identify a number of key turning points around this time that strongly marked this “future-proofing” from a number of organisations including divesting of certain off-shore interests, diversifying into media and other holdings, moving toward fully automated presentation capabilities and of course film production. In my view these have not been without their interesting financial implications; some of which have been well reported, and haveperiodically raised an eyebrow in terms of the cash-flow of some of these large businesses.

For virtually all the remainingexhibition playersone of the largest changes has been the shift away from the city and towards the suburbs. And I’m not sure if that has happened quite as significantly here in Melbourne as it has in smaller cities. But with the urban sprawl of Adelaide, Perth and Brisbane, those monolithic shopping center cinemas just dominate the landscape now. So that’s probably the biggest change aside from the devastating squeezing out of owner/operated venues. And the way of coping with drop-offs in the box officefrom individual exhibitors is by volume: more screens. It doesn’t necessarily mean more people, just more screens. But for the independents, it’s crushed them.

Leanne Downing: What has that meant for the physical distribution of Melbourne’s cinemas?’

Richard Sowada: Ok. Well, for instance, let’s look at some of the broader strategies in the independent sector. From my analysis, the strategic placement of venues in this “integration” phase of a decade agowas based not on the value of the location itself, but the proximity of the competition. And the decision to build is based on the way that they can “ring bark” this competition. So that is the industrial geography. In an area where there were a number of independent screens, you’dfind ahigh level of very direct, rapid andcompetitive development activity. South of the Yarra in Melbourne in these early stages saw this focus, the inner city in Perth and the Rundle Stprecinct of Adelaide all saw this precise activity. Some serious strategies were played outin these environments.So in a sense, it’s not about the strategic location of the audience, it’s the strategic location of competition.

Leanne Downing: I’m interested in unraveling this spatial element further.

Richard Sowada: Say with like the Jam Factory or the Como or The George, that’s a lot of screens in a very small catchment area. And when we look at those days when they were built, there was the Longford, the Track, the Astor, the Elsternwick Classic, and the Brighton Bay, which was fairly close by. So there was already a strong concentration of cinemas there before those ones were built. And you could probably identify with each of those screens a very specific character. So for the new cinemas it wasn’t just building screens, it was building an identity into those screens to attract the demographic that had previously gone to those other venues.

Leanne Downing: Melbourne played a significant role in the vertical integration process. Am I correct in thinking that it was used as a blue-print for other cities?

Richard Sowada: Yes it was. The Village/Palace partnership was a very strategic and powerful one and very much defined the current landscape as we know it. It still continues to dominate although the partnership has since been modified. The Melbourne screen acquisition policies of that consortium were very much seen elsewhere around the country whilst other current players in the area also have quite definable national patterns. These patterns have been very interesting to observe and also have implications to sectors outside distribution and exhibition.

One of the dangers of vertical integrationof any form that we should be aware of though, is that a weak link could affect all the others.Large organisations are not immune from a variety of market forces, and so given current structures it’s not too much of a long bow to draw to say that instability in one component can have serious if not disastrous ramifications throughout the entire chain and thus the industry.

Leanne Downing: My last question is about the future and the onset of digital film and multi-platform release. How do you think the industry is going to respond to these changes?

Richard Sowada: Most won’t have made any serious moves in that area,in exhibition at least, and it seems so odd to me that distribution is still so far behind also. There will be a couplethough who will be ready to rock with it.I think mostdistributors have actually fallen into the trap that they created: they feel that they arein such a dominating position that theremay bea level of complacency in dealing with these issues whichironically was the chink in everyone else’s armour 15 years ago.

There is though, a whole new wave of independent exhibition developing at quite a rapid rate here in Melbourne and elsewhere. It’s going to be a decade or more before they become of force like the independents were in the 80s, but it’s happening and it’s pretty wide open which I like and I like being part of.

BIO: Leanne Downing is a Fellow of the Cinema Studies Department at the University of Melbourne. Over the past ten years she has taught courses in Film History and Narrative, Cultural Studies, Sociology, Media Audiences, Media Communications, Cultural Identity, Globalization, and Urban Entertainment Space.