Australia’s strong handling of the COVID-19 pandemic is forecast to boost the country’s screen sector, as major global film studios relocate their production activity to benefit from the minimal restrictions on movement and gatherings. This trend is projected to benefit the local Motion Picture and Video Production, and Video Post-Production Services industries over the short term. This production activity is also anticipated to benefit the Cinemas industry over the medium term, as delays to major blockbuster releases have further compounded revenue losses caused by temporary closures.
Production boom
With film production significantly disrupted in countries such as the United States and United Kingdom, global studios have turned to Australia’s existing production and post-production infrastructure to maintain their content pipelines. Queensland has secured 39 international and domestic productions since the start of 2020, including Baz Luhrmann’s Elvis biopic and romantic comedy Ticket to Paradise, which is set to star Julia Roberts and George Clooney.
The influx of film production work comes as a relief to Australia’s Motion Picture and Video Production industry, which was heavily affected by the first wave of the COVID-19 pandemic. According to Screen Australia, total Australian expenditure on feature films, and TV and online drama programs fell by 18% in 2019-20 as production shut down in the final quarter of the year.
Work flows downstream
The rise in production activity is anticipated to support the Video Post-Production Services industry over the medium term. While industry revenue is expected to decline by 11.7% in 2020-21 as delays to major productions in 2019-20 negatively affect industry demand, revenue is forecast to recover strongly over the five years through 2025-26. Significant government tax rebates, including the Federal Government’s Post, Digital and Visual Effects (PDV) Offset, will likely encourage global film studios to undertake post-production work in Australia. The incentives on offer for conducting post-production work in Australia include:
- A 30% rebate on post-production work undertaken in Australia (regardless of where the project is filmed) through the PDV Offset
- An uncapped 10% rebate for companies undertaking post-production work in New South Wales, Victoria, Queensland or South Australia, which stacks with the Federal Government’s rebate, subject to minimum spend requirements
- A 20% rebate on the first $500,000 of expenditure, with a 10% rebate for all further expenditure, for post-production work undertaken in Western Australia
These incentives, along with Australia’s strong reputation for producing high-quality visual effects work, are anticipated to support industry revenue growth over the next five years. Nevertheless, Australian post-production companies are forecast to face intensifying competition from foreign players as other countries increasingly seek to grow their screen sectors through tax incentives.
Notably, the New Zealand Government (Te Kāwanatanga o Aotearoa) offers a grant of 20% on qualifying expenditure up to NZ$25.0 million, with a grant of 18% thereafter. Productions can also apply for an additional 5% grant if they can demonstrate significant economic benefits to New Zealand. Companies in New Zealand’s Post-production Services and Other Motion Picture and Video Activities industry, such as Weta Digital, also have strong reputations and can readily compete for work on major international film productions.
Furthermore, state governments in the United States and European governments will likely increase the incentives they offer for film production and post-production work in a bid to boost economic growth as the COVID-19 pandemic subsides. Consequently, competition in the global post-production services sector is projected to intensify over the next five years, constraining the Australian Video Post-Production Services industry’s growth.
Green shoots for cinemas
The COVID-19 pandemic has severely affected the Australian Cinemas industry, with revenue expected to decline at an annualised 19.3% over the five years through 2020-21. While cinemas across Australia have been permitted to reopen, capacity restrictions and a lack of major releases are continuing to limit patronage and are constraining revenue. As the COVID-19 pandemic continues to spread through major media markets, major global film studios are delaying releases of blockbuster titles until the pandemic subsides and enables cinemas to reopen safely.
Despite the significant short-term pain, the upturn in production and post-production work is forecast to support a recovery in industry revenue over the next five years. Industry revenue is projected to rise at an annualised 21.1% over the five years through 2025-26. While patrons are anticipated to return to cinemas for major blockbuster titles, cinema operators are forecast to continue facing intense competition from SVOD services over the next five years. This competition is anticipated to constrain the Cinema industry’s recovery.
IBISWorld Industry reports used in this release:
Video Post-Production Services in Australia
Motion Picture and Video Production in Australia
Post-production Services and Other Motion Picture and Video Activities in New Zealand
