Hi Again,

For over a decade I have been confronted with rumours that I have sold the drive-in to property developers
for exorbitant amounts of money, as much as $8.6 million (believe me if that were the case I would be posting this from the Bahamas) and sometimes people even argue with ME when I dismiss them as just rumours. Just for the record I have done no such thing at this point. There is currently a proposal to rezone the land from the park on the corner of Heddon and Clift Streets through to John Renshaw Drive making way for up to 800 residential lots which will go on display for comment in a few weeks, but that doesn't necessarily mean an end to our operations, not in the medium term anyway. In fact the completion of the Hunter Expressway is likely to add to our longevity. I am estimating that we will still be operating for at least another five years, maybe longer, as long as we keep selling tickets.

A far more pressing issue for us is the conversion from 35mm film to DCI Digital now occurring in Cinema Exhibition throughout the world. For over a century 35mm film had been the medium for >99% of movie distribution however digital cinema gives great technical as well as financial advantages and from mid April this year the conversion of Australia's independent cinemas is set to move into overdrive.

As Australia approaches 40% conversion we are already having difficulty taking up "sub run" movies. e.g. When a movie opens the major cinema complexes in Sydney would typically have two or three 35mm copies to run overlapping sessions and/or gold class. After two or three weeks these copies would become available to "sub run" bookings such as ourselves. As most of these cinemas have now converted to digital these 35mm copies simply don't exist. We are already having difficulty booking titles and this is clearly going to get worse with film likely to completely disappear by mid 2013. Also the cost to a film distributor of supplying us with a 35mm copy of a film is about twice that of a "VPF" subsidised digital copy.

This means I need to make a decision to continue or close now and I have chosen to convert the drive-in to DCI Digital, but converting a drive-in has a number of issues.

Firstly:  Because the area of our screen is about 440 square metres, roughly equal to or slightly greater than the combined screen surface areas of many multiplexes, we need the largest and most powerful of projectors which comes with the highest purchase price and by far the highest running cost with hourly lamp cost around five times that of our current 35mm projector.

Secondly: The "VPF" (Virtual Print Fee) scheme has been established so the movie studios can contribute to the cost of the conversion of cinemas, but as we only screen one session per day (night) of each film and because we only screen two nights per week in school terms, the VPF contributions we will receive will be only a fraction of that of a typical cinema.

I am sure you can see where this is going.

I have always made a point of keeping our prices as low as possible. I am aware that for some families we are the only place they can afford to go out to a movie as a family so I have stuck with this principle even though my personal financial situation would probably be a lot healthier if I hadn't, however the time has come and the more money we can put in the bank the less we have to borrow.

Effective 1st March our admission prices will be as follows:

Admission per car (up to 8 people) per movie $30.00

Discount Admission per car for two consecutive movies $50.00

Discount Admission per car for three consecutive movies $70.00

This represents a rise of $5.00 per movie per car and I must warn that there may be yet another later this year but this must be done if are to continue to trade and I think most people will see that for a family this still represents great value.

I should also mention that >90% of our restaurant prices have not increased since 2007 and that will need to be addressed soon as well. Our restaurant has most of the fixed overheads of any take-away outlet but only trades on average 15 hours per week and our goal is to average break even point but we can no longer afford to have the gate subsidise it.

Well now you know what I do.

Best wishes and thanks for your continuing patronage.

Scott Seddon. 28th January, 2012.