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Silky Otter
Silky Otter CEO Neil Lambert says customers want more from movie theatres these days. (Photo: Supplied / Treatment: Archi Banal)

BusinessJune 16, 2022

‘We’ve sold out every session’: How Silky Otter is bucking cinema trends

Silky Otter
Silky Otter CEO Neil Lambert says customers want more from movie theatres these days. (Photo: Supplied / Treatment: Archi Banal)

While some movie theatres have struggled to keep their doors open through the pandemic, one new chain has been busy opening new cinemas.

Neil Lambert knew his timing was terrible. In October of 2019, he opened a brand new two-screen movie complex in the Auckland suburb of Ōrākei, one that came with a simple concept: he and his backers wanted Silky Otter to reimagine cinematic experiences in places where theatres had never been before. 

That meant malls were out, and the suburbs were in. So were downsized screens, smaller theatres, and bespoke food and drink offerings, including a fully staffed kitchen available for those after a catered night out, complete with cocktails, dinner and dessert.

That means popcorn chicken, smoked salmon pizza, sticky date pudding and tap beer delivered to your chair. “A lot of cinemas, especially in the regions, haven’t been updated [in decades],” says Lambert. “We want to [deliver] this better experience.”

Silky Otter
At Silky Otter, cinema-goers can get popcorn chicken, smoked salmon pizzas and sticky date pudding delivered to their chair. (Photo: Supplied)

Five months after opening, the pandemic hit. Cinemas up and down the country shuttered as people turned to streaming services at home to pass the time. Major movie franchises postponed films or sent them directly to streaming. As box office takings dropped by as much as 70%, some theatre chains saw the writing on the wall and closed their doors for good.

But it was too late for Silky Otter. Ōrākei was already open, and Lambert had signed construction deals to expand the chain to the Christchurch suburb of Wigram and Richmond near Nelson. “Everyone was shouting … ‘Maybe you guys should stop,’” he says. “We were too far down, and we believed we could bring it back.”

That belief came from an “unwavering faith” in the industry. Lambert, 47, grew up in an age when blockbusters dominated and going to the movies at the weekend was pretty much a given. Despite the numbers saying otherwise, Lambert refused to believe those glory days were over. He believed cinemas simply had to evolve to cater for customers like him who remembered cinema’s 80s and 90s peak, but now wanted a different experience. “The world has moved on,” says Lambert. “I want a glass of wine, a hospitality experience”.

Jurassic Park
Jurassic Park, one of the biggest films of the 90s.

Silky Otter was designed to provide exactly that. Every auditorium has a maximum of 47 seats, huge leather chairs with plenty of leg room. While Event and Hoyts offer similar premium options like Gold Class, film-goers are often charged $40 or more for that experience. Lambert wanted to offer the same thing for an everyday price. (Tickets at Ōrākei are $22.50, and $19 in Christchurch and Richmond.) Why? “We want you to come more regularly.”

So, despite the bleak box office forecasts, he ploughed on. The Wigram complex opened in Christchurch in July 2021; two weeks later, the country again went into lockdown. Still, he refused to panic. Lambert’s backers and construction partners continued to support him. “I don’t know whether that strengthened belief, or [we had] a little bit of crazy,” he says. “We just kept pushing.”

His resolve hardened watching movie studios discover streaming wasn’t delivering the returns needed to create blockbuster films. “They didn’t make the money that they’d hoped,” he says. “What they learned is that they need cinemas to create a zeitgeist [moment].”

Silky Otter
At Silky Otter, every seat is large and leathery. (Photo: Supplied)

He’s seen cinema’s resurgence first-hand recently, when demand for Top Gun: Maverick forced his Richmond theatre to open early, even though it wasn’t finished. Digital displays were still arriving as fans arrived en masse to check out their suburb’s new cinema, and watch Tom Cruise finally follow-up his 1986 classic.

“We’ve sold out every session. Demand’s been off the charts,” says Lambert. He helped out on the candy bar and watched faces closely as fans emerged from screenings. “They were smiling, saying, ‘The seat, the screen, Tom Cruise flying a jet, it doesn’t get any better.'” It is, he says, “why we do this”.

Yet, he’s not out of the woods just yet. Trend reports suggest cinema’s future may rest on the shoulders of millennials, who have flagging interest in theatre-going. Others suggest tiered pricing models to bolster interest in smaller indie fare might be needed, as well as theatres pivoting to offer other services like TV shows or gaming on the big screen. (Silky Otter offers both.)

There could still too be more twists and turns in the pandemic to play out. Lambert is well aware of all of this. But he remains hopeful. He has to. In late October, he’s opening another four-screen complex in Auckland, behind the Ponsonby Central food court. Then, next year, there are concrete plans to open Silky Otter theatres in Takanini and Queenstown.

Some of that “little bit of crazy” might need to be kept in reserve. But Lambert points out the upcoming pipeline of blockbuster films – including Jurassic World Dominion, Lightyear, Elvis, Minions, Thor and Avatar 2 – as reasons to stay upbeat about cinema’s future. “The pipeline is full,” he says. “I knew movies would come back.”

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two nadshakes with coins and a burning planet. it's sorta dire unforch
Young renters will pay the price for the governmentkeepingdebt rates low Getty Images / Tina Tiller

BusinessJune 14, 2022

Is the global agreement on corporate taxes in trouble?

two nadshakes with coins and a burning planet. it's sorta dire unforch
Young renters will pay the price for the governmentkeepingdebt rates low Getty Images / Tina Tiller

Last year 136 countries signed what some called the most significant international tax agreement in a century. Then the politicians got involved and the delays began. Tax expert Terry Baucher explains what’s going on.

Last October New Zealand, together with over 130 other countries, signed up to a new plan to tax multinational corporations. The initiative, sponsored by the G20 and the OECD, would overhaul the century-old international taxation rules made obsolete by the increasing digitalisation of the global economy.

The G20/OECD proposed a two-pillar solution: Pillar one would ensure profits are reallocated and taxed in the country where the multinational’s users and customers are located; pillar two would introduce an effective global minimum corporate tax rate of 15%. The rules would apply to multinationals with annual turnover exceeding €750 million in two of the last four years. Approximately 1,500 multinationals worldwide will be covered by the rules, and Inland Revenue estimates the changes will affect 20–25 multinationals here in New Zealand.

The proposals are intended to address the situation where some multinationals are able to arrange their affairs so as to derive relatively substantial income from New Zealand but pay little income tax. For example, according to its publicly available financial statements, Google New Zealand reported gross income for the year ended December 2020 of just over $43.8 million and a pre-tax profit of $10.1 million, on which it paid income tax of $2.36 million.

However, the notes to the financial statements revealed that Google New Zealand also paid over $517 million in “service fees” to related parties in the same year. These fees give a clearer indication of what Google earns from its New Zealand operation. Those related parties would almost certainly be located in a range of low-tax jurisdictions.

The deal sets a global minimum corporate tax rate of 15% and would force tech giants like Google to pay tax in all of the countries they operate in (Photo: Getty).

Incidentally, we don’t know how much income tax Facebook or other multinationals such as Visa and MasterCard are reporting in New Zealand. This is because they have adopted a business model which doesn’t oblige them to file publicly available financial statements. (Facebook’s last published financial statements are for the year ended December 2014).

The OECD/G20 proposals are intended to put a brake on such tax planning. Globally, pillar one is expected to mean an extra US$125 billion will go annually to what are termed “market jurisdictions”. Pillar two, which is the minimum corporate tax, is expected to raise US$150 billion of tax. It’s estimated that New Zealand’s share of this would be between $60-$100 million.

This new regime was planned to be implemented in 2023. However, OECD secretary general Mathias Cormann recently admitted that implementation of the pillar one proposals is now likely to be deferred until 2024 as negotiations continue. Pillar two is more advanced as model rules have been agreed. Based on these, Inland Revenue currently has an 84-page issues paper out for consultation until July 1 about how the pillar two proposals should operate in New Zealand.

Passing legislation invariably involves politics which opens the door for some potential strong-arm tactics. In Europe the politics are complicated by the European Union requiring unanimity amongst its 27 members before the proposals may be implemented. Poland has not yet agreed, supposedly because of technical concerns over wanting the two pillars to be implemented in tandem. However, it may be using the issue as leverage in its dispute with the European Commission over its bid for a bigger share of the EU’s €800 billion Covid recovery fund.

Meanwhile in the United States, the relevant legislation has been passed by the House of Representatives but has hit delays in the Senate regarding spending proposals which are part of the same legislation. Both the Polish and United States blockages will probably get resolved by some old-fashioned horse-trading. The mid-term congressional elections in November are likely to act as an incentive to resolve the hold-up before then.

So, should we be worried by the delays? The short answer would be “Not yet.” Putting in place an international agreement involving over 130 countries was always going to be a complex undertaking. Each country has to incorporate the relevant changes into its tax legislation and that takes time.

But if these issues can’t be resolved, how bad would that be for New Zealand? It would be disappointing but not necessarily disastrous if the agreement does not proceed. As an alternative, the government could unilaterally introduce a digital services tax (DST) specifically targeting large tech companies such as Meta and Google. Prior to last October’s announcement several countries, most notably India and the United Kingdom, had introduced DSTs. New Zealand’s Tax Working Group (2017-19) recommended preparing for a DST as a means of leverage over multinationals. If introduced here a DST might be worth between $50-$80 million in tax revenue.

In fact, the tech giants might prefer the global agreement to the alternative of a series of DSTs, particularly one implemented by an economically significant country such as India. The intention is that all DSTs that have been introduced will be repealed once the pillar one proposals are adopted. Similarly, objections around pillar two are also likely to fade away as countries with significant budget deficits in the wake of the Global Financial Crisis and the Covid pandemic see the opportunity for much-needed additional tax revenue.  Ultimately, tax is about politics, and although some parties are using politics right now for short-term advantage, the politics of gaining extra revenue from an unpopular group seems likely to carry the deal into effect.

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