This post is about the circumstances that resulted in a school buying, then unexpectedly selling, a cinema building within a few years, with the sale apparently driven primarily by negative public opinion expressed through social media. Like my previous posts about the business and psychology of social media, this one examines the power of social media and the perils faced by those who ignore it.
As usual, there is a disclaimer. I was working at St Michael’s Grammar School when the Astor saga occurred, developing its new website, and it would have been a conflict of interest for me to write about it at the time. I’ve been holding this post for months, out of respect for my former employer, waiting for an appropriate time to publish it.
I have chosen to publish it now after new information about the issue was published yesterday in the Age. I have been careful to ensure that this post contains only publicly available information, and I have done my best to be an impartial observer. Note: this post was altered on 18 May to adopt information provided by commenters. New text is in italics. Old text has been
In December 2007, the private St Michael’s Grammar School (‘the school’) bought the heritage protected Astor Theatre building (‘the building’) in St Kilda, and consequently became the landlord of the Astor cinema (‘the cinema’), one of several small business tenants in the building.
If you’ve read St Michael’s Grammar School: A study in educational change by Victoria Peel (Allen & Unwin, 1999) you’ll know that the school has been buying and selling property on the periphery of its campus throughout its existence, depending on economic circumstances, so the 2007 purchase of the Astor could be considered business as usual.
Institutions over 100 years old like the school are slow to act and they plan for the long term. When the school bought the building, it is reasonable to assume that it saw it as having an economically viable long term use.
In the short term, the school needed a venue close to its campus (a block south from the Astor on Chapel St) for school assemblies and functions. With approximately 1200 students, the school did not have a sufficiently large space on campus to hold large events. At the time, the purchase was received positively by the cinema and the broader community.
It’s pointlessly ironic now, but prior to the 2007 sale of the building, cinema owner George Florence was open to a multi-screen renovation, and seemed more concerned about preventing the building becoming an apartment complex than saving his business. The cinema was not considered financially viable and the school was seen as the building’s saviour.
The FOTAA campaign
In the period it owned the building, the school used it during weekdays and the cinema continued to operate at nights and on weekends. The cinema’s lease was renewed in 2010 for another 5 years, and the school released a brief statement about the building’s potential future in 2011 (46kb pdf). In the longer term, it planned to develop the building into a multi-purpose arts facility that would be accessible by the community and which was likely to retain a cinema within it.
For unknown reasons, the Friends of the Astor Association Inc (FOTAA) launched a campaign on Facebook in March 2012 to ‘save’ the cinema. However, there was no evidence that the cinema was under threat from the school or anyone else. The school’s 2011 draft plan had no timeline and it seemed to be in no hurry to decide what to do with the building.
The campaign to ‘save’ the cinema can therefore be seen as a deliberately manufactured fear campaign that was fundamentally false, dishonest and manipulative of the public’s goodwill towards the cinema.
In its Change.org campaign to save the Astor, published by May 2012, FOTAA claimed that ‘the school has not responded to the cinema’s efforts to secure a new lease’. This claim was repeated by Tara Judah, PA to the cinema owner George Florence, who is quoted in a 28 May 2012 article as saying ‘We have not been offered a new lease by our current landlord, St Michael’s Grammar School’.
Central to the FOTAA campaign was this misleading accusation that the school was refusing to discuss a renewal of the cinema’s lease with Florence in 2012. While it was factually correct, there was a simple reason for the school’s silence: it would have been illegal for it to
discuss the issue a formal notice of a new lease with Florence. It is plausible to hypothesise that the school had made no concrete plans about the future of the building and hence its tenants at this time.
The school was able to discuss terms for a new lease but it chose not to, and in any case it was not required to. The idea that the school was being unreasonable in not discussing a new lease was central to FOTAA’s campaign, but it provided no evidence to substantiate this claim.
The legal fine print
Victorian law does not allow a landlord to
renegotiate issue a formal notice of a new lease with a tenant more than 12 months ahead of its completion. This law exists to protect tenants from manipulation by landlords. The fact that the school was legally prevented from renegotiating limited in how it could respond concerning the lease never became common knowledge during the situation.
The head of FOTAA, Vanda Hamilton, appears from information gained through Google searches to be a lawyer. For the sake of this discussion, assume that Hamilton is a lawyer. As a lawyer, Hamilton would surely know the law relating to commercial leases and, consequently, must have been aware that the premise of FOTAA’s campaign was fundamentally dishonest.
The law appears not to consider the possibility that a tenant (or its supporters) would use ignorance of the law (in the eyes of the public) to manipulate its landlord. This is what FOTAA did to great affect, with the school being the innocent victim.
The school was
unable probably simply not ready to renegotiate a lease expiring in 2015 in 2012 : by law it had to wait until 2014 to begin discussions. The school’s failing in this situation was to not make this simple fact widely known as soon as possible. Had it done so, the FOTAA campaign may have collapsed before it gained much momentum.
Instead, the school stayed silent for far too long. It did not participate in the social media discussions to represent itself or its interests. It did not attempt to correct the facts. It took too long to issue a press release about the issue, which was not shared on social media and so was not seen by many people, and in any case by then the story had moved on and the school had already lost the battle.
The school hired a consultant to mediate with FOTAA and the cinema, but the public had tasted blood and the Change.org petition received over 10,000 signatures demanding that the school relinquish control of the building. All the relevant documents are available on the FOTAA site.
The school complained about unspecified mis-truths in May but by June had begun to acknowledge that it had lost the public relations war by indicating that it was willing to sell the building.
The public perception
The public was hopelessly fooled and mislead by FOTAA, resulting in lots of well intentioned but entirely fatuous commentary. It was obvious that the public:
- Did not understand that the building, the cinema and the film collection were separate properties
- Were not aware of the school’s statements about the situation
- Had no idea about the legal conditions of the lease
- Believed that FOTAA’s statements were factual (when they were not)
- Believed that they had some ownership of the cinema
- Felt entitled to exercise a bit of colourful inner city class and/or cultural warfare against the beige suburban bayside establishment (the school’s clientele)
The public should feel aggrieved by the way it was manipulated by FOTAA. Unfortunately, it is likely that few of those who signed the petition will ever know the truth about how they were misled.
The 2012 sale and the future
In August 2012 the school announced that it had sold the building to Ralph Taranto, owner of the George cinema in St Kilda. This was viewed as a victory by FOTAA, but no one seems to have analysed the circumstances. In 2012 the cinema was claiming that it was financially viable. This may be true, partially thanks to improved online marketing, but its economic potential is marginal.
Taranto is an elderly man who failed to manage the George once the Palace ended its lease and he shut it down. He may love the cinema, but he has not demonstrated good business sense about it in recent times. He bought it out of sentiment.
Taranto has mentioned that he may cede ownership of the building to a trust, and Florence has suggested that he could contribute the cinema business to this trust. But combining the building and the cinema into a single entity will not make it more financially viable. It won’t have the money to remake itself as a multi-screen cinema, which is the only way it could ever become profitable.
Unless this trust has considerable assets to pay for building refurbishment, it will not be able to even maintain the building in its current state and survive. It will be unable to continue trading and will close, leaving the building derelict and financially unviable. It would probably then be offered for sale by whoever ends up being the owner, probably a bank.
The school is believed to have lost money when it sold the building in 2012. It may have an opportunity to buy the building again in future, perhaps at a discount price if the trust collapses. Perhaps it could get the building for less than it sold it for and recoup its losses.
That would be a sweet victory. The conservative, long term planning and vision of the school appears, in hindsight, to have been the best mechanism to protect the building. But you won’t hear FOTAA admitting that.
Once the sale was concluded, FOTAA went quiet. Its website has not been updated since about October 2012 and it last tweeted in August 2012 (last checked in April 2013). It may think it has achieved its goal, but I doubt it has achieved anything constructive in relation to preserving the building or the cinema within it. FOTAA succeeded only in creating some pointless short term hysteria.
Given that it championed Taranto’s purchase of the building, FOTAA cannot blame him the way it blamed the school for threatening the future of the cinema without being accused of hypocrisy. This is doubly ironic given the fact that when it first purchased the building the school was, like Taranto, viewed as its saviour by Florence.
Social media lessons
St Michael’s lost the propaganda war because it did not understand guerrilla public relations warfare fought in social media. It responded too slowly to FOTAA and mostly ignored the public. In contract, FOTAA focused on the public and manipulated public opinion against the school.
The school’s press releases were not seen by many of the participants in the social media discussion about the Astor because they were not widely circulated there. There are valuable lessons for organisations to learn here:
- It is risky to ignore social media discussions about your brand or reputation
- If you do ignore such discussions you are likely to be interpreted as ignorant (if it is assumed that you are not aware of the conversation) or guilty (if it is assumed that you are aware of the conversation)
- If you choose to ignore social media discussions about your brand or reputation you are partially responsible for the consequences
- If you do respond you must do so where the conversation is happening. You can’t respond to Facebook and Twitter comment threads by posting a press release on a corporate website where no one will see it.
The details of the cinema business
The cinema owns its projection equipment. Florence also owns a separate business, Chapel Distribution, which is a film distributor that owns and leases film prints, including many that are shown in the cinema. Due to this joint ownership, the operation of the cinema is dependent on the business decisions made by Florence.
Should the cinema no longer trade in the building, Florence could chose not to rent his films to another cinema business if one took up a lease in the building, meaning that what makes the Astor cinema unique could not easily be replicated by another operator. Without the cinema’s projection equipment, and Chapel’s portfolio of films, the building is merely an empty space that was originally designed to be a cinema.
The building is privately owned. The cinema is privately owned, as is the portfolio of films. So why do so many people behave as if the cinema is a public asset? Consider this quote from FOTAA President Hamilton:
[If] the doors to The Astor close in 2015, one thing is for certain – we will never, ever get it back again. If The Astor closes Melbourne will lose its last picture palace, one of the last ones operating in the world, and that will be it. That’s not a risk I’m willing to take. It’s not a risk that anyone who loves The Astor is willing to take.
For people that love watching films, the cinema has a sentimental appeal, especially the repertory cinema where old and rare films are screened. There’s few left because they have limited appeal to the lamestream masses, who prefer to sit at home watching their peers on reality television.
Single screen cinemas have almost disappeared because they are not economically efficient. Multiple smaller cinemas in a complex offers a wider range of entertainment and thus has a better, more consistent income and thus represents a better business model. Even then, things aren’t good.
The cinema business has been shaky since the arrival of the VCR, and each new technology, from DVDs to bittorrent, makes it easier for audiences to see films elsewhere than in cinemas. If you have a Dolby digital surround sound amplifier and an HD digital projector, the cinema experience you can have at home is scarcely different to that offered in smaller digital cinemas, such as those at the Nova.
To summarise the whole saga in a sentence, you can’t blame a landlord because social and technological change undermines the business model of a tenant.