Here’s the strange thing about IMAX these days: the large screen exhibitor reported terrible financial results for the first quarter although analysts were projecting it would continue to report a profit. Yet its stock price closed up 6% at $34.24, for a more than 60% gain over the past year. Even this morning, Wall Street was reassured by the IMAX upbeat projections for ticket sales and global expansion plans. Which is why CEO Richard Gelfond today tells me that 1st quarter financial results are not nearly as terrible as they look.
GELFOND: If you strip out nonrecurring things, it really shows up as a 4 cent (earnings per share) number. That was a little short of expectations among analysts. And I think frankly some of that happened because we incurred expenses in China in building our business there. Some in R&D, and reinvesting in our business. And I think people didn’t understand that the first quarter was devoid of any blockbuster films. For us, if the box office drops 25% — as it did — as long as there are blockbuster films that doesn’t matter. We don’t play a full film slate. We play just a couple of films. But what made the quarter noteworthy was that there were no blockbuster films. That has a big impact on us. Fortunately, starting tonight at midnight, we have Fast Five domestically and Thor internationally. So the blockbuster season starts. I think you’ll see a dramatic turnaround in the second quarter.
DEADLINE: What will ticket prices look like for IMAX films this summer?
GELFOND: We don’t set the prices. The exhibitors set the prices. There’s a fairly diverse approach. In some chains I’ve seen them take down children’s prices and increase adult prices. In other chains I’ve seen them keep them consistent with where they’ve been before. So there are no general trends.
DEADLINE: You can’t say on average it will be up or down ‘X%’?
GELFOND: It’s too early to say that.
DEADLINE: This year exhibitors will have a lot more digital screens than they had last year. Will that affect you?
GELFOND: The other big difference is that is we have a lot more digital screens. If we do the same per-screen (sales) numbers, that automatically translates into much larger (total revenue) number because our network is bigger. In terms of competition from digital itself, I don’t think it’s been proven that digital projection increases box office over film prints. It’s more relevant on the cost side. It’s cheaper for exhibitors to use.
DEADLINE: Some chains including Cinemark and AMC are opening their own large screen theaters. Is that affecting IMAX?
GELFOND: After AMC opened its large screen theaters it signed a contract for up to 25 additional IMAX theaters. And I think Cinemark signed a contract for several IMAX theaters and is upgrading some more. Most exhibitors have found that IMAX brings in incremental dollars in a significant way. The home grown (large screen theaters) for the right movies increase the ticket price, but don’t bring in new bodies into the multiplex.
DEADLINE: Still, you’re competing against more large screen theaters.
GELFOND: There are, but it’s not at our expense. Our box office doubled in 2010 vs 2009. We track the performance and we do multiples of the home growns on a per screen basis — meaning 2 to 3 times the home growns.
DEADLINE: Have you weighed in on the premium VOD question?
GELFOND: Our corporate mandate is to be Switzerland, to do business with all of the studios and many of the exhibitors. My feeling is that it’s really between the studios and the exhibitors and however they work it out, IMAX will thrive quite well.
DEADLINE: It wouldn’t affect IMAX at all if a film in your theaters becomes available on TV two months after it’s released?
GELFOND: None of our films play for more than a month. And going to an IMAX theater is so different from anything that you’d see in the home. I don’t think the consumer is going to make that choice. It’s available on TV or your phone or your computer – those are all so different than seeing a film in IMAX that I don’t think that’ll affect us at all.
DEADLINE: What’s driving your growth these days?
GELFOND: The financial model works really well for the exhibitors. That references back to what I said about the box office doubling last year. Exhibitors who were in the IMAX business made a lot of money and they saw it as a way to get people off the couch — even in a year when people were less and less willing to get off the couch. Then there’s our international expansion: We’re underscreened internationally and our international theaters perform better than our domestic theaters. You have rising income levels especially in places like China, South America, and Russia.