EXCLUSIVE: In 1994, Richard Gelfond didn’t know that much about the movie business. He was an investment banker, a lawyer and an entrepreneur and together with his business partner Brad Wechsler, snapped up Imax, a nice purveyor of nature and science documentaries. When it came to expanding to more blockbuster fare, there was a bit of catch 22: Studios wouldn’t shoot movies in Imax unless there were more commercial theaters and exhibs wouldn’t build more theaters unless there were more Imax studio releases. Eventually, Imax developed a model that worked, and now the major studios, particularly when it comes to their tentpoles, can’t live without Imax. Not to mention filmmakers, including Christopher Nolan, James Cameron, J.J. Abrams, Brad Bird and Michael Bay can’t live without their large format cameras. Imax is that extra boost that makes all the difference at the box office. This month, Imax saw its widest release ever with Furious 7 at 809 theaters, generating $22M in its opening global frame (U.S. alone grossed $14M, repping close to 10% of the $147.2M domestic opening). With Marvel/Disney’s Avengers: Age of Ultron and Star Wars: The Force Awakens set to open– F7‘s records are about to be squashed. Per Gelfond, if there’s a sleeper this year, it’s Robert Zemeckis’ The Walk which follows Philippe Petit’s 1974 high-wire attempt to cross between the Twin Towers; a film that exudes the breadth and body of the Imax large screen format. Since taking the helm, the Imax corporation CEO has built the exhibitor into a network of 930 venues in 62 countries with China, a prime marketplace, expanding rapidly. During CinemaCon he sat down with Deadline to discuss what’s on the horizon for the leading large format exhibitor.
Deadline: Given Imax’s recent success with Game of Thrones [close to $2M in one week at 205 venues], I’ve heard you’ve been getting phone calls from networks to deliver more hit TV shows in large format.
Rich Gelfond: We look at television for the shoulder periods. Imax is mostly a place to see movies in the best way on Earth and to show a director’s vision. However, there are periods of the year where there just aren’t great movies, such as Super Bowl weekend or February. So, we have gotten a lot of calls after Game of Thrones’ successful test. I think you will see. I’d be really surprised if there weren’t other examples. Although I can’t name them, they’re properties a lot of people know. I think even someday there will likely be a simultaneous release of a season premiere or season finale.
TV (exhibition) isn’t the core of who we are. For the right thing and the right time like Game of Thrones, it was fantastic and the fans celebrated it. That’s not going to change who we are as a company. The whole thing is you really have to have production value, which Game of Thrones had so it looked fantastic on the Imax screen. I don’t think you’ll ever see a game show in Imax. It has to be the right property. It has to have Imax DNA in it, which Game of Thrones did, meaning a similar kind of fan base and passion. So we’re talking about it, but again it’s not going to be a big part of our business.
Deadline: In addition, you’ve been booking more adult, non-fanboy fare during shoulder periods. Titles like American Sniper, Focus and Fifty Shades of Grey.
Gelfond: We’ve definitely broadened the genre of films that we’ll show. Again, I think we have a core fanboy audience in the blockbusters that’s really for the prime season of the summer, Memorial Day, Christmas. But for the shoulder periods I think we’ve learned to be much more flexible in three ways. One is flexibility in the genres. Second would be flexible in different territories because we’re in 63 counties. What we’re doing is we’re playing certain films in certain countries and not in other countries because they’ll fit cultural taste. The third thing is we do local language films. So this week in Japan we opened Dragon Ball Z and it was the number one film in all of Japan. It beat Furious 7, which was the third film.
Deadline: What other local language films have been a huge success for Imax?
Gelfond: In India we did Doom 3, which was very successful. In China, there are so many successful ones – Aftershock, Wolf Totem. This year Dragon Blade and Gone With the Bullets. I’m leaving out half of them. Because China has blackout periods and the quota, you need to find other things to go in different periods. Sometimes Chinese local language films are just the best offerings. That’s something that’s been really successful for us. I forgot one of the biggest ones was Stalingrad, which was the biggest film in the history of Russia. We did that in Imax.
Deadline: Let’s talk a bit about your 30-picture deal with Warner Bros. that was announced this morning. How does the booking process work?
Gelfond: We convert a movie into Imax with a studio then the studio will distribute it to the Imax network. So in this case, Warner Brothers would call up Regal and Warner Brothers would call up AMC. However, there are certain programming rights that Imax has which vary depending on who its partner is. So one of Imax’s powers is because we can help deliver a large number of screens for a particular filmmaker, that encourages the filmmaker to make the film with special DNA — Imax DNA. So whether it’s Christopher Nolan using the camera or Sam Mendes shooting to our aspect ratio, the fact that they know they’re going to get close to a 1,000 theaters in the world enables them to do special things. Filming in Imax entails a cost, extra risk, time and different setups but different studios and filmmakers do that because they know they’ll have access to all these Imax screens around the world.
We’re also very involved in the marketing of the film. We have a marketing team that goes out. Because we have relationships with our theaters we’ll work with the studio in distributing the film or we’ll work with the exhibitors. The primary relationship is between the studio and the exhibitor but we’re involved as well.
Deadline: In regards to the Warner Bros. deal, are the terms set for each and every film?
Gelfond: The terms between us and Warner Brothers are set, but the terms between the exhibitors and the studios are set closer to when the film comes out just like they’re set in regular theaters. All the deals are different. We have three different business models with our exhibitors. One model is we put up the equipment, we don’t charge them and that’s called a joint venture. In that case, we get a percentage of the box office, usually around 20%. Another model we have is we sell the equipment for an upfront price at a much smaller royalty. Then there’s something in the middle called a hybrid where the exhibitor pays us roughly the cost of the system and then we charge a smaller royalty around the 10% range. They’re flexible so it depends on the location, depends on the country, depends on how much they’re putting upfront.
Deadline: So you make a percent from the studio and make a percent from the exhibitor?
Gelfond: That’s the way the business model works.
Deadline: In the case of the Warner Brothers deal, when you book something through 2020 and you name a number of films does this cause — specifically in the domestic market — a scheduling conflict with other studios? Can you only make so many output deals a year?
Gelfond: It can, so the philosophy behind the deal is the tentpole films, for example with a Batman v Superman the date is set. We’re doing it, we won’t make a deal with any other studio. For the shoulder periods both Warner and us are a little bit more flexible. So as you get closer to the release date we both have rights to perhaps release it at a different time. We just show more flexibility, but that’s one of the main incentives for both us and the studio to do it is you kind of lock down the dates for the key tent pole films.
Deadline: Is it generally a two-week play that’s booked for each film in Imax?
Rich Gelfond: It depends. This year for example, most of our tent pole films are three weeks. Obviously, Furious 7 is longer because there wasn’t a competitive product and we thought it would play very well. The Avengers: Age of Utron, Tomorrowland and Jurassic World are three weeks. Then you go the other way with Star Wars: The Force Awakens: We have nothing scheduled through the whole month of January after it opens. We hope and expect that the movie will play. But if it turns out that the box office is so big and front-end loaded that it starts to tail off sooner, then we’ll just try and fill it in later in its run with something else.
Deadline: Furious 7 was your widest release globally and your biggest April opener. How are you going to top that with The Avengers: Age of Ultron? How do you do that?
Gelfond: For us it’s not about records. It’s about the long haul. We’ve been in business for over 45 years. I think people, especially in analyzing Imax, are too focused on the opening weekend. For example, Age of Ultron opens in China two weeks after it opens in the US and as we’re seeing from Furious 7, China could be as big a market or bigger market than the U.S. You know, I don’t look at it like how do we top it. For every movie we have a budget. When we put together our budget for the year we have an ultimate and that’s how I measure it against the ultimate. We’re thrilled for Furious 7. I have the highest expectations and the highest confidence in Age of Ultron, so I don’t really worry if it’s the biggest and best, although that’s always a bonus but that’s not the way we look at it.
Deadline: A number of theatrical chains have their own in-house large format brand. Is that inhibiting Imax’s ability to expand in the marketplace?
Gelfond: Not because of that. The limitation to our expansion is that we give exhibitors exclusive territories to operate their business so there won’t be an Imax across the street from another. They’re called zones. We set up our own zones of exclusivity. So that’s fairly finite although it’s grown a lot in the developing countries. In China our original number was 90 zones including our backlog. We have 430 theaters, 215 open, 215 in backlog.
The private label large format theaters are complementary to Imax rather than competitive. The Imax theaters typically sell out the first weekend so the exhibitors take advantage of that and have a price premium in another auditorium. We’ve monitored for years the percentage of the multiplex that Imax does before there were private label theaters and after and they’re not in the competitive set with us. I don’t think people say I’m going to go to this or that. I think there are people who like better chairs and a bigger screen and they’ll go to the private label theaters. There are people who, especially real film buffs, want to see the director’s vision on the screen and really want to enjoy the better sound and the whole experience and they’ll go to Imax. I think the last number of years has proven that they can exist together. There are a lot of situations where there’s an Imax theater and a private label format in the same multiplex. Both seem to do better
Deadline: And the private label large format isn’t a threat?
Gelfond: No. As a matter of fact in some cases it really helps our performance.
Deadline: I thought they would encroach on your market share.
Gelfond: Not at all. Also, we’re a different product. We’re an end-to-end solution, so we work with the filmmakers either in the imagining of how the cameras are going to be used or how their film is going to work. The filmmakers come in to Imax headquarters and they work on the film.
We have a proprietary projection system which we’ve invented that has special aspects. Most importantly, we monitor every one of our theaters in the world in real time so we know if a projector’s bulb is starting to dim. We then call up the theater and tell them to replace it. We know if the fan is going to break and we know how loud the sound system is at our 800-plus theaters all over the world. The private label solution, it’s just a bigger screen and the same projector and putting the same KDM in. It appeals to people who want more comfort or they want a larger image but Imax is about much more than that.
Deadline: Imax was always known for the giant size of its film cells. Are your non-digital films relegated strictly to museums?
Gelfond: We still have film. For Interstellar we converted some back to film. We had 50 film theaters for Interstellar.
Deadline: So when Christopher Nolan or Brad Bird wants to shoot in IMAX are they shooting with the helicopters like they did in the old days with Imax? Or is it a more feasible camera to use since most film is now digital?
Gelfond: It depends on the filmmaker and the film. Nolan shot Interstellar with the traditional Imax camera, the analog camera and he loves the 15/70 capture mechanism. You know, he talked to us before he started shooting and that was what he wanted to do. Michael Bay used our new digital camera in Transformers 4. He was ecstatic with the results. The more I talk to filmmakers, the more I learn and the more interesting it is. Direct comparisons are more difficult. It’s more a matter of style. Think of it as a painter, the way the painter likes to paint and that’s the way I think filmmakers are going to approach digital. J.J. Abrams used our analog camera to film part of Star Wars: The Force Awakens.
Deadline: What type of outreach does Imax do to encourage new filmmakers to shoot in Imax?
Gelfond: There are a number of ways we do that. The company and our largest shareholder donated an Imax theater to USC film school. So, a lot of up and coming filmmakers are working on how to do things in Imax. We have young filmmaker forums. Also, there’s a number of DPs who work with different directors and they will champion shooting in Imax.
Deadline: Now when filmmakers use Imax, they typically shoot certain scenes. What films have been lensed the most in Imax?
Gelfond: The most is Interstellar and The Dark Knight Rises where almost half were with Imax cameras. The reason for that historically is cost and also some people like the cinematic tool of opening up the screen from one aspect ratio to another aspect ratio, but also flexibility. As you point out, the film camera is hard to maneuver. I have no doubt that when we develop this next generation camera there will be movies shot from beginning to end because it could be just like shooting with any other digital camera. We’re going to try to make it really user-friendly.
Deadline: When we think of Imax, we think of the skyscraper-sized screens at Sony Lincoln Square and at Universal Hollywood. However, in an effort to increase your footprint, you’ve installed a number of Imax theaters in suburban multiplexes but on much smaller screens. Was this a matter of sacrificing quality for quantity?
Rich Gelfond: I understand your perspective but I completely disagree with it. I think there wouldn’t be Chris Nolan, Brad Bird or J.J. Abrams films unless we managed to penetrate more of the market. So there’s no question Universal CityWalk or Lincoln Square are amazing but the economics for them work in only six places in the United States. So unless you grew the network, you wouldn’t get the film product and you wouldn’t have access to the great filmmakers. The second thing is Imax is a matter of field of view. So in a big theater if you had a small screen, it wouldn’t be Imax. But in a smaller theater, the smaller screen you get is a relatively comparable experience. Not the same but you still get a great experience.
The other part of your question was: Will there be these large theaters again? That’s one of the great things about laser. Digital had a limitation. You could only get an image about 70 feet wide so that there was enough light on the screen that would be worthy of the Imax brand. But under laser we can go probably go 120 feet, maybe 140 feet wide screens and we have 75 of those in backlog right now. One of the prime reasons for developing laser is to create these bigger theaters.
One example of laser projection is the TCL Chinese Theater in Hollywood. If we didn’t have laser that never would have been converted to Imax because the maximum throw of the digital is 70 feet and the TCL Chinese Theater is 91 feet. So it just wouldn’t work. That’s the first theater in the U.S. to convert. We did the premiere of Furious 7 there.
Deadline: Given your success as an exhibitor, have you ever considered just becoming a chain instead of a co-op deal with other theater chains? You’re such a major brand now.
Gelfond: We looked at owning and operating some and we still have three or four but the business model just didn’t work because when you’re in a multiplex you share the cost of the HVAC. You share the cost of the concessions. You share the common areas. If you built Imax theaters on their own you’d have to do such big numbers, the model would be challenged. By sharing the cost you lower the cost and it just makes a lot more sense.