IMAX reported strong fourth-quarter and full-year earnings Thursday, despite the fact that 2016’s movie landscape did not yield as many giant screen-friendly global blockbusters as the year before, when “Jurassic World,” “Furious 7” and “Star Wars: The Force Awakens” took the globe by storm. The company is expecting 2017 to tell a very different story.
“On paper, it looks like there should be a blockbuster title in every month of the year,” Greg Foster, the CEO of IMAX Entertainment, said on the earnings call. “If 2016 was about doubles, 2017 will be about home runs.”
Foster added that about half of the year’s projected biggest films, including Disney’s “Beauty and the Beast” and “Guardians of the Galaxy Vol. 2,” will have special IMAX features, and the company tends to over-index on films that take advantage of its technology, increasing box office by 15 to 20 percent on average.
“Our core business is increasingly tied to box office,” particularly in China, the company’s fastest-growing market, IMAX CEO Richard Gelfond said on the call. IMAX added 116 screens in China last year alone.
Gelfond blamed China’s “disappointing” per-screen averages, especially in the second half of the year, on a weak slate of local fare without international franchises proven to play well in China, like Disney’s Marvel films or Universal’s “Fast and Furious” movies, to balance it out.
“In the second half we saw stronger headwinds largely the result of a relatively weak slate,” Gelfond said. “China saw ticket prices decline 5 to 10 percent as a result of the weak slate and dynamic ticket pricing.”
That weak slate hurt IMAX, but because of China’s dynamic pricing — in which in-demand films can charge more — a particularly good movie year adds an incremental boost to IMAX earnings, Gelfond said.
Gelfond also mentioned recent IMAX virtual reality ventures, including the opening this year of a VR arcade in Los Angeles.
“We view VR as a natural extension of IMAX,” Gelfond said, mentioning its strong base of superhero film fanboys and immersive nature.
And while there has been a lot of consolidation in the movie theater market, creating potentially fewer distinct entities that could become IMAX customers, Chief Financial Officer Patrick McClymont expressed confidence that it would play out to the company’s benefit.
“Consolidation in sector should work in our favor, given that our biggest partners are the consolidators,” referencing China’s Wanda Cinema Line and the U.S.’ AMC Theatres, both of which are owned by China mega-conglomerate Dalian Wanda Group.