IMAX Winning Big in Hollywood-China Box-Office Battle

Riding a wave of blockbuster hits, the giant screen chain pushes for an IPO behind the Great Wall after sealing U.S. deals

imax china

The battle between the Hollywood studios and China for box-office supremacy may just be getting started, but one clear winner has already emerged: IMAX Theaters.

The giant screen chain earlier this month locked up long-term contracts with Disney and Warner Bros. that will extend its deal for tentpole releases through 2020. But that’s not the only reason IMAX is on a major roll, one day before it announces second quarter earnings, and two days before its traditional time to shine — the summer movie season.

Tentpole movies are the life force of IMAX, and this year will see more roll out than ever before. Action blockbusters like “Avengers: Age of Ultron” and “Star Wars: The Force Awakens” will drive what is expected to be the biggest year in the history of the U.S. box office.

IMAX realized the potential of China early on and that country will soon become its largest market and primary growth driver. It last week extended its deal with the Shanghai Film Corporation and will soon have 427 theaters in that country, more than the 421 that are operating or scheduled to be installed in the U.S.

Those numbers could well be updated — and tilt more toward Beijing– when IMAX reports its first quarter earnings Thursday. And Richard Gelfond, the company’s chief executive, could roll out a timetable for an initial public offering of IMAX China in the next six to eight weeks, according to B. Riley analyst Eric Wold.

Wall Street is paying attention. IMAX stock has risen 27 percent in the past 12 months, and closed at $37.59 per share Wednesday. Based on its China strategy and the expected box-office bonanza this summer and in 2016, analysts are bullish.

“Even though IMAX shares have appreciated 35 percent since the sale of 20 percent of IMAX China (to that country’s CMC Capital Partners and FountainVest Partners) last April, the monetization opportunity is still not fully reflected in the overall valuation,” said Wold, who late Wednesday revised his price target up from $40 to $50.

The Disney deal was for 14 films and includes not only the “Stars War” and “Avengers” releases and spin-offs, but Pixar Animation movies, as well. To broaden its consumer base, IMAX has made a point of expanding beyond action offerings with special runs of HBO TV’s “Game of Thrones” and films like Disney’s “Cinderella,” and the animated offerings could open a new frontier.

imax avengers posterWarner Bros., which signed on for 30 films, wants to turn its Superman, Batman and Wonder Woman characters from D.C. Comics into an interwoven series of Justice League movies. It’s hoping to catch the same sort of lightning Marvel did with “The Avengers” when it debuts “Batman v Superman: Dawn of Justice” next March.

In today’s era of over-the-top stunts and never-seen-before special effects, you don’t connect with fan boys and superhero aficionados and their wallets without IMAX. The premium charges from its 934 screens in 62 countries have become an integral part of the business plan when studios run the numbers on would-be blockbusters.

“For all the expanding we’re doing and new areas we’re looking to try, what we call ‘pillar movies’ are still and always will be our bread and butter,” IMAX Entertainment President Greg Foster told TheWrap.

“Jurassic World,” “Terminator: Genisys,” the James Bond film “Spectre” and “The Hunger Games” franchise finale are among the other potentially huge films out this year, too.

Bradley Cooper in American SniperThose are coming on the heels of the first January blockbuster “American Sniper,” which IMAX nimbly capitalized on by shifting its schedule, the biggest February opener ever in “Fifty Shades of Grey,” and the stunning $1.32 billion success of “Furious 7.”

“This is such a momentum business, and right now it really feels like we’re getting traction from the great start to the year we’ve had,” Foster said.

On the opening weekend of “Furious 7,” IMAX theaters in North America took in $14 million, the best ever in April and roughly 10 percent of the grosses, and accounted for 17 of the top 20 sites. Globally, IMAX delivered $22 million.

Even Foster, who says “the worry gene is deeply embedded in my DNA,” admits things are looking good.

“On paper they look terrific, but the minute you take your eye off the ball is when things go sour,” he said. “But there was a time when this company was struggling from quarter to quarter,” he said. “That gave us a sense of urgency that we try very hard to maintain today.”

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