“When are the rest of the countries in the world going to catch up to China?” asks IMAX CEO Richard Gelfond. “When is Hollywood going to feel comfortable releasing their blockbuster movies globally where the rest of the world is like China. In China, people feel safe and in fact, they are safe. They really want to resume their lives. They want to go back to the movies. They want to go back to restaurants. They want to do a lot of things. China in particular, but Asia in general, is ahead of the western world.”
Richard Gelfond, CEO of IMAX, says that China and Asia, in general, are ahead of the rest of the world in feeling safe and resuming their lives including going to the movies:
When Is The Rest Of The World Going To Catch Up To China?
It’s remarkable that cinema capacity is constrained to 75% yet we did 25% better than our best year which was last year. That’s clearly an indication that people feel safe and in fact, they are safe. They really want to resume their lives. They want to go back to the movies. They want to go back to restaurants. They want to do a lot of things. China in particular, but Asia in general, is ahead of the western world. It hasn’t gone as smoothly in a lot of businesses as it’s gone in China but the indications are quite good that they want to get back to normal.
I don’t think that the message in the rest of the world is survival. From the China experience, we know that there’s a pent-up demand for going to the cinema. We know that when people feel safe and healthy they’re going to go. In the United States, on the other hand, that’s the other end of the spectrum, where people just don’t feel comfortable at this point in time. I don’t believe it’s an existential issue.
The lessons of China, not just from the National Day this weekend, you go back a few weeks ago to when the ‘The Eight Hundred’ came out and that did $115 million dollars in its opening weekend. That is in the top 10 Chinese local language movies of all time. The proof points are there. The question is when are the rest of the countries in the world going to catch up to China? When is Hollywood going to feel comfortable releasing their blockbuster movies globally where the rest of the world is like China.
China Is Largest IMAX Market In The World
We’ve done very well in China. We have about 700 plus screens open. We have another 300-ish in backlog. We’ve also signed a few deals this year in China, one with Wanda Cinemas and another one with a number of other operators. There’s great demand in China and as we speak we’re opening new screens there. There’s also a lot of dialogue going on. China is our largest market in the world for IMAX. It’s about 40% of our screens globally even though we’re in 82 countries. As a reference point, in North America, we have 400 screens.
In China, we have 700 screens with several hundred still to go. So the demand is growing there. The Chinese consumer really wants to go to the movies. The Chinese consumer is also brand conscious. They also want something innovative, the next forward-looking thing. It’s a terrifically promising market for us.
Saudi Arabia Is A Rapidly Growing Market
Japan is another market that has gone very well for us in recent years. We have about 30 to 35 theaters open with a backlog opening. In Korea, we just signed a large deal with CGV, the largest cinema operator there. We have 16 open now and we’re opening another eight or ten in Korea. Saudi Arabia is also a rapidly growing market. There was no cinema in Saudi Arabia until about a year ago.
Since it’s opened it’s been very successful. We have 25 theaters slated to open in Saudi Arabia. In Saudi Arabia, we can’t build them fast enough. Western Europe, also once it starts to feel safe again and cinema gets back to normal, that’s a very good market as well.
Non-IMAX Cinemas Have Short-Term Cash Issues
What happens between now and the vaccine? For IMAX, we have a very strong balance sheet. We have over $315 million in cash and our cash burn is less than $9 million a month. But now that China’s open it’ll be significantly less than that. So for us, we have a long runway and a lot of staying power. For cinemas, in general, they tend to be much more levered than we are so there will be some short-term cash issues.
What they’re going to have to do is just manage their spend rates until there’s a vaccine and Hollywood releases more films so they can come back in a direct way. Most of the major ones have raised capital during the last several months with the financial markets being very amenable. So I suspect a lot of them will make it through it but it’s a matter of cost control and how soon they reopens.
America Didn’t Open Theaters Up As Quickly As China
In China, there is a lot of local content as well as in Japan. IMAX has been in China since around the year 2000. We have lots of relationships with filmmakers and studios in China. We have 10 local language films available between now and the rest of the year. So there’s a lot of content going on there. I think movies got pushed because, in North America, it didn’t open up as quickly as China opened up.
There are a few reasons for that. One is people just don’t feel as good about the virus and they’re leerier about going to out-of-home experiences. It didn’t happen the same way it happened in China. Also in China, they were very intelligent about the way they reopened. They opened about a month before some of the blockbuster movies came out so people got comfortable going to theaters. Then when the movies opened it was just a natural progression.
In the US, because of local regulation, it happened very suddenly and then the movies came out right away. People really weren’t conditioned to go. A lot of people, if you read the polling data, didn’t even know the cinemas were open. In terms of Disney’s Mulan, the results were not as good in China as was expected but I think that probably had more to do with how the movie played rather than any safety concerns.