Yahoo Finance Warner, Discovery deal 'a positive' as movie theaters recover: IMAX CEO
As the media and entertainment world weigh the impact of WarnerMedia's (T) merger with Discovery (DISCA), IMAX (IMAX) CEO Richard Gelfond predicted that the deal could be positive for movie theaters hammered by COVID-19 lockdowns.
"I think it's a great deal for the industry," Gelfond told Yahoo Finance during a recent interview — touting not only David Zaslav's success as Discovery's chief, but also his ability to potentially attract top talent back to WarnerMedia, like former HBO head Richard Plepler.
"I think it's a really great thing for that company — and for IMAX, we are global, we do blockbuster films, we work with great filmmakers. I think it's a positive for us and a positive for the industry," Gelfond said.
Since news of the deal was first announced, many analysts have mulled other potential moves from fellow competitors such as Comcast (CMSA) and ViacomCBS (VIAC)— which now face even more pressure to develop innovative, go-forward strategies in a bid for streaming dominance.
"We probably [will see more consolidation] in the streaming space — it's clear that you need scale to succeed," Gelfond said, referencing streamers' reliance on subscriptions in order to offset production costs.
"If you don't have the scale, you can't make money and I think that was part of the WarnerMedia and Discovery merger," he surmised.
To stream or not to stream
Amid the coronavirus, studios have had to get creative with film rollouts, often choosing to bypass theaters and opt for streamers. Premium video-on-demand (PVOD) offerings and hybrid releases, like "Wonder Woman 1984" and "Mortal Kombat," became go-to options at a time when not many existed.
But is the hybrid model here to stay? Gelfond thinks it will soon run its course.
"That's what we saw through most of the pandemic, but we're reaching the end now and you're starting to see people ask, 'What's the longterm plan?'" the CEO told Yahoo Finance.
"What you're seeing is that almost every studio is talking about a 45-day theatrical window. Yes, there are still some PVOD releases at the same time as theatrical, but we're still coming out of the pandemic," Gelfond said.
"I think a few months from now once we're really out of the pandemic you're not going to see those kinds of hybrid releases," he continued, adding that he expects the shorter window to stay put even as streaming intensifies.
"You have to remember that the theatrical release creates a lot of magic around the property," he explained.
"When you look at what the theaters are holding this year — 'Bond', 'Top Gun,' 'Black Widow,' — it's those franchise kind of movies. I think they will open theatrically, build buzz and then will go to streaming," he said.
More niche films — which often have high marketing expenses — might be made specifically for streaming in an effort to cut costs, the CEO added.
"Shorter windows will also enable some of the streaming services to release their movies theatrically rather than just day and date on the service," Gelfond said.
Yet despite Gelfond's optimism, Americans still seem hesitant. The new "Saw" reboot "Spiral," which features A-list stars Chris Rock and Samuel L. Jackson, underwhelmed at the U.S. box office in its opening weekend — bringing in just $8.7 million verse the $14.8 industry analysts had expected.
To compare, "Jigsaw" — the last film of the franchise — earned $16.6 million in its 2017 debut. However, Gelfond wasn't concerned "in the slightest" about the outlook for the summer box office.
He touted the success of "Godzilla vs. Kong" as a counterpoint, noting how the movie did "extremely well" in IMAX. Since its release, the film has grossed over $95 million in the U.S. and a whopping $427 million globally.
"The 'Saw' movie was a little bit of a niche film. It's the summertime — people want blockbusters," he said, teasing the releases of 'A Quiet Place II,' 'Black Widow,' and 'The Suicide Squad,' which are all expected to debut in the coming months.
IMAX operates in 84 countries with a particularly strong presence in Asia, which has helped lift the exhibitor's quarterly revenue — a bright spot amid U.S. operators' slow recovery.
In China, the box office rebound, in addition to a robust pickup in theater installations, drove revenue recovery to pre-pandemic levels of $26 million, in line with the first quarter of 2019, Gelfond revealed to analysts on the company's latest earnings call.
"We have a very clear vision into the future and can see what's happening in other parts of the world," Gelfond said — referencing China, Japan and Korea's recent blockbuster success.
"They're going back to the movies in record numbers [overseas] and the same thing is going to happen here in the U.S. when the dynamic is the same," he predicted.
Alexandra is a Producer & Entertainment Correspondent at Yahoo Finance. Follow her on Twitter @alliecanal8193
Read more:
Prince Harry, Meghan Markle announce flurry of deals in bid to expand media footprint
What 'The Ellen Show's' exit says about the future of TV, talk shows
Time's Up CEO hits 'manifested racism' of Golden Globes, HFPA amid backlash
Big Red Hot Chili Peppers deal shows song catalogs as a 'safe asset class'
