The coronavirus crisis has proven 'the value of the theatrical window': IMAX CEO

Richard Gelfond, IMAX CEO, joined Yahoo Finance's Myles Udland, Jen Rogers, Dan Roberts, and Andy Serwer to discuss the company's first quarter earnings report and his outlook for the movie theatre industry.

Video Transcript

We're joined now on the phone by Richard Gelfond. He is the CEO of IMAX, the company out earlier today reporting its latest quarter the results. And Richard, I guess my first thought that stands out to me in this release is you're estimating monthly cash burn of about $10 million. Now, you've got about $350 million on hand. But I think in this environment, did it seem most important from your vantage point to let the market know what your financial position was right now above anything else?

RICHARD GELFOND: Yeah, I do think there are pretty much two questions for a lot of companies that were affected in a big way by COVID-19. One question is you know how much staying power do you have, what you're addressing, what does your balance sheet look like? And the other question is how soon can you get back to normal and what does that look like? So when we put the call together, you know, those were the two things and the release we were trying to focus on.

JEN ROGERS: Hey, Jen Rogers here. Help us think about what re-opening movie theaters looks like. Because I know-- I mean, you've said, look, you can't have a blockbuster movie just go to the home theater way, the "Trolls" way. These huge tent poles need to come out and be released. But people need to want to go into seats.

So once they get opened, are we actually going to see new movies, big movies that people want? Or do you think the waters will be tested in a different way? How are people thinking about that?

RICHARD GELFOND: So that is a great question. And as a matter of fact, I was just on the phone 10 minutes ago with the head of one of the major studios. And I think everybody's trying to work together to figure that out. And I think since this is the first time anything like this has ever happened, there's not a proven model.

So in China, which is opening in early June, or scheduled to, what they're talking about is starting slowly and working with library titles and titles that have never gone into China, and seeing how it goes. And then if that goes well, bringing in Chinese films and then Hollywood films.

I think the question is, is that the right model for here? And one of the interesting movies is "Tenet" Chris Nolan's new movie, which is scheduled for mid-July. And Chris really wants to release it. And he really wants to release it at that time. And certainly, people who are going to show it really want it released and lots of fans want it released.

But at the end of the day, as you know, a lot of these things are based on detailed economic projections. So is it going to do the right kind of revenue that's going to work for Warner Brothers? Will audiences show up? In what numbers?

And I hate to say this, because I probably know as much as anyone about this particular issue. I think everybody's trying to figure it out together. There's no real binary answer.

DAN ROBERTS: Richard, Dan Roberts here. Thanks for joining us. So bring it back to sort of the controversy right now, with "Trolls" and Universal, you know, your peers in the industry, AMC, have threatened not to show Universal movies after this. Which, it's hard to believe that will really stick. Because, as you say, after this time ends. everyone needs to work together.

So I ask you your take on whether that's really believable, that those two sides will make up? And then related to that, everyone already seems to be assuming that after coronavirus, the field will completely change for movie theaters. But there's also the chance that it doesn't change so much. I mean, are people wrong, on balance, to think that just because of this "Trolls" example, you know, everything is going to change with movie releases?

RICHARD GELFOND: Yeah, as a matter of fact, the verdict is completely out on "Trolls." You know, it did pretty well streaming. But people had no choice, if they had kids, watching a family movie at home, even if they had to pay for it. I mean, I wonder what that model would look like if there was competition in the movie theaters at that point and, you know, the kids could go watch sports or do other things.

So I think probably declarations that that's changing the movie industry are pretty premature. The other part is, if you look at the overall economics of the industry, there are a lot of windows. And they stream-- they go from theatrical release at the front end to, at the back end, whether it's merchandising or sequels.

And what happened with "Trolls" is it did some good business streaming. But you can't now sell the streaming rights and you can't sell the electronic sell-through rights. And, you know, where are the ancillaries there?

So I think it's way too early to say that that's a new model. As a matter of fact, I think what the crisis has probably taught us more of is that theatrical is really important. So, you look at movies that couldn't be shown, blockbusters-- "Bond," "Top Gun," "Wonder Woman," I mean, "Mulan," "Black Widow--" every one of them has been scheduled for a theatrical release later in the year. So I think if it proves anything, it's the value of the theatrical window.

And I think with "Trolls," they're trying to create a perception of a new way to go. But I think we're a long way off from that, if ever.

ANDY SERWER: Hey, Rich, quick last question. This is Andy. So, would you have social distancing in the seats so that, you know, the capacity is cut in half? And maybe that's something that's going to last for like a year. Could theaters, could your company, handle that?

RICHARD GELFOND: Well certainly, we could handle it. Because as you said in the lead-in, we have $350 million in cash and a $10 million burn. So we could last a long time under constrained seating.

I don't really think it's going to play out that way. I think maybe when the theaters open, there'll be more limited capacity and social distancing. And some of the plans in other countries that have either started to reopen or thought about it have been 50% capacity, social distancing. We don't know yet what's going to happen in the US.

I think one thing we have to remember also is that the people who go to blockbuster movies, millennials, other young people, are kind of the least at risk from the coronavirus in science. And then subjectively, they feel the least at risk. So I don't think we're going to look at-- we may open with limited capacity. But I don't think that's going to last for a long time.

MYLES UDLAND: All right, Richard Gelfond is the CEO of IMAX. I really appreciate you taking the time to talk with us. Hopefully we can talk after your next quarterly update.

RICHARD GELFOND: OK, thanks a lot. I appreciate it.