IMAX CEO: ‘People are screaming’ to go back to the movies

Richard Gelfond, IMAX CEO, joins Yahoo Finance’s Zack Guzman to discuss the company’s earnings and movie theaters reopening amid the pandemic.

Video Transcript

ZACK GUZMAN: I want to spotlight the action we're seeing play out in IMAX shares, up considerably, up more than 10% today, after the theater giant reported earnings, and the adjusted loss came in roughly in line with expectations. But a lot of investors are focusing in on the reopening of those theaters. Importantly, in New York City, we are seeing that reopening now, 25% capacity to focus in on.

So for more on that, we're going to bring in the CEO of IMAX, Richard Gelfond joins us now. And Richard, I mean, you know, we've been focusing a lot on kind of the quarters that have been reported for companies like yours. But I think importantly, as we're seeing play out today, investors more keen to find out what this recovery looks like, what the reopening plans look like. So talk to me about what you're expecting in the months and quarters ahead, given what we're seeing play out on the pandemic front.

RICHARD GELFOND: Well, one reason that our stock has done so well today and over the last six months or so is because the reopening has gone extremely well in Asia. And we're really the only global exhibition technology provider in the world. We're in 82 countries.

And if you look at our financial results sequentially, every quarter since the pandemic started has been better than the last one. And the quarter we just reported yesterday evening, we actually had $10 million in EBITDA, and we actually had $6 million in free cash flow. And that's a very different financial characteristic than anyone else that's providing virtually anything to the exhibition industry.

So, that was really driven by an incredibly strong Chinese and Japanese box office. In China, for our opening weekend for Chinese New Year, we were up 45% from 2019, which was a record at that time. In Japan, the biggest movie of all time called "Demon Slayer" came out, and that movie did about $27 million in IMAX, which is the largest IMAX release in Japan of all time.

So I think what people are seeing and what we're seeing and have a front row seat to, is that where it's safe to go to the theaters and people feel that way, they're not only coming back, but they're coming back in record numbers. And they're preferring IMAX over other entertainment options, as our market share is going up.

ZACK GUZMAN: Yeah, I like the the use of the metaphor front row seat. In my experience, not necessarily a good thing when you're at an IMAX theater because you're so close to the screen. When we talk about what the expectations are from studios, though, that's another headwind potential problem here, moving forward, when we think about how much production has been impacted by the pandemic as well, especially as they embrace streaming.

So talk to me about that and how you see that. I know the strength over there in Asia, but back here in the US, what are the expectations on that maybe weighing in on you guys specifically? And it's a sector wide thing we're talking about. But how do you see it playing out?

RICHARD GELFOND: So I don't really think it's going to be an issue, because while you're quite correct you have production that was shut down for long periods of time, you also had exhibition that was shut down for long periods of time. And virtually every IMAX movie, with a few exceptions, was moved from 2020 to the back half of this year. So when you look at the film slate this year, you have the Bond sequel, "No Time to Die," you have "Mission Impossible," you have "Maverick," Tom Cruise's sequel to "Top Gun," you have "Black Widow," a lot of other Marvel movies.

So while production was delayed, movies that were completed were moved. So the fact that production was delayed, now it's starting to pick up again, that'll go into 2022. And that already looks strong. Some of the movies were moved from '21 into '22. And then you also have other big blockbusters, like "Jurassic World," which are back in production again. Finally, the next "Avatar" is coming out.

So I think the equilibrium between production being closed and exhibition being closed really won't affect what's available when things reopen. And in fact, it looks like one of the strongest slates we've ever seen.

ZACK GUZMAN: Yeah, Richard, let's get into the IMAX specific story here, too, though, because those are the kind of questions people have sector wide. But IMAX specifically, I assume, would have some competitive advantage, not just because on the financial side, as we talked about. Some of these other theater chains that we saw, AMC kind of tap the debt market, also issue a bunch of shares. You guys, as you kind of leaned on, as you're talking about the strength in Asia, maybe not necessarily seeing kind of the same financial weaknesses.

But when we look into exactly the reopening here, what are you seeing in terms of demand in those areas? I know New York has been kind of later to get to that point. But what are you seeing in the areas in the US where reopening has come back? What is kind of the demand that you're seeing there, matched up relative to how many seats you're actually allowed to put consumers in?

RICHARD GELFOND: So it's really premature to answer that question because there are two components. The theaters have to be open, and there have to be movies to show in those theaters. And virtually, all the movies that would support an IMAX release were pushed back. Some were moved into a simultaneous PVOD window, or some were moved into a simultaneous streaming window.

But those aren't real IMAX releases with premieres and buzz and celebrity talk shows and red carpets and those kinds of things. So, in other parts of the world, when real movies have opened up and the cinemas have been opened up, the traffic has been phenomenal. So, in China, we did 28% more in 2020 than we did in 2019, when "Star Wars" was released into theaters and "Jumanji" was.

It's too early to say in North America. As I said, I feel really confident about it. But the theaters that are open now are really on limited schedules, and they're playing reruns of other films, or they're playing small films, so we haven't seen it yet. But I believe starting in May and then really going into the summer, blockbuster season, we're going to, over the summer, see a traditional blockbuster season.

ZACK GUZMAN: So if it's starting in May, I mean, what does it look like to you? And of course, obviously, it's very difficult to predict because of just how these cases have gone here in the US. But if you assume kind of a relative decline like we've seen, that continuing and vaccines rolling out at the current pace as well, beyond May, I mean, back to getting to normal, it seems like there's a lot of pent-up demand among theatergoers out there to want to get back into the big screens. So talk to me about maybe what you see in the year ahead in terms of your financial expectations as that opens back up.

RICHARD GELFOND: We have relatively high expectations for the back half of this year. Of course, that is contingent on the vaccines continuing to roll out and the theaters opening and the films being released. But, you know, when I look at a film, just using one example, like "Maverick Top Gun," which is scheduled around July 4th weekend, and again, you look at the audience which is a lot of younger people-- they have less risk of serious illness than other people. Vaccines will be up at that period of time. I think that's the kind of movie that's going to feel like a normal summer blockbuster when that comes out.

And then, again, as I said, you have "Black Widow," you have the Bond movie, you have "Dune," [INAUDIBLE]. You know, it's-- "Spider-Man." There's just a lot of good things coming out this year. "Venom"-- I can't even remember them because I've got to integrate them, and some of them moved around. But I think it's going to feel very much like normal. And as the year goes on, I think the numbers are going to start to return to the definition of normal.

ZACK GUZMAN: Specifically, just one last for me because of this definition of normal has been challenged now with the idea of studios going direct to streaming. We've seen that with Disney increasingly looking to do that as well. What does that look like to you, the relationship with studios around theaters since it sounds like-- I've heard this from a lot of people watching this play out-- it's difficult to put the genie back in the bottle once they realize they might be able to make a little bit more money going direct to streaming. How do you see that shaking out?

RICHARD GELFOND: Yeah. So your point-- make a lot more money going direct to streaming-- is the fallacy. Because what happens is there's been a windowing structure for decades. And let's use "Avengers," for example. They had it play at the movie theater, and it did $2 billion in box office. Then it went to electronic sell-through. Then it went to airplanes. Then it went to streaming services. So they sold the same property many times.

And the theatrical window really built great demand for it and helped publicize the property. Skipping those windows and going just to the streaming window does not provide a fraction of the economics of the other model. Now, I get it. You couldn't go to the movie. You were sitting in your living room. Theaters were closed. People didn't feel safe. So you sent it out on streaming, and lots of people streamed it. That makes perfect sense to me. It's a great response to a global pandemic.

But once that pandemic is over, as I said to you, we've seen, in other parts of the world, people are screaming to come back to movies. And the studios realize that. So if you look at virtually all of the big blockbusters this year, they were pushed back to the back half of the year. They didn't send them out on streaming. And you look at the numbers. Warner Media released "Wonder Woman," [INAUDIBLE]. So the response I understand because of the pandemic. But the first "Wonder Woman" did $800 million more than that globally. This one did less than $150 million. And they get it.

So I think even Warner, when they look at next year, post-pandemic, is going to have a different strategy, which I think they'll talk about that soon. So I don't really think what worked for a pandemic is really going to be the right result when the world is opened up.

ZACK GUZMAN: Yeah, it's definitely a lot of people are hoping that it is indeed going to be a very different world once we all get back into normal. But appreciate you coming on here to chat. Richard Gelfond, IMAX CEO, thanks again for taking the time.