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‘We’re cash flow neutral’: IMAX CEO on recovery amid pandemic

Yahoo Finance’s Alexis Christoforous and Richard Gelfond, IMAX CEO, discuss the impact of the COVID-19 pandemic on the film industry.

Video Transcript


ALEXIS CHRISTOFOROUS: Hello, everyone, and welcome to our Yahoo Finance special "COVID-19-- Overcoming the Pandemic." I'm Alexis Christoforous. We're so glad you could join us this hour, because over the next 60 minutes, we're going to be speaking with the top voices in the fields of education, health care, film, sports.

We're going to discuss how they're navigating through this unprecedented time in our history. And they're going to give us insights into how they are transforming their businesses in order to thrive in this new world. And we're going to begin with the movie industry, which we know has been ravaged by the pandemic. Global box office sales plummeted 71% from their record high in 2019 as movie chains struggle to survive pandemic-induced shutdowns and occupancy restrictions, and also some high-profile would-be blockbusters like "Tenet" have drastically underperformed.

But there was a glimmer of hope. It emerged over the Christmas weekend when Warner Brothers released "Wonder Woman 1984" in theaters and also simultaneously on its HBO Max streaming platform. The film took in more than $36 million worldwide in that opening weekend. And the giant screen movie chain IMAX took in 10% of that global box office.

Joining me now is the CEO of IMAX Richard Gelfond. Richard, good to have you here. We should mention that "Wonder Woman" was filmed in part with IMAX cameras. So what did the superhero movie tell us, do you think, about the resiliency of the movie industry, and in particular the theater chains?

RICHARD GELFOND: Actually, I obviously listened to your lead-in, and I'm not sure I agreed with the lead-in. "Tenet" did $350 million globally, and "Wonder Woman" is now at about $120 million globally. So I think "Tenet" was actually a bigger success in theaters than "Wonder Woman" was. I think what Warner Brothers tried to do was simultaneously release something online at-- you know, with theatrical.

And at the time, the pandemic was much worse than it was when "Tenet" was released, and a lot of places weren't open. But I think what we learned from "Tenet" and a little bit from "Wonder Woman," but I'd say more from the global box office, is where places are open and people feel safe, they want to go to the theaters. And we've seen that in China, Japan, other place in Asia. And where it's not safe, it's a little bit slow going.

ALEXIS CHRISTOFOROUS: I want to talk about where you are seeing a big pickup right now, because you are truly a global platform. You're in more than 80 countries. About 2/3 of IMAX's annual box office revenue actually comes from outside of North America. And you are seeing a huge rebound in Asia, particularly in China. Tell us about what you're seeing there.

RICHARD GELFOND: Yeah, in China and Japan as well. So in China, a number of films this year became among the top 10 releases in Chinese history, and there was still 75% capacity restrictions. IMAX has done a much better job of indexing, meaning our percentage of the box office. So I think what that means is when people feel it's safe and they want to go out, they're seeking out the best way to see it.

And there was a movie just out in the last couple weekends where a local film where we usually do maybe 5% of the box office, and in one of the days we did 20% of the box office. So I think when they come out, they want to see a premium. In Japan, the largest movie in the history of Japan with capacity restrictions at 75% called "Demon Slayer" came out. So it seems like there's an awful lot of pent-up demand, and people really want to get out and socialize where it's safe to do so.

ALEXIS CHRISTOFOROUS: Is that local movie that you were talking about in China, is that "The Eight Hundred"?

RICHARD GELFOND: No, that was another one that did-- that did very well. It just slipped my mind, but I'll remember it before we get done.


RICHARD GELFOND: "Shock Wave 2."

ALEXIS CHRISTOFOROUS: You know, I also-- when Warner Brothers--

RICHARD GELFOND: It was called "Shock Wave"--

ALEXIS CHRISTOFOROUS: --announced-- what was it?

RICHARD GELFOND: "Shock Wave 2."

ALEXIS CHRISTOFOROUS: "Shock Wave 2." Got to check it out. All right.


ALEXIS CHRISTOFOROUS: When Warner Brothers announced not long ago that it was going to be releasing all 17 of its 2021 movies simultaneously in theaters and on HBO Max, you were pretty outspoken about it, and you said that it really didn't make sense. Do you still feel that way? And why?

RICHARD GELFOND: Well, I separate it into two pieces. I mean, during the pandemic, I think it does make some sense. And you know, we were talking about "Wonder Woman" a few minutes ago, and the fact is if you wanted to get it out there and have some sense of recouping your investment during the pandemic, you needed to release it online as well. But once the pandemic is over, there's no way you're going to achieve the numbers on that model and recoup your investment the way you can theatrically.

So let's use real numbers. The-- the first "Wonder Woman" did over $800 million theatrically. And then after that, it went to different windows, whether it was electronic sell-through, TV streaming, other places. As I said a minute ago, this "Wonder Woman" did $118 million so far, so it's going to do a fraction. But then you've already streamed it, so you can coast off the success of the theatrical run.

And one thing great about the theatrical run, in a way it becomes like a huge trailer marketing the rest of the run. So I think during the pandemic, and unfortunately probably have a few-- through April, May, something like that to go, it makes sense. And Warner, by announcing the whole year, I just didn't understand it for the life of me, because you can't recoup the investment that way. And I also think it may help them get more subscribers in streaming, but I just don't think it has the event status it has when you release it in theaters.

ALEXIS CHRISTOFOROUS: You think that Warner Brothers might reconsider? What do you think it would take for them to reconsider here as we move on in the year?

RICHARD GELFOND: I think they might. You know, I think, frankly, everybody's disappointed in, you know, the "Wonder Woman" theatrical numbers, so they might learn from that. The other thing is, when things really start opening, and, you know, there are scheduled movies coming forward for this year like "Bond," and "Fast and Furious," and "Mission Impossible," and "Maverick," and just lots of terrific blockbusters, so I think if they see big numbers coming out of those blockbusters, they're going to say, does it really make sense to give that up for the rest of the year? And I hope to the conclusion-- that they come to the conclusion it doesn't.

ALEXIS CHRISTOFOROUS: When do you think we might start to see things go back to normal? I mean, now we have the vaccine rollout. It's being billed as a game changer for industries like yours. But when do you expect to see theaters opening up in a more-- in a bigger way and people really making that push to get back into the theaters?

RICHARD GELFOND: So again, to remind you, in Asia, it's largely, you know, is open. And Europe, it's going through a time analogous to the United States, and in the United States. So in those markets that aren't open, you know what? No one knows for sure. Who can know? We can't predict the virus, and we can't predict vaccines.

But my best guess would be something like late April, May, you know, maybe June at the latest when they-- it really starts to open up in a meaningful way. And I'm hoping that by summer things start to come back to normal. And certainly in the back end of the year, I think they will be normal. And as I just referenced, there's a lot of terrific movies, almost an embarrassment of riches, because a lot of things have moved forward from '20 to '21. So I think, you know, I think by the end of the year, we're going to see an industry that resembles the one we saw in '19.

ALEXIS CHRISTOFOROUS: You know, you ticked off a number of movies that are going to be coming out that I'm looking forward to, including "Black Widow," looking forward to that one. But when you look at business post this pandemic, how do you think the theatergoing experience will have changed, perhaps forever, because of what we're going through right now?

RICHARD GELFOND: I think there'll probably be more of a focus on blockbusters, because I think during the pandemic people have gotten used to streaming, you know, some things on their couch. And I think the-- the economics of non-blockbuster movies make it feasible to do either a simultaneous release in theaters and online, as well as maybe just an online release. So I think for smaller movies and more niche movies, you'll probably see more things online and less choices in the theater.

But I think for blockbuster movies, if anything, I think it'll be like the roaring '20s. People will be itching to get out of their homes, and they're going to want to socialize with other people, and they're going to want to enjoy event experiences like concerts and big movies with other people. So I think for those things, the kinds of things IMAX does, it's not going to change that much.

ALEXIS CHRISTOFOROUS: Richard, you see the news coming out of AMC Entertainment, the biggest movie chain in America, very near to bankruptcy. They're trying to raise money to stay alive. What is the financial health of IMAX right now? I mean, I know you're a global platform, but how are things looking?

RICHARD GELFOND: Really good. So one of the things we did-- because we have a big presence in China, when COVID came to the United States, we had a blueprint for how to act. So we-- we conserved our cash. We focused on new businesses. We were very conscious of what our costs were.

So we went into this with about 350 million dollars-ish in cash available to us. And it's now almost a year later, and we're over $300 million in cash. And because of our global presence, we're cash flow neutral at this point. So we're in really good shape.

Our stock price today is pretty much the same as what it was when North America closed down back in March. So you know, unlike other people in the industry, we're positioned well because we're global, and I think we did a lot of the right things really early. And we also focus internally on what do we do when we come out of the pandemic, and we're very prepared for those kinds of things.

ALEXIS CHRISTOFOROUS: What's the-- that's an enviable position, for sure, that you're in, Richard, and it's nice that you're able to report that. What's the one movie you're really looking forward to this year?

RICHARD GELFOND: You know, because we do-- we're kind of Switzerland, Alexis. So you know, I could get shot by a lot of people for picking out one. But I have to say, we've always been close to Tom Cruise, and we've done a lot of his movies.

I've heard from people close to him that the new "Top Gun-- Maverick" is amazing. And it was shot in IMAX in some places. And you know, just thinking of the scope of those planes, and the sound, and all kinds of things like that, at least in IMAX, I'm really excited about that.

ALEXIS CHRISTOFOROUS: Yeah, and we know Tom Cruise does lots of his own stunts too. So that's a good one to look forward to. Richard Gelfond, CEO of IMAX, thanks so much for joining us today.

RICHARD GELFOND: Thank you, Alexis.