Regal Entertainment Swings to Q1 Loss Amid Weak Box Office
NEW YORK – Movie theater operator Regal Entertainment Group on Thursday said it swung to a first-quarter loss amid weak box-office results, but the conference call with management put the spotlight on the ongoing debate about premium VOD, which drew a slew of questions.
"We are presently speaking to a number of studios to better understand their perspective and ultimate plans while stating our concerns," CEO Amy Miles said during her presentation on the earnings call Thursday afternoon in addressing controversy over the early-release movies four studios launched last week with satellite provider DirecTV. "We, however, recognize the symbiotic relationship between exhibition and the studios, and we are hopeful that, as with past tweaks to the model, we will again find ways to ensure our mutual success.”
She said studios and exhibitors "agree that the theatrical release is the most important window in the content cycle and sets the tone for the ultimate profitability of a film or film franchise in subsequent downstream distribution channels." She added, "Neither party wants the current business model to evolve [in a way that] on a long-term basis denigrates the ultimate theatrical gross of a film.” Miles said, however, that “we may differ on what we believe impacts the theatrical gross of a film.”
Asked by a Wall Street analyst if the $29.99 premium VOD price and the 60-day delay after the theatrical launch of films could be undercut anytime soon, Miles said Regal has not heard of plans to change those terms. Miles said her team hasn't heard or seen how the first DirecTV premium VOD title performed during its first week.
Asked about financial exposure to premium VOD, the Regal CEO reiterated that 97 percent of theatrical revenue typically flows in during the first six weeks (including 85 percent during the first four weeks). However, Miles said Regal doesn't want consumer perception to be that all films are available early to avoid training moviegoers -- particularly more casual ones -- to not go to the theater and instead wait for movies to be available in the home.
Asked by another analyst if the initial movies announced for the premium VOD window really seemed to threaten the theatrical business, Miles said she wouldn't comment on specific titles as Regal finds long-term protection of the theatrical window key. Current windows benefit studios and exhibitors and maximize theatrical results for both, she emphasized.
The movie theater chain on Thursday posted a quarterly loss of $23.6 million, compared with a profit of $16.5 million in the year-ago period.
Regal's revenue declined 20 percent, from $719.8 million to $570.9 million, amid lower admissions and concessions results. Admissions revenue fell from $506 million to $394.4 million, while concessions sales dropped from $185 million to $151.3 million.
Miles cited “a challenging first-quarter box-office environment” after a record-breaking year-ago period but also said she is excited about the films scheduled for release during the summer movie season.
Management cited a number of wide releases that is in line with past years and a higher number of premium-format films this summer. Executives also lauded a less kids-heavy wide-release slate, saying this summer's titles should appeal to a broader range of audiences. Regal also cited a healthy mix of tentpole fare, from Harry Potter and the Deathly Hallows, Part 2 to Kung Fu Panda 2 and Pirates of the Caribbean: On Stranger Tides, and new product, such as Green Lantern and Super 8.
Are $4-plus gasoline prices a concern for exhibitors? Regal executives said they have looked at the issue and not found a correlation between gas prices and box office.
Management also said Regal is not planning to lower ticket prices for 3D family films, arguing that a slight reduction wouldn't drive enough added attendance.
The company also got questions about Open Road Films, its movie-distribution joint venture with AMC Entertainment. The venture is eyeing the release of a couple of films this fiscal year, Regal said.