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“We are not an exhibitor.” That’s been Imax CEO Richard Gelfond‘s pitch to Wall Street as the exec aims to differentiate the giant-screen company from more volatile rivals like theater giants AMC and Cineworld. And, on Sept. 22, Imax unveiled a $21 million acquisition of a streaming video tech firm, SSIMWAVE, that would be surprising if Gelfond hadn’t already been telegraphing his ambitions.
SSIMWAVE, a startup run by CEO Dr. Abdul Rehman, uses machine learning to allow clients — including Disney, Paramount and Warner Bros. Discovery — to offer high video quality for viewing on multiple devices. The startup’s tech aims to allow streaming players to deliver a better customer experience by reducing content delivery issues like quality drop-offs, screen audio and video out of sync and uneven color contrasts and depth. The buy looks to bolster Imax’s efforts to broaden its revenue streams beyond reliance on the 1,600-plus screens it operates globally.
The purchase adds to a portfolio of non-box-office-related assets including Imax Enhanced, a remastering service to optimize films for at-home streaming viewing, and Imax AI, a joint venture with VFX firm Maximus that develops high-resolution video tech for streaming services.
Unlike Imax earlier growing new revenue streams on its own with its spinning class studio ImaxShift and selling in-home private movie theaters, SIMMWAVE represents a tuck-in acquisition with a business model that gets the large format exhibitor deeper into TV and streaming content.
“Many of our prior business efforts were to enter new markets on our own,” Gelfond tells The Hollywood Reporter. “With this one, we’ve acquired first-in-class technology with world-class clients, revenues, proprietary technology, and which leverages our brand and our core business.”
But these assets are a fraction of Imax’s overall revenue, the bulk of which comes from box office, royalties from leasing its large-format theater tech to exhibitors, and digital remastering revenue from super-sizing movies. As of the fourth quarter of fiscal 2021, Imax’s “new business initiatives” line totaled $1.15 million and $3.7 million for full-year revenue. For comparison, in its most recent quarter, Imax revenue totaled $74 million.
So far, analysts are giving Imax a thumbs-up for the buy. MKM Partners’ Eric Handler wrote that the acquisition “helps further Imax’s goal to leverage its platform beyond theatrical experiences and gain access into the home” and has “attractive risk/reward with minimal capital risk.”
“Strategically we like how this acquisition both expands the company’s reach, building deeper relationships with potential streaming partners and provides solutions that can help both existing efforts in the legacy business and the nascent live events business,” Rosenblatt Securities analyst Steve Frankel said in a Sept. 22 investor note about Imax broadening its industry reach.
Goldman Sachs analyst Michael Ng adds SIMMWAVE, with its perceptual quality analysis technology, will drive new recurring revenues for Imax, expand its own technology expertise in image enhancement and allow synergies as Imax scales the tech startup’s business using its own exhibitor brand and industry reach.
“We’re encouraged by the potential synergies to be realized by combining SIMMWAVE’s product in image enhanced for streaming, gaming, VR/AR with Imax’s scale, deep industry relationships and global footprint,” Ng wrote in a Sept. 23 investors note.
A version of this story appeared in the Sept. 27 issue of The Hollywood Reporter magazine. Click here to subscribe.
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