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No North American movie company is more closely linked to the Chinese film industry’s fortunes than Imax Corp. The Ontario-based giant-screen exhibitor has more than 700 Imax theaters in China — nearly half its global total of 1,500 — and the company has said it plans to add as many as 400 new theaters there over the next three years.
So when China’s movie industry roared back into growth mode last weekend during the start of the Lunar New Year holiday, Imax was among the big beneficiaries. The company had its strongest revenue weekend ever in China, pulling in $25 million in ticket sales over three days — a 45 percent gain over its prior record during Chinese New Year in 2019.
Since then, Chinese tentpole Detective Chinatown 3 has climbed to more than $575 million in total revenue, followed closely by family comedy Hi, Mom with about $490 million. Overall, cinemas in China have brought in a record-smashing $1.2 billion (RMB7.8 billion) in just six days. With the pandemic under tight control in the country, the theatrical movie business has not just recovered in China — it has soared to new heights.
Some analysts view China’s resurgence as a bullish indicator for the beleaguered theatrical business worldwide. Says Rance Pow, president of exhibition industry consultancy Artisan Gateway: “China’s theatrical sector rebound suggests the appeal of cinema is alive and well, and reason for optimism as the global industry is reignited with must-see blockbusters on tap in the coming months.”
Imax analyst Eric Wold of B. Riley Securities, meanwhile, reiterated his “buy” rating on the exhibitor’s stock, writing: “We see multiple positive takeaways from these results, including impressive pent-up moviegoing demand, the Imax format’s ability to gain share in a post-pandemic world and the benefit of holding films for the theatrical window vs. pivoting to a streaming platform.”
Shares of Imax have surged 10 percent on the New York Stock Exchange this week, hitting a 52-week high.
With many in Hollywood tracking China’s recovery and pondering what it might foretell for the U.S. movie business, The Hollywood Reporter connected with Imax’s longtime CEO Richard Gelfond to discuss how the company capitalizes on China’s unpredictable but hugely lucrative Lunar New Year holiday, the risks of Warner Bros.’ direct-to-streaming plans, whether Chinese moviegoers are becoming anti-American in their tastes, and why he’s “100 percent” confident U.S. moviegoers will be back at the multiplex in a big way soon.
What were you expecting going into China’s Lunar New Year holiday, and what have been your observations and impressions as it’s unfolded?
We were expecting that this year’s holiday earnings would be approximately flat with the 2019 Chinese New Year — both for Imax and the whole industry. Our reasoning was that 2019 had been a record year. There wasn’t a Chinese New Year in 2020 at all because of the shutdown surrounding COVID-19. And now in 2021, there would be capacity limitations. In most of China, cinema seating capacity was limited to 75 percent, and in the Beijing region it was 50 percent.
Then we also looked at the movies that were coming out. We were always quite optimistic about Detective Chinatown 3, but in 2019, there was the sci-fi movie The Wandering Earth, which was an-off-the-grid success for us. It was just very unexpected. So we thought that with the variety of movies, and all the circumstances, we would, as I said, come out about where we did in 2019.
But then we beat the 2019 opening weekend by 45 percent and looked at the full industry itself, which is now up by 33 percent! So I’ve been using the term “blown away” to describe our impression. We were really pleasantly caught off guard by how powerfully the holiday weekend opened.
What lessons do you draw from China’s phenomenal theatrical market recovery for other territories that are going to be looking to stage their own comebacks as public health conditions improve — particularly North America? Can China tell us anything about how a recovery might unfold in the U.S.?
I think China tells us 100 percent that when people feel comfortable going to the movies — when it’s safe and there are great movies available — they’re coming back. There’s no question in my mind. They’re coming back in big numbers, and they’re going to come back particularly to Imax, because when they can leave their home, they’re going to want to experience something that feels transporting and special.
And by the way, we haven’t only seen this in China. We also saw it in Japan [when cinemas reopened there last year], with Demon Slayer becoming the number one movie in the history of Japan’s box office — and it was also the number one Japanese movie ever in Imax. We’ve seen it in Korea. We’ve seen it in Taiwan. There’s nothing unique to the Chinese people that suggests that their behavior is going to be different than anyone else.
You don’t give any credence to the theories that the pandemic has accelerated a fundamental and inevitable shift in how people consume screened entertainment?
Unfortunately, some people who have benefited from the lockdown in the home have liked delivering a narrative that the world is changed forever. But I don’t think 100 years of culture, and 100 years of wanting to associate with other human beings and be with your family to experience a story in an exciting way, is changed by the ability to stream.
If you go back, there were much more serious threats to moviegoing than streaming. I mean, let’s start with the advent of television. As you probably know from studying history, when everyone in the world was getting a television in their living room for the very first time, people said, “Oh my God, that’s the end of the movie business.” But if television didn’t kill the movie business, certainly streaming is a much less significant threat.
I’m going to paraphrase what someone else said, because I like it. “Everyone has a kitchen in their house, but we still go to restaurants.” The fact that they happen to have an ability to watch something in their living room doesn’t mean they’re going to stop going to movies. As a matter of fact, speaking personally, I can’t wait to get away. I mean, I really like a lot of streaming programs, nothing against them at all, but I can’t wait to get out of my house and get to a movie theater, especially an Imax theater, and see a great movie the way the directors wanted it to be seen.
Sorry, you can hear my passion in this, but I think there’s zero chance that this is the way audiences are going to prefer to see movies permanently. Now is not the time to be drawing conclusions. I mean, people are locked in their houses right now. They can’t go out. Of course they’re watching everything in their living room. They have zero choice.
Once they’re not locked in their houses, they’re going to have different choices. We’ve seen in every country where people have had that choice, they go back to the movies in huge numbers.
The situation is very fluid, but based on what you’re seeing now and what you’ve seen so far throughout the pandemic, when do you think North America is going to be in a position to begin to mount a recovery like China’s?
There are a couple of pieces to what China did that helped them get to this point. One is that they didn’t try and open it up in one day. For people seeing these big Chinese New Year numbers, maybe it appears like this happened suddenly, but that’s not how it unfolded. They prepared the market by running, for a little while, some older movies and some classic movies. Then they ran some smaller new movies, and they had certain capacity limitations. Then they eased the capacity limitations. So they kind of prepared the market and built confidence steadily. They took their time and did it in a systemic way.
Imax had an event about a month ago called CEO Forum where we invited CEOs of most of the major exhibitors in the world, who represent a significant majority of the global box office. We invited some of our colleagues from China to speak about how they reopened, and their message was very clear: You do it in a measured, systemic way rather than trying to do it all at once. That’s what I think we need to do.
Now, with that said, as you know, in North America at least, a significant number of the screens are open, albeit with limitations on days of operation or capacity. So there is kind of a pre-reopening going on right now to some extent. We need to rebuild enthusiasm in a thoughtful, deliberate way.
And what timeframe do you envisage?
In terms of a broader reopening, it obviously depends on the rate of vaccination and the progression of the pandemic. Internally, my own best guess would be in the May/June timeframe.
I’d like to discuss a few more China-specific issues, because the Chinese New Year release window is so unique in various ways. One aspect is the volume of releases that open simultaneously, head to head, all in the same window. There were nine major movies released this year. That’s just amazing, and not something you would witness anywhere else in the world. Another issue is how unpredictable the outcome tends to be. There’s usually a strong frontrunner or two in the lead-up to release, but then once the movies hit the market, word of mouth takes over and there can be a pretty radical reshuffling. We’re seeing that to some extent this year with the way Hi, Mom has suddenly surged ahead of Detective Chinatown 3. How does that present challenges for a company like Imax, where you kind of have to pick your horse early? A lot of the regular Chinese exhibitors can shift their screen allocation between titles in real time, but you guys have to work ahead and select just a few titles to show in your format. How do you do it?
That’s a great question and one we’re dealing with in real time right now. Years ago, we only picked one film for Chinese New Year. So using your analogy, we had to bet it all on one horse. You may recall that Imax has a process, it’s called DMR, in which we take a movie and we convert it to an Imax movie. But it takes time and expense to do that, so generally, we have to pick which movie we’re going with well in advance.
Three or four years ago, one movie broke out of Chinese New Year and it was the biggest film ever in China at that time and we had picked a different film. About a week into the New Year period, we spoke with the studio that had produced that movie and decided to convert it quickly; so in the back end of that period, we still did some pretty good business. But there’s no question that because of the difficulty of picking the big one we missed out on some box office.
Starting with China’s National Day Holiday in October 2017, we decided that we had to go with a multi-film programming strategy, so that we could see how everything would play out as the period went on. That holiday we went with Never Say Die ($335 million) and The Foreigner ($81.2 million), two of the most highly anticipated films releasing over the two-week holiday. Since then, we have always selected two or three films for the big holidays.
What we try to do is pick different movies from different genres, because you’re quite right about how people’s tastes change, but it seems to follow a pattern where they’ll shift from genre to genre in their preference. So we try to figure out what the most popular movies will be and then we vary the genres. That’s what we did in 2019. The Wandering Earth ($691 million) was not the original box-office leader, but it came on strong at the end. And fortunately, it was one of the three we had.
And how did you approach this unique comeback year of 2021?
This year, we had been committed to Detective Chinatown 3 for a long time, because it was actually our 2020 pick, which got delayed because of the pandemic. And that particular movie was filmed with Imax cameras at Wanda Studios. So we had a lot invested in that movie, both from an aesthetic point of view, as well as from a psychological point of view, and we had very high expectations. So that became our cornerstone. Then we went with A Writer’s Odyssey and Nezha Reborn, the new animated version that came out, to kind of diversify genres.
We’re still analyzing the data right now. As you said, Detective Chinatown 3 came out of the gate really fast. We considered doing Hi, Mom as well. We knew that was going to be a big movie, but we weren’t sure that that particular genre would fit with the Imax experience, so that’s one reason we decided not to do it. But actually now we’re working on adjusting our programming a little bit to show more shows of A Writer’s Odyssey and less shows of Detective Chinatown 3 in order to try and anticipate where the public’s taste is going. There’s still time where if there’s a dark horse in the group that resonates, we still might be able to pivot to another movie.
So it’s something you really pay attention to. Since Chinese New Year is such a big part of the yearly box office, around 10 percent of the full total, you need to be very agile during this period. There’s almost as much art as science in trying to predict where consumer tastes are going to go.
Because of the pandemic and release delays, there was obviously a backlog of strong content ready to go for Chinese New Year. Looking ahead, how are you feeling about the rest of the year in China?
I think we’re feeling very good about the rest of the year — but with the caveat that we still need Hollywood movies to be released to fill in the calendar. I know that we feel very good about the local-language films this year. And in fact, if you look at our performance in 2020, it was by far the best year we’d ever had for local-language films in China. I think it was a combination of the quality of the films going up, Imax playing more of them, and the public continuing to value local films.
But Hollywood films, or foreign films, have typically accounted for about 50 percent of the box office, so while we’re very enthusiastic about the local-language films and what their performance has been, you can’t predict the whole year’s results until you know the slate of Hollywood films coming out. And some of them, like Godzilla vs. Kong, which is coming out in March, we’re quite enthusiastic about. In fact, the final sequence of that film is shot in Hong Kong, so I think it will do very well in China.
There are other U.S. franchises scheduled, including the next title in the Fast & Furious franchise, Top Gun: Maverick with Tom Cruise, who typically plays well there; the Bond film No Time to Die, etc. It’s a slate that seems designed, in certain respects, for the Chinese market, but it’s hard to have absolute certainty as to when those will be dated because of how the pandemic is proceeding in other parts of the world.
As you mentioned, Hollywood content has been absent from the China market for an unprecedentedly long time. There are different views on how Hollywood product is regarded in China now. As you mentioned, there’s been a lot of audience enthusiasm for domestic Chinese-language filmmaking as they conquer new genres, and patriotically themed content has done particularly well. Meanwhile, even prior to the pandemic, Hollywood’s market share was slipping. Some people look at that and think it means the audience is turning away from Hollywood content — that they’re becoming much more interested in Chinese stories with uplifting Chinese themes than American-made movies. But then other people look at the long Hollywood absence and assume there has to be considerable pent-up demand for Hollywood franchise spectacle and visual effects on the big screen after all this time. Where do you fall on that?
I definitely do not think it’s an either/or situation. If you look at box office in the United States, for example, you can love the Avengers franchise and you can also love the Mission Impossible franchise. It’s not a question of which one. I think it’s the same with Chinese-language movies versus Hollywood movies for most people in China. And the most recent experience with a Hollywood success in China was Avengers: Endgame, which was one of the largest successes in the history of China (it earned $629.1 million in China). And I know it seems like a long time because of the pandemic, but Avengers: Endgame was not ancient history. It was just a year and a half ago. I don’t think public tastes get wildly changed in a year and a half. If you told me it was 10 years or 20 years, there might be some truth to that, but people who lined up and paid premiums to see Avengers: Endgame aren’t disappearing for the Marvel releases this year.
Now I’m sure one of the things that you could say, and it would make sense, is during the pandemic there hasn’t been a Hollywood full-on release in China, so we don’t know. And the U.S. releases that were there didn’t attract traditional numbers. But for me, there are two really good reasons for that. Number one is there hasn’t been a Hollywood film that’s been released globally like a normal Hollywood film. And particularly in China, when you look at films that break out and do very well, I think they play off the global premiere, the global red carpet events, the media, the paid marketing, all of which we put under the category buzz. There’s a lot of buzz that gets established that helps how things play out in China. We’ve yet to see a post-pandemic movie with that kind of buzz.
And number two?
Then the second thing is the piracy. Virtually every film that’s opened in China this year, whether it was the Disney film Mulan or Wonder Woman from Warner Brothers, they all came off of some kind of simultaneous online run, whether it was PVOD or a streaming run. The Imax office in China has said to me that there’s no question that massive piracy trampled down the box office of these movies.
This past weekend, Warner released Judas and the Black Messiah at midnight. People at Warners said that at 12:01 a.m. there were pirated versions available, and at something like 12:03 a.m. there were pirated versions with Spanish subtitles circulating in Latin America.
Remember, these pirated copies aren’t ones where people went into a theater with an iPhone; they’re perfect digital copies, as good as the original. So in a place like China, where piracy is very common, you can’t overstate the impact of those kinds of releases. Frankly, I think once the pandemic subsides, the studios are going to go away from simultaneous streaming and Chinese releases because the piracy really plays a role in killing the Chinese box office.
So, again, going back into your question, I think once Hollywood returns to a normal distribution pattern with extensive marketing, red carpets, talk shows, social media and simultaneous theatrical releases in China — and a reassessment of how digital versions are released — the China box office for Hollywood will bounce back, especially for the popular franchises.
Given your points about piracy, I would assume you’re quite concerned about China earnings when you look at the 2021 Warner Brothers slate, which they will be releasing simultaneously over HBO Max — including Imax-friendly movies like Dune and Godzilla vs. Kong. Are you expecting they may do the China releases a couple of weeks ahead of the the rest of the world and HBO Max to mitigate piracy losses?
I do think Warner has made rumblings, but no official announcement, that it’s going to release in China early. And I think if they did that, that would be a really good policy because I think even they recognize the impact of piracy.
Anything you would like to add?
The only thing I would add is that people’s perceptions of the future are always wildly exaggerated by the present. I think when the pandemic started, nobody could imagine that it would last this long or change things this radically in such a short period of time. And I think the same thing is going to happen with reopening, which is what was demonstrated in China. Although it’s hard to see right now, once things turn, they’re going to turn very quickly, and I think the public is going to be surprised at how quickly people go back to the movies.
Interview edited lightly for length and clarity.
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