Cineplex CEO Says Diversification Key to Growth for Cinema Giant

Ellis Jacob - Warner Bros. Pictures Private Cocktail Reception for The Man From U.N.C.L.E. - Getty - H 2017
Getty Images

Canada's largest movie theater chain saw fourth-quarter theater attendance and earnings slip, even as overall revenue rose from diversified businesses.

Cineplex CEO Ellis Jacob says Canada's largest movie theater chain offers much more than Hollywood tentpoles.

That's why the exec on Friday urged investors to be more patient as Cineplex's diversification into media, amusement and leisure businesses to reduce its reliance on fluctuating Hollywood box office ramps up. "People are looking for instant gratification. When you're building a business like we're doing, you have to look further out. It's three to five years," Jacob told The Hollywood Reporter.

Cineplex saw fourth-quarter earnings fall to $27.2 million, against a year-earlier $28.8 million, as box office revenue from Dr Seuss' The Grinch, A Star Is Born and Venom wasn't enough to match that of fourth quarter 2017, which featured returns from Star Wars: The Last Jedi, Thor: Ragnarok and Justice League.

Shares in Cineplex fell by $1.63, or around 6 percent, to $25.53 on the Toronto Stock Exchange after the company unveiled its fourth-quarter and full-year 2018 results. 

During the latest quarter, Cineplex saw box office revenue fall 1.5 percent to $182.3 million, as overall theater attendance fell 3.2 percent to 16.99 million patrons. Total revenue, however, jumped by $1.9 million, or 0.4 percent, to $428.2 million, as box office per patron rose 1.8 percent to $10.73 on price increases in selected markets and concession revenue per patron rose to $6.53, from a year-earlier $6.29.

Jacob pointed to Cineplex continuing to diversify from its core multiplex business, which depends on Hollywood box office receipts that fluctuate from financial quarter to quarter. "We're confident in our strategy going forward. We are basically doing things that are different from all our peers," he argued.

Looking ahead, the CEO said 2019 will see Cineplex open six more Rec Rooms, which are filled with bars and games, as the exhibitor's restaurant and gaming facility businesses provide the key to future growth. Cineplex is also partnering with U.S.-based Topgolf, which combines a golf driving range with other games, to open Topgolf entertainment complexes across Canada.

The Canadian cinema giant also struck a strategic partnership with Seattle-based VRstudios that includes a "significant" equity investment in the maker of commercial virtual reality arcades and Cineplex installing up to 40 VRstudios arcades in its multiplexes and location-based entertainment centers across Canada by 2021.

Cineplex also offers high-end VR attractions like The Void in its multiplexes and entertainment venues. 

Jacob said Cineplex is evolving from a cinema company to becoming an "entertainment destination." Elsewhere, Player One Amusement Group, a division of Cineplex, recently signed a deal with U.S. exhibitor Cinemark to bump up the amusement gaming experience at over 270 Cinemark locations.

"We basically want to own your entertainment dollars," Jacob said of wooing Canadians when they leave their homes to enjoy entertainment options at Cineplex venues.