Movie Market Madness: Imax to Open 75 New Big Screen Cinemas in China

If they are spending money on clothes and cars, movies wont be far behind. Important question: who is going to supply the popcorn for 1.3 billion people?

Andrew Edgecliffe-Johnson reports in the Financial Times:

"Imax has announced a $40m plan to open 75 cinemas in China by 2014 in a bet that Chinese spending on entertainment will start to catch up with western markets.

Rich Gelfond, chief executive, said the joint venture with Wanda Cinema Line, China’s largest cinema operator, would see Imax put up the per location cost of 2D and 3D projection equipment and screens of about $500,000, with Wanda building the theatres at a cost of about $1m each.

Mr. Gelfond would not disclose the share of box office takings Imax would keep, but said the large-screen film exhibitor typically retains 20 per cent in similar revenue-sharing partnerships.

Shares in Imax were up 11.2 per cent at C$29.00 by late morning in Toronto, setting a record for a stock that traded below C$13 as recently as last June.

“In China, about 3 per cent of GDP is spent on entertainment, compared with about 7 per cent in the more developed world,” Mr Gelfond said. “It’s a market where people like affordable luxuries, and spending $3-$4 extra on entertainment is clearly something there’s appetite for.”

Tickets at Imax’s 10 cinemas in China typically cost $10-$15, compared with $6-$7 at non-Imax screens.

Cinema’s rapid growth in China, where box office receipts rose 40 per cent to Rmb10bn ($1.5bn) last year and the number of screens has risen threefold to 6,000 in three years, has attracted attention from international exhibitors and film studios.

China’s quota, allowing 20 foreign films to be distributed each year by two state-owned companies, was deemed a breach of World Trade Organisation entry terms last year. But rather than waiting for this rule to be relaxed, many foreign filmmakers have bet on Chinese co-productions.

“I think what they show is going to change rapidly,” Mr Gelfond said. “I think with all this capital going into the exhibition industry you’ll have a lot more global production.”

Wang Jianlin, chairman of Wanda, a subsidiary of Dalian Wanda Group, said its existing smaller partnership with Imax had already helped set its properties, many of which are shopping malls, apart.

The deal with Wanda caps a period of expansion for Imax, which three years ago was in just 145 cinemas but which has ridden a wave of interest in 3D films following the success of Avatar. “Part of me has to slap myself because that kind of growth is so unusual,” Mr Gelfond said.

Imax would fund the investment in China from its positive net cash balances, Mr Gelfond said.

“The payback is relatively fast. In the first year we’ll roll out 25 theatres. It comes back fairly quickly.”

Mr Gelfond, who began exploring the Chinese market 12 years ago, said he had chosen to strike the joint venture with Wanda in part for the transparency of the group’s ticket reporting systems.