Cineworld Bankruptcy’s Impact On Imax Is Blunted By Nature Of Lease Deals, Presence In Top-Grossing Sites, CFO Maintains

Imax Corp. CFO Natasha Fernandes said the company is “not exposed as much” as other business partners of Cineworld to the Regal Cinemas parent’s bankruptcy filing.

The No. 2 global exhibitor made the long-expected move this morning, citing the impact of Covid on its business.

Speaking at the Bank of America 2022 Media, Communications & Entertainment Conference, Fernandes credited the nature of lease agreements as well as Imax’s presence in top-grossing markets. “Imax has a longstanding, great partnership” with Cineworld, she said, and “we have a strong liquidity position and a flexible business model, so we can maneuver and navigate changes in the exhibition landscape.”

Imax theaters operate under a master lease agreement, she continued. “What that means is that we don’t have single agreements for each screen. We have one agreement that governs them all. … You’re not exposed as much from that perspective.”

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As far as the road ahead for Cineworld, she said, the bankruptcy process will allow the exhibitor to “clean up its balance sheet and move forward and continue to operate going forward. So, if they’re going to operate, they’re going to operate the top complexes. So, [they will] clean up the under-performing complexes and either sell them off or do something with them. But that’s not where Imax screens are — Imax screens are all in the top-performing complexes.”

Heather Anthony Boyriven, Imax’s enterprise transformation head, appeared onstage with Fernandes. Asked how the company defines itself in the post-Covid marketplace, the exec said, “We still view ourselves as the most immersive movie experience in the world. That’s who we are and that’s what we focus on,” across not only large-format auditoriums but cameras and other technology used in filmmaking and exhibition.

Pressed about inflationary pressure and how the company’s premium-priced offerings will fare down the line, Fernandes said box office revenue has grown during the last seven consecutive recessions. In 2008, amid the global financial crisis, Imax saw the most significant growth in its history. “When you think about disposable income from moviegoers, they’re going to cut out vacations, sporting events, concerts. But they won’t necessarily cut out a movie, because a movie is still within the affordability. They’ll still want to go out and experience something.”

After Fernandes touted releases in the fourth quarter, especially James Cameron’s long-awaited Avatar sequel, she also acknowledged a high degree of uncertainty about which films would be permitted by Chinese government officials to play in the country. “We hope that it gets in,” she said. As a hedge and a longer-term strategic adaptation, however, Imax has been emphasizing “lots of local-language” titles in China and other markets.

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